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Governments have a big role to play

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In a number of conversations I have had with some of my friends about the future of Lesotho, we have sometimes been tempted to feel like people should not expect anything from government, and that instead each one must work hard for their success because there was nothing that government (due to a lack of good leadership) could do for the country. I was reminded of these conversations as I read the chapter, "The Visible Hand" in Tim Harford's book, Fifty Things That Made the Modern Economy.


"The Invisible Hand"

"...when individuals and companies compete in the marketplace, the outcome is socially beneficial: products are produced efficiently, and they are consumed by the people who value them the most...".

In the chapter, Tim provides examples of where government's involvement in markets has had a positive effect on the development of the modern economy. Tim describes The Visible Hand as the opposite of a popular economic metaphor, "The Invisible Hand" which he says effectively means that: "...when individuals and companies compete in the marketplace, the outcome is socially beneficial: products are produced efficiently, and they are consumed by the people who value them the most...". He argues that this idea, which is core to what proponents of free markets believe, doesn't always work as intended and that sometimes we need government's intervention to enable "the market to allocate resources [appropriately]" (Harford, 2017).


Examples of government's backing

We see examples of government's backing and involvement benefiting things such as innovation in a country like America. A news article reported that Elon Musk's companies, from Tesla to SpaceX have benefited a total of $4.9 billion in government interventions ranging from "...grants, tax breaks, factory construction [to] environmental credits". This simply means that the American government, through its policies and legislation, incentivises people like Elon to create and innovate for the benefit of society as a whole (Hirsch, 2015).


If you have ever watched the show, Shark Tank, then you will have noticed what a game-changer it is for an entrepreneur to tell the judges that they have filed a successful patent to protect their idea making such entrepreneurs more likely to receive an offer from the Sharks than someone whose idea is not even patentable in the first place. It is this very ability to protect one's intellectual property (through legislation enabled by the government) that has given birth to great American companies through inventions like Gilette's razor blade, Spanx's pantyhose undergarment and manufacturing process as well as Apple's micro-computer for use with video display unit (Durant, 2016; Graves, 2017).


In the same manner, African countries have and continue to benefit in many ways from government interventions in developing markets by making goods and services accessible to customers to create and/or increase demand, and meeting businesses halfway in providing these goods and services to create and/or increase supply.


In Lesotho, for example, the government has the objective of ensuring broadband access for everyone in urban areas and at least 75% of people in rural areas including educational institutions between 2014 and 2018 (Government of Lesotho, 2014). Two of the ways in which government has created an opportunity for this to happen is by funding and leading a project on constructing fibre optics in Lesotho and installing telecommunications towers in specific rural areas, thereby cutting these capital costs for telecommunication companies and therefore increasing the ease of access into the industry (ADF, 2013).

In recent years in South Africa, we have all borne witness to how government's Black Economic Empowerment (BEE) legislation has contributed to the economic growth of South Africa and given previously excluded groups of people access to creating their own businesses and the poor access to goods and services. A news article written on a study that assessed the impact of BEE deals on the poor South Africans, states thats $4,1 billion of the funds had gone to charities which mostly benefited the poor in areas such as education, entrepreneurship and youth development (Ziady, 2017).

These are not the only examples of how African governments have played a role in creating the African economy that we know today, there are many more examples which include the ease of travel to countries like Rwanda and the ease of doing business within certain trade areas in Africa.


When we begin to reflect on the important role that the government plays in developing our economies, then we begin to understand that the Africa Rising narrative cannot fully materialise without the evolution of government leadership in Africa, and without the government investing in the right activities and actions to enable this Rise.

The idea that individuals or organisations should just work hard and ignore the government is not an option at all because at best, any inaction by government can frustrate anyone else's actions and keep them stagnant, and at worst, left on its own, bad leadership could intentionally compromise and counter any non-governmental efforts to develop Africa.

Furthermore, if we have even the slightest of hope (which we do) to see Africa raising up young innovators and game-changers who can create companies that can compete with the likes of the Gates, Zuckerbergs and Musks of the world - with more success and more societal impact - then the government needs to invest real money, infrastructure and other resources in areas like Education; Research and Development; Youth employment; and Innovation to create a full ecosystem that can complement and benefit the talented, hard-working people that Africans are. In addition to this, African governments need to deal with practises that directly or indirectly sabotage the good efforts of ordinary Africans from making the necessary kind of progress.


About the Author:

Likeleli Monyamane CA(SA)


Sources:

Fifty Things That Made The Modern Economy[Book] / auth. Harford Tim. - [s.l.] : Little Brown, 2017.

Elon Musk's growing empire is fuelled by $4.9 billion in government subsidies[Online] / auth. Hirsch Jerry // http://www.latimes.com. - May 30, 2015. - http://www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story.html#page=1.

Individual Patents that Built Empires[Online] / auth. Durrant Damian // https://ipstrategy.com. - July 25, 2016. - https://ipstrategy.com/2016/07/25/individual-patents-that-built-empires/.

10 Patents that Launched Billion-Dollar Empires[Online] / auth. Graves Harlan // IPFOLIO BLOG. - August 23, 2017. - http://blog.ipfolio.com/10-patents-that-launched-billion-dollar-empires.

Lesotho, G. o. (2014, June). Lesotho National Broadband Policy 2014-18.Retrieved from Ellipsis: https://www.ellipsis.co.za/wp-content/uploads/2016/07/LesothoDraft_NBP.pdf.

ADF. (2013, October). Project Appraisal Report, eGovernment Infrastructure Kingdom of Lesotho.Retrieved from African Development Bank: https://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Lesotho_-_E-Government_Infrastructure_Project_-_Appraisal_Report.pdf

Ziady, H. (2017, June 29). BEE deals — the surprising truth. Retrieved from Financial Mail: https://www.businesslive.co.za/fm/fm-fox/2017-06-29-bee-deals--the-surprising-truth/




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