In their September 2013 declaration, G20 leaders agreed that creating more and better quality jobs should be at the heart of government policies in the recovery, not only to create growth, but to reduce poverty and increase social cohesion. G20 leaders also agreed on the importance of better integrating and coordinating policies to restore public confidence in the global economy of which Africa economy is significant. It is noteworthy to assert that as the biggest economy and the most populated country in Africa, Nigeria is a force to reckon with not only within the Africa Continent but also in the global economy.
Governments create the rules and frameworks in which businesses are able to compete against each other. From time to time the government will change these rules and frameworks forcing businesses to change the way they operate. Business is thus keenly affected by government policy. Key areas of government policy that affect business are economic and legal in nature.
The word regulation itself can mean many things. At its most basic level, regulation is treated as synonymous with law. Regulations are rules or norms adopted by government and backed up by some threat of consequences, usually negative ones in the form of penalties. Often directed mostly at businesses and individuals, and even regulations can also aim at nonprofit organisations. Regulations are derived from any number of institutional sources – parliaments or legislatures, ministries or agencies. Given their variety, regulations can be described using many different labels: constitutions, statutes, legislation, standards, rules, taxes and so forth.
The questions are – is regulation supposed to effectuate some improvements on businesses and job creation in Africa and with a resultant increase in standard of living? Improvement here means that the conditions with regulation are better than what they would have been without it. Regulation should seek to make such improvement by changing individuals or organizational behaviour in ways that generate positive impacts in terms of solving societal and economic problems including the macroeconomic challenges posed by unemployment. It should gear towards achieving positive end; better improved conditions and a more robust, as to businesses, capacity for optimal productivity, increased revenues and higher performance through cost minimization, expansion, improved technology as well as quality human capita. It is therefore paradoxical that government regulations have been the banes of business growth not only in Nigeria but Africa at large.
To start with, a proper understanding of government policies anywhere in the world would tend toward asserting it as the boss that cuts the shots any day, anyhow. There is this general view particularly in Africa that ”nobody fights government and wins.” This in mind makes government regulations and controls to be obeyed like the proverbial ”Dundee United” even if it means closing your business. The way to marshal issues here is to say that often times government policies or regulations which aim at making government active participant in business or resource control in its quest to create jobs can only be ‘a bad action in a good direction.’
Governments are run by politicians, not businessmen; Politicians need headlines, they like seeing their names on daily tabloid and this means they have a deep need to do something even when doing nothing would be the better option. Governments use other people’s money. Corporations play with their own money – they are wealth-creating machines in which various people (investors, managers and labour) come together under a defined set of rules in hopes of creating more wealth collectively than they can create separately. Government does not tolerate competition. Government enterprises are almost always monopolies and thus do not face competition at all. But competition is exactly what makes capitalism so successful an economic system. The lack of it has always doomed socialist economies. Government is regulated by government. When “postalization” of the nation’s phone system appeared imminent in 1917, Theodore Vail, the president of AT&T, admitted that his company was, effectively, a monopoly. But he noted that “all monopolies should be regulated. Government ownership would be an unregulated monopoly.
Simply put, government has no sensitivity to cost; has no sensitivity to price; has no threat of going out of business by putting out a bad product; has no competition who can lose money every year and simply raise more taxes to make up for it; and has no capital market discipline placed upon it because there is no competition or true market prices that provide any signals of value. None of the discipline of multiple market forces applies to the government. Government can create a bad product and not worry about going out of business. It can overspend because it doesn’t care if it loses money, it can simply raise more taxes (by threat of force/jail) or, if you’re the federal government, it can simply print more money. In fact, government ownership would be an unregulated monopoly.
Telecommunication companies in Nigeria are concerned about the huge uncertainties trailing the country’s digital migration process, as a series of bottlenecks, including paucity of funds, regulation, unrealistic timelines, and low awareness amongst the populace, seem set to frustrate the initiative. This palpable fear among telecommunications companies stems from expectations that migration to digital broadcasting would free-up requisite frequency spectrum resources for the deployment of efficient and affordable broadband services across Nigeria. Revenues from voice services in the telecom sector are declining due to regulatory and competitive pressures. Somalia’s telecom system is often used as an example illustrating that self-regulation can stimulate entrepreneurship and be successful. Despite the lack of telecom regulations, Somalia is the cheapest country in Africa to make international telephone calls, as 11 telecom operators compete without a clear regulatory framework.
A well-functioning financial services sector could add 2 or 3 per cent to gross domestic product, creating 47,000 extra jobs in the industry and 218,000 elsewhere in the economy in each nation of the African continent. It could do this through its lending activities and its purchases of things such as telecoms, IT, transport and catering. According to Kelvin Burrowes at PwC, it requires “robust” and “better” regulation, as well as beneficial economic conditions. He furthers that a “sensible balance” had to be struck on regulation.
Contrary to the beliefs held by many professional economists spending does not make an economy grow. Any program that diverts capital into consumption and away from savings and investment will diminish future economic growth and job creation. For instance, Nigeria government’s subsidy policy to control prices of petroleum products has ruined the oil sector and discouraged private investment and injection that can boost the economy. In spite of the declaration that more than 20 licenses had been issued to investors willing to build refineries in Nigeria, none of them has started construction on the approved sites for the project. Between 2006 and to 2013, subsidy running to N4.9trn Naira was spent. Can one imagine the number of jobs that could be created if the 20 refineries are built in Nigeria?
