are Sub-Saharan economies lagging behind?
economic growth of SSA countries has accelerated these past ten years, thanks
largely to improved macroeconomic policies and favorable terms of trade, but
living standards of the vast majority of the population are still lagging far
behind that in other regions. Taking a longer view view, SSA’s massive exodus
to city slums is largely a result of failure, in most countries, to modernize
smallholder agriculture. Such modernization provided a foundation necessary to
long-term development everywhere except in the case of "city-states”. The
reasons for lagging smallholder progress in SSA are rooted in geography
(climate, inaccessible "interior”) and history (no written language except in
Ethiopia, which made it difficult to transmit knowledge across generations and
between African societies; no history of "real states”, slavery, colonial rule,
and then very bad governance.
make things even more difficult, SSA’s population growth rate is the highest in
the world. Unlike in other regions – particularly East Asia, where the ratio of
working-age population to dependents has risen sharply to around two to one –
SSA’s dependency ratio has remained close to one for the past half-century and
more. This means that the proportion of young people is one of the world’s
highest, and this makes the challenge of catching up with the education gap
but not least, SSA’s economies are tiny on the world scale, and in the absence
of far greater intra-African economic integration, small market size precludes
economies of scale in many activities. The whole of SSA’s GDP is about the size
of Belgium’s ; South Africa’s is equivalent to the San Francisco area’s
Nigeria’s is smaller than Baltimore’s ; and the average economic size of each
of the remaining 45 countries is smaller than Honduras’s.
development cooperation has achieved mixed results over the last half-century.
The literature is roughly evenly-divided between studies which show that "aid
worked” and those that do not. One thing about which there is consensus is that
despite rhetorical support for institutional and human-resources development ("capacity-building”),
in reality aid organizations have tended to eschew such long-term efforts in
favor of programs yielding more easily quantified and shorter-term results.
can scarcity of economic resources be blamed entirely for lagging development
(notably the failure to modernize smallholder agriculture and to provide
adequate education and health services). Two large pools of under-used
resources exist throughout SSA. First, corruption remains pervasive. According
to Transparency International, not only do SSA countries show undesirable
levels of "perceived corruption”, but perceived levels of corruption have not
diminished significantly since the "corruption perception index” was first
published in 1998 . Resources that might be redirected from corruption to
development include not only annual illegal flows but also the capital
accumulated – for example in Swiss banks – over the decades by corrupt public
officials. Second, and this is the subject of Section 2, weak management
translates into wasted resources; better management can "revive” such
resources, increasing their development impact.
stories of low-income economies that have "caught up” with those of Western
Europe and the US during the last half-century revolve largely around transfers
of relevant knowledge, nurturing "receptors” for the knowledge so transferred,
and creating organizations that translate knowledge into improvements
"on-the-ground”. A great deal of the knowledge required in order to raise
living standards in SSA already exists, and hence social returns to transfer
and adaptation to local conditions are much higher than to new research. The
trick is to "know what to look for” in the world’s immense store of knowledge.
Universities could act as knowledge receptors, but all too-often African
universities teach "knowledge” that is fairly irrelevant to local conditions.
a reasonably competitive environment, private firms, including subsidiaries of
foreign companies, act as knowledge receptors. Successful developing countries
are open to foreign ideas; they nurture "receptors” capable of absorbing those
strands of knowledge that can take root in their local environment. Throughout
the world, private enterprises act as knowledge receptors. Where competitive
conditions prevail, leading enterprises will constantly seek out information
that has practical uses locally. To remain competitive, other firms, in turn,
will emulate their behavior. In this process, executives and employees upgrade
their human capital, their productivity, and their incomes. The role of private
firms in absorbing knowledge and putting it to use is especially important in
the processes of technology generation and diffusion is fundamental to
a focus on effective knowledge receptors brings to light one of the most
hopeful development in recent decades: the gradual replacement of an aid-seeking
African middle class by a much broader and more dynamic market-driven
middle-class. This middle class consists largely of private sector leaders and
managers, as well as a new breed of start-up entrepreneurs whose sights are
trained on the global economy. Two factors have facilitated this rise
enormously. First, local middle-classes are closely linked to diaspora
relatives living abroad, and this makes it easy for them to adapt relevant
global know-how to local circumstances. Second, of course, is the mobile phone
revolution, which occurred quite independently of national development plans,
and which has in effect taken whole swathes of SSA’s population out of
isolation, reduced transaction costs and so opened up space for new and
expanded economic activities. This growing middle-class embodies what Marx
reviled as "bourgeois cosmopolitanism”, which is exactly what SSA needs.
