Capitalism is Key to Fulfilling the Promise of “Black Lives Matter”

Magatte Wadehttps://magattewade.com
Magatte Wade is a serial entrepreneur building companies featuring Senegalese recipes and ingredients, updated for the US market. Her current company, SkinIsSkin, also manufactures products in Senegal. She is Director of the Atlas Network's Center for African Prosperity and has spoken at MIT, Harvard, Columbia, Cornell, Berkeley, TED Global, etc. and is featured in "Made in Mekhe" and "Poverty, Inc."

As a black African who is acutely aware of the global discrimination against black people, I’m very appreciative of the focus on improving the lives of black people. Living in fear of a biased criminal justice system is a real concern that we face in the United States. Black lives do matter, and the many injustices of the US criminal justice system need to be eradicated.

That said, when the founders, and many followers, of the “Black Lives Matter” movement position themselves as anti-capitalist, they are speaking from ignorance. Their anti-capitalism is a very serious problem for the 90% of black people who live in Africa. Africa needs far more free enterprise, not less.

Occasionally the media will feature a story of black Africans being rescued in the Mediterranean Sea as they attempt to cross into Europe to get jobs. I grew up hearing stories of my people dying at sea as they tried to get to Europe in tiny fishing boats. What the media highlights as an occasional crisis, when they have a slow news day, is an ongoing reality for people in my country, year after year, decade after decade.

Moreover, when mainstream media does cover our crises, they get the most important causal factor wrong. For instance, see this 2019 Time magazine story on the African slave markets in Libya:

By the time his Libyan captors branded his face, Sunday Iabarot had already run away twice and had been sold three times. The gnarled scar that covers most of the left side of his face appears to show a crude number 3. His jailer carved it into his cheek with a fire-heated knife, cutting and cauterizing at the same time.

Iabarot left Nigeria in February 2016 with a plan to head northward and buy passage on a smuggler’s boat destined for Europe, where he had heard from friends on Facebook that jobs were plentiful. . . . The brand on his face, he says, was both punishment and a mark of identification. Fourteen other men who attempted to escape the fetid warehouse where they had been held as captive labor in Bani Walid, Libya, for several months in 2017 were similarly scarred, though the symbols differed. Iabarot, who is illiterate, wasn’t sure if they were numbers or letters or merely the twisted doodles of deranged men who saw their black captives as little more than livestock to be bought and sold. “It was as if we weren’t human,” the 32-year-old from Benin City, Nigeria, tells TIME. . . . Iabarot is among an estimated 650,000 men and women who have crossed the Sahara over the past five years dreaming of a better life in Europe.

It is a morally compelling story, but it does not provide any information about the root cause of the tragedy. The article mentions “climate change and lack of opportunity” but tells us nothing about why there are so few opportunities for paid work in sub-Saharan Africa.

I am a Senegalese entrepreneur who has spent the past decade working to create jobs in my home country of Senegal. It would be cheaper and easier for me to manufacture goods (lip balms) in the United States, but I feel a moral obligation to create jobs back home. Work brings income, skill development, and ultimately the dignity that comes from producing something of value, things urgently needed across Africa.

While there are bright spots in Africa, and the continent is definitely better off than it was a decade ago, it remains the poorest region in the world. More than 90% of “black” people live in sub-Saharan Africa. In a region with one-seventh of the global population, more than half of deaths of children under five occur in Africa. Many studies have confirmed a correlation between GDP per capita and reduced infant mortality—so much so that GDP per capita is “statistically indistinguishable” from the Human Development Index, which combines life expectancy, education, and GDP per capita.

For a region as poor as Africa, there is no excuse not to be committed to economic growth for the region. It is a sad artifact of our times that the need for growth and prosperity for the global poor even needs to be mentioned, but as long as anti-growth ideologues such as Jason Hickel are allowed to campaign in mainstream publications to keep Africans poor we must continue to state the obvious.

While there are ongoing controversies regarding the relative role of the state vs. the market in economic development, no one today denies the need for a vibrant private sector to achieve economic growth. Dani Rodrik, one of the most high profile economists to prevaricate about the role of economic freedom for economic development, acknowledges that nations need a minimum amount of economic freedom for development. Unbeknownst to most people, African nations are mostly below any reasonable threshold of economic freedom.

Africans urgently need access to a free market economic system—aka “capitalism.” The problem with the word “capitalism” is that generations of Marxist professors have taught young people (many of whom remained ignorant as they grew older) that “capitalism” implies “greed” and “exploitation.” I’m not advocating for “greed” or “exploitation.” I am advocating for a legal environment in which entrepreneurs can create jobs and prosperity for all. If you can show me “anti-capitalists” who are also advocates for better legal environments for doing business, then I’ll accept they are part of the solution rather than part of the problem. But my perception of many people who claim that “Black Lives Matter,” including the founding leadership, is that they are “anti-capitalist.” (They even say so.) Insofar as they are, they are condemning a billion black people to poverty, misery, and death.

