Finance and Development in Sub-Saharan Africa

The five decades since independence across sub-Saharan Africa (SSA) began in 1960 haves seen dramatic shifts in the definition of economic development in the rhetoric, policy, and practice of African nations, international financial institutions (IFIs), and bilateral donors from the Global North. There has also been a significant redefinition of finance in relation to capital accumulation, and the role and functioning of national financial sectors. Approaches to economic development that were prominent between the 1950s and 1970s stressed the role of finance as a servant to industrial development. The development of manufacturing with industrial policy was viewed as an imperative in order to transform newly independent economies that were —once characterized by capitalist enclaves and extractivist structures, and formed under colonialism— into integrated and diversified modern economies that promoted productivity enhancement and employment generation. Since the 1980s, development policies have been underpinned by the logics of the Washington Consensus and by the neoclassical economics that informs the approach. Concerns of financial and industrial structure gave way to issues of efficiency of intermediation and growth, and the rejection of industrial policy. From the late -1990s, the market-centered logic has moved further towards a view that the achievement of a market- based financial system should be a goal of development in itself whereby ‘financial development’ is both the means and the ends of ‘financing development’. The shift from ‘financing development’ to ‘financial development’ and, more recently, the promotion of private finance and private sector development in SSA, has taken place in the context of the profound restructuring of the global economy and capitalist accumulation in relation to finance. Financialization can be understood most broadly as the “increasing power of the owners of money in the management of economic affairs” (Bracking, 2016: 1). The extension of power and influence over economic activities across SSA has occurred through different avenues, that includinge development policies and financial sector development programmes that take on particular local characteristics owing due to the specificity of colonial histories and capitalist development. This chapter traces broad changes in the role of finance in development policies, practices, and processes in SSA. It does so by assessing the relationship between finance and industrial development: (i) that is implied by different approaches to finance in development policy; (ii) in relation to the trends and changing patterns of external debt and financial flows on the continent; and; (iii) in the historical development of economies in SSA. The cases of Tanzania and South Africa are presented to illustrate commonalities and differences in the ways in which financial sectors have developed owing to similarities and differences in their respective colonial experience, and the character of capitalist development after independence.