Thursday 29 October 2015

2015 Tanzania Entrepreneurship Camp: Call for Applications

Source: bussybambo.blogspot.com
Application is now open to University students and young professionals in Africa interested in attending the 2015 Tanzania Liberty and Entrepreneurship Camp by Language of Liberty Institute (LLI), USA and African Liberty Organization for Development (ALOD), Nigeria at “Lodge Twitter Lodge” . Temeke Pile, Near Pile Bar/Pile Bus Stop Dar es Salaam- Tanzania from November 21-26, 2015.

To qualify, write an essay agreeing or disagreeing in 500 words on: “Regulation of trade by government kills employment and development. Discuss” 

Apply fast to benefit from the limited scholarship available Application closes by November 15, 2015 and only successful applicants will be contacted.

Email your essay or further inquiries to: Adedayo Thomas at adedayo.thomas@gmail.com

Wednesday 28 October 2015

Excessive Corporate Tax is Hurting Business Innovations in Africa



Source: icsid.org
Africa in the last decade has not witnessed ample development as proposed in the MDGs and towards the implementation of the SDGs since governments have writhed in finding means for financing series of seemingly enormous development agenda, which has seen a great rise in international debt for most African countries. While most of these countries struggle with debt servicing and settlements, pressure grows on corporate taxation on the home front.

The Africa of today is in dire need to capacitate an ever-growing population, averaging about 5% annually. Governments will definitely need to increase spendings but should not be dependent on corporate tax. It will be consequentially grave for governments to raise tax rates considering the recent abysmal performance of economies across the continent, if latest performance indices are anything but valid. Rather than rashly increasing tax rates especially the corporate taxes as it trickles down negatively on the real tax revenue, focus should be on expanding the tax base.

One of the main ruins to investment in modern economics is high tax rates; it logically forces expanding businesses to invest locally accrued revenue in foreign markets with lesser tax rates. For example, in 2011 dozens of top earning companies left Nigeria for other African states where cost of operation was lesser and tax rates favourable, it dearly cost the Nigerian economy billions of nairas in revenue within a short period, part of why it is heavily shaken by recent fluctuating oil prices.

African governments hurt business innovations by proportionately attempting to feed everybody by excessively collecting from the capacitated few. It compels the majority to persistently depend on the revenue from the working few, making everybody to try to please everybody else at the expense of their own comfort. Just a perfect depiction of The Land of Gentlemen, an adaptation from Li Ruzhen’s Flowers in the Mirror, a 19th century Chinese novel where conventional welfarism eventually led to conflict and lack of consensus.

Evidently, when taxes become the highest budget on the ledger sheet, businesses will be compelled to raise prices of commodities to balance the book as no company wills to run on deficit. Jobs will be cut, prompting a pushof more figures into the labour market.Simply put, loses of jobs caused by high taxes leads to a drop in government revenue, as economic production drops then government raises tax rate to regain the cost revenue, production drops again and revenue drops even more.

The US was faced with a similar dilemma in its taxation system when unemployment was ravaging and incapacitating the economy in the 1980s. Prior to Ronald Reagan’s emergence as the US president in 1981, he advocated for a fundamental tax reduction policy. He argued that the most possible way to promote economic growth was to gradually reduce tax rates by at least a 30% over the period of three years especially the upper income taxes. Reagan adopted the ‘supply-side’ economic principle. The idea was that higher income taxes will be cut as to promote businesses capacities to increase investments and spendings: which means lower tax rate will translate into more revenue and more resource to grow, and effectively enlarge the economic base on the long-run by providing more jobs and of course more taxpayers.  

However, inflation did crept in at the initial as with most major reforms but after it was brought under control, the US economy witnessed rapid growth and around 21million jobs were created within the an 8year period through historic innovations averaging a 2.6 million annually while tax revenue and GDP averaged a 7% annually between 1981-1989.

Drawing a parallel between the ‘Reaganomics’ experiment and the current Africa might be enormous, but Mauritius’ tax policies prove it on the domestic. A 15% makes the lowest in Africa while it competitively ranks highest on the Global Competiveness Index for an African country placing a 46th globally. The secret here is there must be a relative stability for ratio of tax revenue to GDP regardless of the existing tax policies.
It is obvious taxes unfortunately add cost to economic dealings; they affect and hinder aggregate upward movement of the curve. If taxes are minimised more transactions will happen at a lower price point. Albeit, there are always capacities for governments to expand their tax base and until they have fully done that, it will be economically immoral to increase tax levies on potential expansionists.

