Mixing politics with business slows down growth

I just finished reading an interesting book titled “Rich People, Poor Countries” by Caroline Freund. The book documents achievements of business people from the developing world that have built multi-billion shilling commercial empires. Among those covered in the book are billionaires like Jack Ma and Zhou Qunfei of China, Mukesh Ambani of India, Aliko Dangote of Nigeria, and German Mota-Velasco of Mexico. These individuals have managed to not only succeed at home, but have also built truly global companies that can compete with international industry leaders.

Unfortunately, the African representation on the list of such individuals is thin. And the reason is that most wealthy people in Africa are wealthy not because of the value they create, but because of political connections. They are not creators of value; they are peddlers of influence and patronage. The beauty of the wealth created through innovation and value creation is that it not only benefits the owner of the business, but also creates jobs that have a positive impact on countless numbers of families. Jack Ma’s Alibaba, for example, has created more than 35,000 jobs. His raw ambition and desire to accumulate wealth has therefore generated positive externalities for the wider Chinese economy. Not only is Alibaba now recognised as a brand that can compete with other online stores like Amazon, but it also has raised the image of China as a favourable investment destination.