I drove a 580 SEL once. Externally it didn’t look impeccable. But the drive, once we had found our way out of the bush path onto the expressway, was effortless. The car was true to the Mercedes-Benz tradition of comfort, safety, engineering and design.
Over a 12-year production period, 818,036 saloons of the model W 126 were made, making it “one the most successful premium-class series in the history of the company.” Though not a vintage car (is it a classic?), this S-Class is a vintage of Nigeria’s political economy. It was nicknamed Shagari.
The flagship model from Mercedes-Benz handles the uneven road well. I later found out that the springs and dampers – few of the many moving parts of a well engineered car – absorbed bumps quite well.
You don’t just buy a Mercedes-Benz S-Class says a Daimler document on the S-Class, “it comes to you when fate has ordained that your life should take that course. The door closes with a reassuring clunk – and you have arrived.”
Shehu Shagari’s 1979 campaign slogan of “One Nation, One Destiny” was complemented with an economic policy focused on agriculture, housing, industries and transportation. The oil boom was just beginning. With a budget bulging with petro-dollars all seemed rosy until oil prices collapsed, inflation rose and debt weighed on the economy. Besides, the economic goals were beset by corruption: white elephant projects like the Ajaokuta and Delta Steel complex were initiated.
The many moving parts of development
The economic development of country is not pre-determined. Fate doesn’t ordain the development path a country must take. If there are no political and business leaders thinking and executing policies the door will close with a disheartening crash leaving a country nowhere.
Labour productivity is everything, according to Credit Suisse, an investment bank. “There are common factors that link success stories but unsuccessful outcomes have different [root] causes”.
In a 2012 report, Credit Suisse highlights five factors for productivity: consistent quality of human capital; innovation that moves up the value chain which depends on the level of technical training and R&D; physical infrastructure i.e. maintenance of high gross capital formation ratios for at least three decades; business climate and demographics. In addition to productivity growth of 4 percent a year the interaction of these factors contributed to the growth of the US in the 19th century and Japan and Korea in the 20th century.
In South Korea, high and consistent labour productivity gains for at least 30 years (1980 to 2010) resulted in a productive labour force measured by GDP per employee. China, the country most likely to join the club of advanced economies, has been successful in promoting and turning out global leaders in technology (Huawei), industry (Dongfeng Electric and Bao Steel) and transportation (Geely Auto).
An explosive combination
McKinsey, a consultancy, says improved productivity is responsible for 55 percent Nigeria’s growth. Productivity, measured as output per worker, has been improving in Nigeria since 2010 but not because more Nigerians are being employed. The output per Nigerian worker is 57 percent less than the average seven developing economies: Russia, Mexico, Malaysia, Brazil, Turkey, South Africa and Indonesia.
Productivity is rising but there is an abnormal divergence from the expected pattern. The yearly output per worker in South Africa is five times more than that of a Nigerian. This is because Nigeria is not benefiting from urbanisation and infrastructure is poor.
Typically urban dwellers should work in manufacturing which pay better wages and send remittances to the village which can be used to buy fertiliser and hire tractors. An abysmal infrastructure network limits access to markets and lack of electricity hampers manufacturing. So, although many Nigerians live in cities they are either engaged informally or underemployed and are faced with high living costs.
Rising investment in agribusiness will likely turn things around. Commenting on investments in rice paddies and mills by Olam and Dangote, Segun Olukoya, head of financial services and payments business at Nextzon, says “brains and money are an explosive combination”.
People, certainly, will cringe and say crony capitalism. At the turn of the century the likes of Rockefeller, Carnegie and Ford did what Aliko Dangote is doing today. We need to find one such entrepreneur for each sector of the economy we have some level of competitive advantage.
Human capital, innovation, infrastructure, business climate and demographics are vital but without government support – in the form of pro-growth policies and reforms – more “mega entrepreneurs” won’t emerge. Dangote, Innoson, Oando, Seplat etc are brimming with smart people who will unlikely try to replicate what their bosses have done.
So how does government support a Nigerian entrepreneur to, say, build the largest power plant in Africa, how does it support Innoson to become a Kia? Deciding who to back should not be the issue. Rather clear rules and a smooth transparent process are an alternative. For instance, why did take so long for Oando to get ‘ministerial’ approval to buy the assets of ConocoPhillips?
Savvy suits, institutions and political connections
Gradually we are seeing a model: a combination of institutions, savvy suits with political connections at our current state of development and in certain ‘traditional’ industries. In IT or services for example, the need for the political connections is not as critical.
The emergence of indigenous oil companies like Oando, Afren and Seven Energy show that this might be the “spark” that opens the door. They have blazed a trail and delineated a path. Hopefully not a path solely for themselves; corporate governance issues are springing up as some of these companies grow. With luck, others will follow and maybe player number two, three, four or five will then be able to come in and run a proper business. But without number one it’s unlikely to happen.
Olukoya argues that “the business friendly policies are a must have but someone must write those policies. From what I see, it’s the business men that ‘push’ governments to do it. [And] for some strange reason, I believe most ‘good’ government policies have a ‘private’ sector backer prodding government along.”
This is where institutions e.g. regulators come in. If we can get people who understand the language of the entrepreneur and make the right decisions in Nigeria’s interest into government the best brains won’t need to have political connections for their ideas to see the light of day. For now, projects like the Falomo Shopping Centre will require politically connected savvy suits to get off the ground. “Smarts must go with some political leverage for things to work” says Olukoya.
Tayo Fagbule
