How to get ahead in Africa

This article is provided by the Deloitte Institute of Innovation and Entrepreneurship.

It seems like a no-brainer: take a country, add some tried-and-tested institutions, then sit back and wait for the economic development that will surely follow. The problem with Africa is that – all too often – this just hasn’t happened.

Conventional wisdom has it that poor-quality national institutions lead to failure; that a country cannot succeed economically if its government, legislation and judiciary are not sound. Researchers have cited factors such as a lack of constraints on the country’s leaders, poor property-rights protection, the absence of checks and balances and legal systems that are inefficient at best. Others have pointed to the geographical issues that make it harder to implement institutions effectively, such as high mountain ranges and virtually impenetrable forests. And other influential scholars stress the role of cultural traits, related to family ties, religious norms and trust, on the process of development.

While there is a strong correlation between institutions such as the rule of law, the protection of property rights and control of corruption and economic development, it does not follow that the former lead to the latter. In fact, many political scientists suggest that, actually, development leads to good institutions rather than the other way round. The so-called “modernization hypothesis” – asserting that economic development, human capital, commerce and industrialisation lead to capable, strong institutions – goes back to Aristotle, Marx, and Lipset. So we’re left none the wiser. 

What’s really going on in Africa? Elias Papaioannou, Professor of Economics at London Business School, and Stelios Michalopoulos, Associate Professor of Economics at Brown University, have shed some light on the underlying causes for the seemingly unpredictable, certainly unreliable rates of development across the continent, by reassessing development and innovation using both historical data and contemporary satellite imagery.