While the World Bank’s Doing Business rankings are not a perfect measure for the difficulty of doing business, they usually provide a decent summary of the situation. Consider the top ten on the 2019 Doing Business rankings:

    1. New Zealand
    2. Singapore
    3. Denmark
    4. Hong Kong
    5. Korea
    6. Georgia
    7. Norway
    8. US
    9. UK
    10. Macedonia

Lest someone consider Georgia an anomaly, the only poor nation in the top ten, consider Georgia’s progress as noted by the World Bank:

Georgia has a strong record of implementing economic reforms and raising the living standards of its citizens. Economic growth has been solid—averaging 5 percent per annum between 2005 and 2019—and poverty (national measure) declined rapidly to 19.5 percent in 2019, almost half its 2007 rate.

Macedonia has more recently become a fast-track improver, with similar economic successes. I’d love to see African nations do so well.

Meanwhile, let’s look at the bottom ten:

181: Chad

182: Haiti

183: Central African Republic

184: Congo, Dem. Rep.

185: South Sudan

186: Libya

187: Yemen

188: Venezuela

189: Eritrea

190: Somalia

Indeed, most of sub-Saharan Africa is in the bottom half of the rankings. The only exceptions are:

  • Mauritius: 20
  • Rwanda: 29
  • Kenya: 61
  • South Africa: 82
  • Botswana: 86
  • Zambia: 87

Mauritius is the economic star of Africa, a small island nation which is now a middle income nation. Rwanda is a committed reformer along the lines of Georgia. In recent decades it has both been among the fastest growing economies in Africa as well as the fastest to improve its business environment, improving from 143rd in 2009 to its current ranking. Kenya is doing well, with Nairobi being the startup capital of Africa. Meanwhile, South Africa, Botswana, and Zambia are all doing better than the rest of Africa, albeit barely making it into the top half of the rankings.

My own country, Senegal, is ranked 141st. But what does all of this mean?

The good news is that my country, Senegal, has been working hard to streamline the process of starting a business. The bad news? Well let’s look at a few features of the “streamlined” version through the Agence de Promotion de l’Investissement et des Grands Travaux (APIX), our “one stop shop” for business startups.

It is possible to apply for an exemption from paying taxes on labor and equipment for the first three years of operations (with a possibility for another two years), which they call the investment period. Basically all this does is to suspend the taxes you were supposed to pay for the first three to five years. After that, they make you pay the value-added tax (VAT) due on everything you imported to conduct business. For this exemption, you have to make a list of all the materials you intend to import in order to do business: computers, cars, tables, etc., with as good a description as possible and cost. If you import something slightly different or of a different price, you might have issues importing it in at the exonerated rate.

Paying taxes in Senegal is exceptionally challenging. We’re rated the 166th worst nation in the world for paying taxes by the Doing Business rankings. We’re supposed to make 53 payments per year, which will consume an average of 416 hours per year to calculate and file and which take 45 percent of profits from a small- or medium-sized business. How many companies are likely to relocate operations from, say, Singapore or the Bahamas to come invest in Senegal?

When we import raw material and packaging, we have to pay regular customs at importation. Standard tariffs are 45% to import a copier, 28% to import a computer. In essence my cost for basic business items is roughly 30–45% more per item. I did find a customs official who found a one-year exemption from customs for new businesses, but with the following conditions:

  1. It only applies to materials being brought in to incorporate into your finished product, which must be exported as a finished product within one year.
  2. It must be in a validated industrial manufacturing and warehousing site. (When you are just getting started, it is hard to comply.)
  3. Of your annual production, 90% needs to go to exportation with 10% going to the local market. But what if there is no viable local market even for that 10% of your production? If you want to sell the remaining 10% to export you have to solicit the approval of the General Director of the Customs Office.
  4. There needs to be a follow-up (aka government control) on repatriation of currencies (“suivi sur rapatriement des devises”), starting at 3 million CFA, which is roughly $6,000. This is a step you need to take up with your bank. Very cumbersome.
  5. Hire a government licensed expert to determine your manufacturing yield rate. It refers to the percentage of non-defective items of all produced items, and is usually indicated by the ratio of the number of non-defective items against the number of manufactured items. Usually, and in most manufacturing processes, you will end up with less; maybe some material fell on the floor and needs to be discarded, or some material evaporated during the heating process, or a mistake was made and the batch needs to be thrown away, etc. By having a licensed expert determine this percentage, the government is trying to avoid you bringing in more raw material than you need at an exonerated rate. Complying with this requirement means we would have to disclose our formulations and detailed production steps to third parties. These are our trade secrets, for which we paid a lot of money to have developed during the Research & Development process. It is not hard to see why these would be very sensitive pieces of information to share with third parties, especially in environments where you can’t always be sure of the integrity of those third parties. It is a risky proposition. So risky, in fact, that we decided as a company that the benefits of the savings one could get from choosing this route did not outweigh the risks. And even if we wanted to do it anyway, no one can point you to these so-called experts. I am still waiting for the high ranking customs official I spoke with to send me referrals for such experts or give me pointers as to where to even begin looking for them. He is the government representative who told me I needed, by law, to work with an expert, yet to his great embarrassment he does not know where to find them and no such source of information is indicated anywhere in the law. The requirement is, you have to comply by using the services of a very specific X imposed by us, but we can’t tell you where to find X. Good luck!
  6. In the miraculous situation in which you were able to find X, you then must proceed to approach the Direction de l’Industrie (at the minister of industry) to get an “admission temporaire exceptionnelle” (“exceptional temporary admission”) and provide at least seven more documents.

A few things have probably changed since this happened to me—a little more than three years ago—but you can see how heavy and senseless this process is. Moreover, try to imagine all the controls once you start, and the many times you have to file all types of records with various agencies, most not available online. Again, this is the “streamlined” version.

Meanwhile, for the part of my business that operates in the United States, I go online and get any supplies I want for my products almost instantly via Amazon, Home Depot, specialized suppliers such as Uline, and a thousand others, with no special permissions of any kind. Do you understand why it is easier to do business in the US than in Senegal?

Perhaps my anti-capitalist friends would like to claim that really, we need to provide education to help Africans, rather than improve the business environment to support capitalism there?

But almost half of the ten million graduates churned out of the over 668 universities in Africa yearly do not get a job. Kelvin Balogun, president of Coca-Cola, Central, East and West Africa, said:

If it is nearly impossible for entrepreneurs to create jobs, then it really doesn’t matter how much we pour into education. The NGOs and governments can absorb only so many university graduates. Basically without an ecosystem that allows for the creation and growth of businesses, we have frustrated university graduates underemployed and poor. A university degree on its own, in the absence of a vibrant economy, does not feed the holder.

There is a saying in Senegal that the first job of a fresh university graduate is as a street vendor.

A recent UNDP (United Nations Development Programme)  article notes that, “10 to 12 million young people join the African labour force each year, yet the continent creates only 3.7 million jobs annually.”

There will be a “youth bulge” of some 830 million people by 2050. This is a catastrophe in the making. As the enslaved man profiled by Time above notes:

As long as the opportunities for men and women like Iabarot are limited in their home countries, they will continue risking everything to find something else in Europe. Iabarot says he wouldn’t go through Libya again, but he would consider leaving again by a different route. “I had to leave because there was nothing for me here. There still isn’t,” he says. “So what should I do?”

Climate crisis or not, our efforts should be focused on improving the business environments of African nations. Regardless of the way in which climate change impacts Africa, we have a youth unemployment time bomb of unimaginable proportions. UNDP also notes that 40 percent of people who join rebel movements do so because of a lack of economic opportunity.

Surely, if “Black Lives Matter,” then the world should begin to care about making Africa more business friendly. In 2018, Africa represented 17% of the global population but attracted only 3% of global foreign direct investment (FDI). In light of this brief overview of the terrible business environments of Africa, disappointing results are not surprising. African nations need improved business environments so that more entrepreneurs are able to launch legal businesses more easily. We need more streamlined financial markets to allow for more sophisticated capital markets so that African entrepreneurs can then grow their businesses more easily. As we are able to grow more successful businesses within Africa, then we will be able to create the jobs and prosperity that are so sorely needed.

In a word, we need more capitalism. Anyone who is anti-capitalist does not value the black lives of black people in Africa, who by the way represent 90% of the black people on Earth.

This essay is excerpted with permission from the forthcoming book, The Heart of the Cheetah, which is available for preorder here.

Magatte Wadehttps://magattewade.com
Magatte Wade is a serial entrepreneur building companies featuring Senegalese recipes and ingredients, updated for the US market. Her current company, SkinIsSkin, also manufactures products in Senegal. She is Director of the Atlas Network's Center for African Prosperity and has spoken at MIT, Harvard, Columbia, Cornell, Berkeley, TED Global, etc. and is featured in "Made in Mekhe" and "Poverty, Inc."