An America example is after the economic downturn began in 2008, calls came from Keynesian politicians for Congress to enact “stimulus” legislation in the hope that a sharp increase in government spending would cause the private sector to create more jobs. As government revenue dropped in a contracting economy, Congress drove America further into debt with government spending in the name of economic “stimulus,” most egregiously with the American Recovery and Reinvestment Act of 2009 (ARRA). The Act provided for $637 billion in increased federal spending, about 80 percent of which the government has already spent. The jobs expected by Keynesian politicians did not materialize. In February 2009, when the ARRA became law, 12.5 million Americans (8.1 percent of the work force) lacked jobs. In December 2011, with 80 percent of the ARRA’s government “stimulus” money spent, 13.1 million Americans (8.5 percent of the work force) lacked jobs. A larger percentage of Americans lack jobs today than when ARRA became law. The sharp jump in government “stimulus” spending did not produce new jobs and a healthy economy—it just helped to produce a bigger national debt.
In the aviation sector in Nigeria and most African Nations, government’s control has suffocated a lot of operators thereby reducing the available jobs in the sector. For instance, government regulations and controls on age of aircraft, maintenance check, multiple taxation as well as logistic for clearing are serious threats to expansion and growing concerns of firms in the sector. According to Mr. Allen Onyema, CEO Air Peace on Channels TV interview on 22nd June, 2015 said, ‘age of aircraft allow in Nigerian Air space is 22 years which most operators cannot afford. Aircrafts are built for sixty years. He continued that, mandatory 18 months fleet check gulps $650,000 which is avoidable capital drain and can be used for expansion. According to him, fleet check is two years in some developed nations. He also lampooned the multiple taxation collected by various government agencies in the sector such as Nigerian Airspace Management Agency (NAMA), Nigerian Civil Aviation Authority (NCAA) and Nigerian Metrological Agency (NIMET)’.
IMANI, a Ghanaian Think Tank, has said the National Communications Authority is involved in dubious, exploitative and manipulative policies which are affecting telecoms growth. Franklin Cudjoe, IMANI’s head, exclaimed there are tall lists of successive “absurd and completely baffling policy decisions” with regard to evolution of technology, especially with relation to the ability of service providers to organically grow and this he said, has the potential to derail any viability of technology infrastructure in Ghana. In Kenya , Cliff Otega posited that uncertainties in regulatory laws is bad for mining industry and makes such venture unattractive to foreign or private investors.
What Then Should Government Do?
Nigerians ushered in a new government in May 2015, with lots of promises to positively turn the economic tide. Economic freedom is the way to go, since economic freedom and political freedom are inseparable. Maintaining freedom is just as important in developing economic policy as it is political policy.
A good standard of living can be stimulated through a stable macroeconomic framework, but also structural policies which encourage free market, innovation, skills, and business development. With less regulations new jobs are created as industries expand and as new firms start up and grow. Net job creation is typically led by a small number of young firms. Policy makers can support this process by encouraging technological innovation and capital formation, affordable premises backed with sound property right policy, and start up financing, while promoting networking between firms. Flexible training, education and employment services are required to proactively respond to skills gaps that may act as barriers and obstacles to business growth and expansion.
Mauritius remains the clear leader of the Africa continent in 19th position globally (ahead of Germany, France and Luxembourg). Its bilingual culture, mixed civil/common law legal system and business-friendly tax legislation have helped this island to become an investment stepping stone for Africa. As a total democracy (according to the Democracy Index published by the Economist, which classified France, Italy and Spain less favourably: as flawed democracies) Mauritius has also emerged as a role model for many African nations. Also, South Africa achieves first place for the ease of raising debt. It is hellish in Nigeria to do business owing to poor social amenities such as good roads, electricity supply, insecurity, and importantly dubious and non-transparent tax system.
Labour market policy plays a central role in supporting business growth, through ensuring that businesses can access people with the right skills to help them to start up and grow. Taking an integrated approach to skills, productivity and economic growth requires strong coordination and social dialogue at the local level as well as active outreach by public employment and business support agencies. All these resort that government’s business is to create the enabling environment for businesses to thrive. Policies and regulations that guarantee optimal performance and expansion of businesses should be the main concerns of government.
Also, the housing deficit in Nigeria can be resolved through policies or regulations that encourage a transparent Public Private Partnership rather than the cosmetic policies of government housings awarded to developers of no reputes. The government creates the enabling environment, has access to land and law; the one that has access to resources (human& financial) brings them together. This is PPP (Public Private Partnership). Government should give special attention to the modernization of technical and vocational education systems, lifelong learning and to quality apprenticeship schemes in cooperation with social partners.
Lastly, government proper roles should also be consistent with the idea of free enterprise, limits its regulations in order to unleash the creativity of the private sector. Rule of law and security are also priority. It should allow expanded exploration, recovery and good transportation network; grant free trade agreement negotiation and cut overregulation of the economy. Just as there are no perfect people, there are no perfect economic systems. Capitalism isn’t perfect. Indeed, to paraphrase Winston Churchill’s famous description of democracy, ”as the worst system of government” can be viewed of capitalism as worst economic system (having in mind vices of capitalism as held by socialist). But in spite of their reservation, capitalism remains the best features for economic growth and remain an awesome economic system that creates wealth for all the people, maintains individual liberty, prevents the concentration of power in the hands of a few, freedom from overpowering government and confiscatory taxes and it remains the best system that rewards ingenuity, hard work and thriftiness.
Photo: Nigeria’s National Assembly.
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