With 60% of African population between 15 and 25 accounting for 45% of its labour force, employment capacities could still be expanded. African states should not be Bastiat’s “fictitious institution where everybody try to live by embody else”. Social welfarism is the old wisdom dismantling the Africa of today. Only attitudes about trade and innovation can hold it together not excessive tax levies.

-          Ibrahim B. Anoba writes via anobasenior@rocketmail.com

Monday 5 October 2015

Development Aid: Africa’s Dead End, and Africa Beyond the End

Source: 1africacnchild
Since the 1980s Africa has received billions of dollars in development related aids and consequently pays up to $20 billion annually in debt service. Sub-Sahara Africa alone pays about four times as much money as the countries in the region spend on education and health care annually. The result is that more than 50% of countries with most international debts are in Africa. 
 
The effects of civil unrests are hitting Africa hard. Up to 4 million people are at risk of hunger and starvation and more than a million people die annually from malaria, yet, huge amounts of government revenue are to be spent on debt repayment. Africa is in a socio-economic emergency no doubt. In light of this position, it is apparent that Africa needs immediate help and development aids seems imminent.  This will however effectively put Africa deeper in debt pit, a condition the continent cannot afford to find itself.
Is developmental aid a dead end?
Development aids have not effectively elevated Africa. Most African countries are still listed as poor despite a history of massive aid. The state of key sectors such as the economy, health and education in comparison with the inflow of aids are not harmonising. The IMF in its 2005 report on Africa, Aid in Africa, revealed that the influx of foreign aid into the African economy has not been met with tangible development, which is quite obvious, and that the billions of dollars in aid has not transformed into developments in the receiving countries with a 5.5% average growth.
Economically wise, developmental aid is actually a viable alternative but in Africa, it seems to be a dead end. For an example, the Marshall Plan was a defining step for Western Europe towards development after World War II; the European Recovery Program was aimed at rejuvenating Europe’s war-turned economy and to prevent the spread of communism.It was a major success primarily because ofthe well-structured development and recovery plans of recipient states and the desire of Europe to reposition its economic superiority. Africa on the contrary has received around 4 times an equivalent of the Marshall Plan since the 1980s, and a lasting legacy has yet to ensue,it is a disturbing fact since numerous factors hinder the translation of the billions of dollars into equitable development, factors such as endemic corruption, funds mismanagement and economic centralisation.
Corruption and funds mismanagement are a major reason aid has not lift Africa, corruption alone costs Africa over $150 billion annually. Funds intended for development are grossly mismanaged, this is not surprising since nearly every African government since 1985 has been indicted in at least a corruption scandal, corruption is a bane to any development agenda, and it cripples progression and nurtures uncertainties. Before the millennium, numerous African economies were much economically centralised especially as a legacy of the military swerve, presently, some aspects of Africa’s economy and business policiesare still structured around state ownership of means of production, an economic positioning that negates modern demands.
A rose flower from the nursery needs fertile not harried soil to thrive, likewise, development aid needs a diverse economy rich in entrepreneurial initiatives to capacitate its economic intensions.  In reality, governments cannot assure effective production in all sectors of the state since the basic functions of security and welfare are more comprehensive in the current world compared to previous centuries, nowadays governments worry more on national security, diplomacy and administration of justice, and business should not be inclusive.
Beyond the end
Africa is an ingeniously blessed continent. With dispersed abundant natural resources, millions of investment opportunities and over a billion populations, Africa logically should be the new frontier. African governments need to look inward. Agriculture is a sector analysts have echoed to be the oil well of Africa, a sector estimated to yield billions of dollars annually if well tapped but lies almost unproductive,only of recent that a few African governments has attempt innovative measures, agriculture aggregately suffer in Africa.
African governments should promote innate and indigenous business initiatives. With millions of Africa youthsunemployed and a convincing percentage of them embracing entrepreneurial innovations,governments can promote economic development through provisionsof incentives for entrepreneurs and by making capital available for small-scale businesses. Promotion of entrepreneurial ingenuities is a pathway to development for Africa if embraced. In substitution for development aids, Foreign Direct Investment (FDI) and an Open Market System could prove an alternative. Just as China, other established economies and lenders should invest massively in Africa’s key sectors; governments acrossthe continent should also enact investment friendly policies to attract private investors.
In appreciation of these propositions, progressions will ensure and Africa would in no time go beyond the end.
Anoba Ibrahim
writes at anobasenior@rocketmail.com