Breaking away from cultures rooted in state-dominated colonial legacies, the
"new bourgeoisie” value critical thinking, teamwork, and pragmatic
organizations have played a highly useful role in capturing and disseminating
relevant knowledge (both between Africa and the rest of the world and within
Africa). The African Economic Research Consortium (AERC) for example is a
highly successful network institution established 20 years ago, whose mission
is to strengthen local capacity for conducting independent, rigorous inquiry
into problems pertinent to the management of economies in SSA. The success of
this program is also demonstrated by the increased adoption of the networking
concept in other disciplines as a cost-effective approach to attaining a
critical mass of professional activity in the region and applying peer review
for professional excellence. A spin-off of sub-networks, often in collaboration
with professionals outside the region, has further widened research
opportunities and firmed up interest in African research. AERC’s web site lists
1,160 alumni, who, together, have contributed significantly to the region’s
macroeconomic improvements noted earlier .
The Global Business
2005 Report of the Commission for Africa, which was chaired by Tony Blair and
made recommendations to the G8 meeting in Gleneagles (Scotland), mentions the
word management 129 times, most often in the context of the need to strengthen
management. The report lays great emphasis on capacity-building, notably in
order to revitalize higher education and "revive” health services in Africa,
yet nowhere does the report mention management schools, let alone does it
recommend strengthening local business schools.
economists, Nicholas Bloom and John Van Reenen have developed an innovative
double-blind interview methodology to measure management practices, providing
large-scale survey evidence on the quality of management practices from
manufacturing firms around the world. This research
(http://www.cepr.org/pubs/new-dps/dplist.asp?dpno=5581) finds a strong
cross-firm correlation between the quality of management practices and measures
of firm performance like profitability, productivity, growth and survival. More
recently, preliminary evidence from a randomized-controlled trial of
broad-based management improvement programs in Indian textiles and garments manufacturing
firms by suggests that external assistance can help firms dramatically improve
their management practices (http://www.stanford.edu/~nbloom/NSF_India.pdf) In
turn, the distribution of a country’s firms (and non-profit organizations, as
well as government agencies) is a major determinant of that country’s overall
competitiveness and standard of living. The following Table illustrates
hypothetical distributions. Bloom and Van Reenen have calculated actual values.
Quality of Management: Hypothetical Distribution
a year this program should provide direct causal evidence on the impact of
management practices on firm performance a developing country. Higher education
imparting practical business knowledge is essential to successful
entrepreneurship, one of the few proven paths out of poverty. Based on 3,500
observations in 14 SSA countries, Vijaya Ramachandran, et al. find that
"University education appears to be correlated with a larger size at start-up
and a higher rate of growth for black-owned businesses”.
link between improved management and better outcomes is not confined to
business. So, for example opinions were elicited from 82 developing country
representatives of the public and private health sectors, interviewed at the
2008 World Health Assembly by the Duke Global Health Institute as part of a
landscaping project for the Rockefeller Foundation. The majority of respondents
felt that health systems financing, policy, and management experts are
"extremely needed” in developing countries, and that the local job markets for
such HS professionals was strong. Additional research from Merson et al.
includes in-depth interviews with 339 informants from six LMI countries: Kenya,
Mexico, South Africa, Uganda, Vietnam, and Zambia. Interviewees worked for the
government (40%), non-governmental organizations (18%), academia (17%), private
for-profit health sector (16%), private not-for profit health sector (6%), and
elsewhere. Informants agreed with those at the WHA, with the majority
characterizing an "extreme need” for HS expertise in their countries’ public
and private health sectors. The HS competencies felt to be in highest demand
included: health financing (resource allocation, cost-effectiveness analysis,
and resource development); health policy (analyzing policy issues, developing
national health policy guidelines, and monitoring the implementation of health
laws and regulations); and health management (strategic planning,
leadership/governance, and human resources management). Although health care in
developing countries is a multibillion-dollar endeavor, "the people charged
with leading and managing this work have little formal preparation to succeed.
Until this truth is recognized, the billions of dollars being pledged by donors
– plus the huge investments that countries make in health – will not achieve
the hoped-for results”.
weak management skills are undermining potential outcomes for philanthropic
organizations and nongovernmental organizations engaged in global health , in
agri-business and other areas critical to achieving social and economic
progress in SSA.
general neglect of long-term capacity building noted earlier, there are several
reasons for neglect by governments and aid providers of capacity-building for
management education. The United Nations’ Millennium Development Goals, which
govern much of development cooperation, do not include higher education.
Second, business schools are being perceived by many as catering to the elites
and not the poor, when these schools "teach how to fish”, enhance national
competitiveness – which is especially critical during the current economic
downturn – and, as noted, help generate employment. Third, except in South
Africa, SSA’s business schools are young – most did not exist 15 years ago –
and many are private. They are therefore unlikely to be recognized players in
the design of national aid strategies.
This is the gap which the Global Business School Network is
well-equipped to help narrow.
Guy Pfeffermann is the CEO and founder of the Global Business School Network.