“…the grammar of colonialism is in the genetic code of the development project. How could it be otherwise?”[i]
Many stock exchanges in sub-Saharan Africa were established as part of the Structural adjustment programs of the International Financial Organizations or the “development project”.[ii] Developing world countries, in need of loans, followed the required conditions of receiving those loans and liberalized their financial markets and opened capital accounts.[iii] Since then, the International Monetary Fund (IMF) has acknowledged the risks of capital markets liberalization.[iv] In that paper mentioning the risks, the IMF also defines financial globalization as the increased global linkages through cross-border capital flows which surged in the last three decades.[v] Financial globalization is different from financial integration[vi], but also from globalization more generally. To be sure, the West did not invent globalization, it has been around for thousands of years[vii] with scientific, religious and financial concepts spreading from India to China, from the East to the West. Modern globalization, financial, technological, informational and other, is multi-disciplinary has generally been welfare enhancing.[viii] It has eluded some groups, specifically some in sub-Saharan Africa.[ix] To understand why, we must be multi-disciplinary looking for solutions in law, political policy, society and economics and not be imprisoned by any of our past sins or mistakes. We must embrace the difference this challenge presents for us and the future of that region of Africa and work toward change. It is not nearly as simple as saying more infrastructure and better governance and it is time to move past how these exchanges came to be and see what and where they are now.
Africa, the continent, has lots of stock exchanges. They are all regulated with laws, of course, and some with laws that were required for structural adjustment. Most of those laws were transplanted[x] and bear very little relation to what actually gets accomplished on the trading floor or how disputes are resolved.[xi] Many exchanges are small and everyone knows each other. Brokers are formal and polite while business is transacted. They have a communal lunch at the Uganda Securities Exchange where the staff have Master’s degrees from Universities all over the world. Their business is relational-they have a relationship with the other brokers, their boss, the firm they work for, and their customers. This is particularly and specifically in the regions where economic globalization has not yet created wealth. Is that any different than how things used to get done in the kinder, gentler days of Wall Street, before high frequency trading? The legal and economic literature has not yet been able to incorporate that context when arguing about how best to achieve growth in these capital markets.[xii] This does not need to be the work of the IMF or the World Bank or any member of the development project determined to perpetuate itself. This can be just us thinking our big thoughts about Africa and also maybe we can do it just because we love capital markets wherever they are.
A capital market that functions means a company does not need to go to a bank for a loan, it can access individual investors for funding by equity or debt. It can create choice for small to medium enterprises. A bank will also not make risky investments but that happens all the time in the capital markets. That’s what makes it exciting! There is growth in Africa to sustain the capital markets. Africa has experienced exceptional growth over the last decade, as well as the persistence of extreme poverty.[xiii] The US-Africa Leaders’ Summit 2014 created dialogue that will in an ideal world help to remedy misperceptions about the frontier markets in Africa and allow the discovery of opportunities.
The responsibility to care about Africa and Africans rests with African leaders, without a doubt. But our perceptions of Africa must change as well. Our media exclusively focus on the negative. The discourse on capital markets must accept was has gone before and not immobilize us in the future. Stock exchanges in Africa are very nifty. I find it too dismissive to tell those countries in Africa who work hard to develop their exchanges that it is all simply part of a plot of the Global North.[xiv]The exchanges are symbolic of entrance into a global community that wants to see them prosper and p[xv]rovide an excellent rate of return.
[ii] McLaughlin, “Towards a Contextualized Appraisal of Securities Regulation”, found in The Political Economy of Development and Underdevelopment in Africa, Ed Toyin Falola and Jessica Achberger, Routledge (2013) p 118
[iii] Jose Antonio Ocampo, Shari Spiegel, and Joseph Stiglitz, “Capital Markets Liberalization and Development” in edited volume Capital Market Liberalization and Development, Edited by Ocampo and Stiglitz OXFORD 2008. P. 1
[iv] Id at 2, referring to a 2003 paper by Prasad, E. Rogoff, K., Wei, S.J. and Kose, M.A. (2003) “Effects of Financial Globalization on Developing Countries; Some Empirical Evidence.” IMF Occasional Paper No. 220, Washington DC IMF.
[v] Prasad, E. Rogoff, K., Wei, S.J. and Kose, M.A. (2003) “Effects of Financial Globalization on Developing Countries; Some Empirical Evidence.” IMF Occasional Paper No. 220, Washington DC IMF. Pg 1
[vii] Dilip K. Das, Conceptual Globalism and Globalization: An initiation,
2011 Working paper, Center for the Study of Globalisation and Regionalisation, University of Warwick
[viii] Id at 29 citing examples of Eastern economies that suffered in the short-term but gained prosperity in the long-term.
[ix] Id at 17
[x] McLaughlin, Taking Responsibility—Securities Regulation Reform and the Global Financial Crisis: The United States, United Kingdom, and East Africa, 102 Transnational Law and & Cotemporary Problems [Vol.19, 2008] p120
[xii] McLaughlin, “Towards a Contextualized Appraisal of Securities Regulation”, found in The Political Economy of Development and Underdevelopment in Africa, Ed Toyin Falola and Jessica Achberger, Routledge (2013) p121
[xiii] UN Economic Commission for Africa, Dynamic Industrial Policy in Africa, 2014 p 1.
[xiv] “Development is not just a theory about economic development and elimination of poverty, but also an ideological and institutional device to consolidate the domination of the Global North over the Global South.” Alternative Development of Alternatives to Development I, II, III, IV, blog posts by Tayyab Mahmud, www.concurringopinions.com, posted on 25 June 2012, 26 June 2012, 30 June 2012, 10 July 2012, following the Rio + 20 Conference on Sustainable Development.