Why Indigenisation Hampers Growth In Africa By Erwin Ofili

Throughout history, there has been a general feeling that the fruits of the land should only be harvested by the sons of the soil. Different peoples at
different times in history have tried to enforce this. In Biblical times, when the Hebrews settled in Egypt and flourished over time, the pharaoh instituted a policy of ethnic cleansing, killing the sons of Jewish stock and enslaving the adults. The Hebrews who settled in Persia during the Diaspora were the subject of a plot of genocide planned by an Amalekite in the king’s court.

In modern times genocide is deplored. Except in Zimbabwe, violence has rarely been used as state policy in recent times to expropriate assets belonging to “non-indigenes”. But this sort of sentiment finds popular support among Nigerians, maybe not publicly, but in private conversations. Nigerians express desire to reallocate assets from non-indigenes to the “sons of the soil”. Some in the Niger-Delta complain about “Yoruba domination” of the oil industry as much as they complained about “Igbo domination” of their politics in the 1960s. Some of my friends in Lagos have said to me “if Boko Haram keeps terrorising the country and come near Lagos, we would seize Dangote’s properties here”. It might surprise some to know that the people who say this are educated Nigerians.

However, the sentiment of nativism finds expression - fuelled by demagoguery - in government policy and rhetoric. The most recent I can remember is Sanusi suggesting that Telecomm companies making huge profits in Nigeria should be compelled to list their shares in the local stock exchange. This opinion is apparently popular with many Nigerians. This is reminiscent of the indigenisation policy of Gowon’s government. This policy of indigenisation is very common among African countries and is a very insidious product of xenophobia. It is the reason Nigerians complain about Ghana’s government policy targeting non-Ghanaian (mostly Nigerian) businesses. It is a vicious circle that reduces trade among African countries and ensures that poverty level remains high for much of Africa and therefore feeds nativist mentality.
There is justifiable cause for fear of foreign influence in local business participation. At the time that American foreign and military policy was heavily influenced by commercial interests in the early 20th century, the American military invaded Haiti, Nicaragua and other Latin American countries with its politicians egged on by plutocrats whose investments in such countries were under threat from the government policies of such countries. But I believe this fear can be managed by the government seeking mutually beneficial trade agreements with foreign governments and protecting the interests of Nigerian businesses located abroad from harsh government policies.

The conflict between Nigeria and Britain over Britain’s policies that targeted Arik Air shows that foreign investments in the country can be used as a leverage against other countries who unfairly victimize Nigerian businesses. The encouragement of foreign investments would not only bring foreign capital to the country but also provide bargaining power for allowing Nigerian businesses expand into foreign countries. The same philosophy should be pursued on the African continent with other African countries if we would have any chance of reducing poverty on the continent and improving trade. The dearth of trade between African countries has been identified as a main reason for the high rate of poverty on the continent.

It is unusual to hear anyone speak against any policy of indigenisation as it is seen as something that benefits the masses. It doesn’t. The indigenised companies of the early 1970s went to beneficiaries of government corruption and were run down. The expropriated farms and other properties of white farmers in Zimbabwe went to government cronies and were mismanaged. The “abandoned properties” of Rivers state went to government cronies and were also mismanaged, which scared off other property developers from Rivers state who chose Lagos to invest in instead. The people who bought over indigenised companies have made a lot of money for themselves but have destroyed institutions that would have provided jobs for the millions of unemployed Nigerians. These same Nigerians are the ones who would support the idea of forcing Telecomm companies to list their shares on the Nigerian stock market.
The reason indigenisation does not work is neither because all government policies are doomed to fail in Africa nor due to bad implementation. It is
because indigenisation is a faulty and retrogressive policy. It is a policy that rewards people for doing no work and adding no value to the economy. The history of indigenisation in a country scares away potential foreign investors and makes it difficult to attract Foreign Direct Investment (FDI) to the economy. Indigenisation would eventually fail even if it were possible to implement it without corrupt government officials and their cronies taking over the businesses.

This is simply because when you reap where you did not sow, it is natural human tendency to squander the harvest. Given citizens, especially rich ones, handouts permit them to be reckless. Think of a man who buys his teenage son a sports car for his birthday. Do not expect that son to be too remorseful about denting the car, or even crashing it. If, however, the young man made some sacrifices and savings to buy even a less expensive car, he would be upset if a fly does as much as perches on the car.

Instead of people looking on the government to hand them the ownership of big foreign companies, the government should instead allow local businesses to compete with foreign businesses established in the country. Legislation has already been made protecting local big businesses from foreign take over, so that should allay fears of having our economy controlled by foreign powers with stronger militaries. Our banks, for example, have gone from one crisis to another since the indigenisation policy. Allowing more foreign participation in this sector – with foreign banks existing side by side and competing with local banks – would make the local banks step up their game.

They would realise that they have to treat their employees and customers better when they notice competing foreign banks are attracting the best personnel and the wealthiest customers. Decisiveness on the part of the government is also important here. Better operation of our banks is also dependent on effective, but not excessive, regulation and action against corruption. The regulators should not be determined by the state or region of origin of the president or by Federal Character or quota system but by their suitability for the job. The government should also resist the siren call for indigenisation of the foreign banks, whatever form it might take –whether it be laws requiring them to list their shares on the local stock exchange, “local content” or laws forcing divestment. Nigeria can encourage employment of more local staff members by tax incentives instead of by legislation forcing them to employ more Nigerians. We cannot legislate our way out of everything.

Economies that slowly encouraged foreign participation have seen tremendous growth not only in foreign investment and jobs, but also the scale and competitiveness of local companies. China has encouraged American businesses to operate on their shores. The strength of these businesses have even driven so many Chinese businesses that could not compete under and the rest have had to improve their operations. It is usually pointed out to Americans who complain about their large trade deficit with China that the companies in China that cause this trade deficit are American companies operating in China – in a sense, America is having a trade deficit with itself [give the example of the iPhone]. India has seen the emergence of Infosys on the global scene after they opened their Information technology market to international competition. Indeed the founders of Infosys were concerned about this and considered selling their business to the foreign competitors, but decided instead to make huge investment in Indian local human capital. India has even recently opened its local retail sector to global supermarket chains.

The reason we seem to be on track to repeating all past errors in Nigeria and in Africa is because too many of us are ignorant of our history. This is why we do not challenge regurgitated policies that led African economies to the current state. While even the highly educated Nigerians are derelict in this area, the bad quality of education in Nigeria does not help. It is due to the low standard of education that sentiments of nativism are still very strong in Nigeria and much of Africa years after the end of colonialism. But for the low standard of education, more Nigerians and Africans would understand the definition of madness – repeating the same actions and expecting a different outcome each time.

 Saharareporters