Chapter 1: Unpacking African Development Dynamics: A Political Economy Perspective

At the heart of political economy is how politics affects the economy and vice versa. Society wants the supply of public services like healthcare, education, security, and infrastructure to be flexible, innovative, and efficient. However, the barriers created by bureaucracies often stifle innovation. The argument for harnessing the policy-market nexus to increase aggregate economic welfare remains compelling. While conventional arguments on the ability of the private sector to intrinsically generate efficiency gains remain valid, governments’ traditional role of providing an enabling environment to foster private risk taking for capital accumulation is no less important. This chapter offers insights into the political economy of the public policy dynamics of the African economy and society, with emphasis on public-private collaborations for policy innovation. To break new ground and solve some of the most pressing challenges of our era, innovating the public policy cycle is key. Nowhere is the policy innovation imperative more compelling than in Africa.

Chapter 2: Policy Innovation in Africa: Problems and Promises

Mainstream discourses often construe policy innovation in the context of public policy targeted at achieving innovation in a particular domain. However, this chapter argues this is not the same as fostering innovation within the public policy life cycle. The innovation discourse has transitioned from its purely scientific and technical focus to include digital opportunities and the evolution of new business models. Africa has underlying political economy issues manifesting as social, economic, and policy challenges. To understand what has happened to the African economy and society, this chapter analyses the varying degrees of state and market involvement in resource allocation dating back at least to the immediate post-independence period. Policy learning provides a more feasible pathway for policy entrepreneurs and innovators to bridge existing practical knowledge gaps by learning about, and creating opportunities, through innovative and creative approaches. The parameters of a policy implementation path are key drivers of the eventual policy outcome.

Chapter 3: Policy Change: Theories, Evidence, and Implications

Institutional quality lies at the heart of much of the work in comparative political economy, through paradigms such as agenda-setting, policy image, and the influence of the media. And while the growth and development trajectories of economies may encounter positive and negative political shocks, the broad effects have implications in both developing and advanced economies. This chapter presents political economy as a framework for understanding how policy choices emanate from the interactions between politicians and economic elites. With the aid of eight contemporary theories of policy change, the core arguments and worldviews about new paradigms, beliefs, and assumptions that can generate the necessary and sufficient conditions to improve policymaking are presented – while paying special attention to the differing implications for policy innovation. The theories are situated within the broader discussion on the political economy of public-private policy partnerships, and more specifically, within the discourse on policy entrepreneurship.

Chapter 4: Policymaking and the African Renaissance

Political economy analysis relies heavily on rationally justifiable assertions that lend themselves to logical proof. Why are major economic prescriptions rooted in classical physics expected to deliver outcomes that recognize the differing situations and challenges of the actors in our political and socioeconomic systems? This chapter questions why orthodox economists distort theory and logic to defend mainstream, neoclassical approach to economic analysis. Due to the pitfalls of conventional neoclassical doctrines, depicting the evolutionary behavior of economies with static models is a difficult exercise. This chapter acknowledges the potency of pragmatism, in relation to the connections between economic science, philosophy, and normative economics, in making sense of the public policy development process. To break the shackles of poverty and address disturbing patterns of poverty, conflicts, and income inequality, policy innovations and reforms across the fabrics of Africa’s political economy institutions are key.

Chapter 5: The Political Economy of Modern Capitalism

This chapter revisits the debate on modern capitalism. While capitalism has many pitfalls, its unprecedented ability to create wealth through the invisible hand remains compelling. A missing piece in the discourse on the failure of capitalism and the ineffectiveness of regulations is that while mainstream, neoliberal economic thinking puts a lot of trust in the ability of competitive markets to deliver efficient outcomes, the rise of the superstar firms has resulted in the birth of oligopolies in the private sector. This trend is exacerbated by the infusion of politics, which further weakens the purpose of a markets-based system, regarding helping guide incentives. To move the needle, this chapter calls for policymaking to reimagine the outcome of the interactive effects of markets with the digital economy as we seek ways to address the fundamental challenge of inclusive growth. To turn innovation from a paradigm to reality, the interplay of economics and politics is key.

Chapter 6: State Structures and Economic Modernization

This chapter examines institutional structures and a comparative assessment of national and subnational fiscal systems in a bid to gauge policy effectiveness around redistribution and stabilization in Africa. The social, political, and economic ramifications are expected to offer a glimpse into the policy innovation imperative of the dichotomy between decentralized governance and centralized fiscal architecture. If the gains from regional innovation ecosystems are to be maximized, political economy nuances around state structures, fiscal regimes, executive-legislative financial autonomies, and allied matters must be appropriately situated. While most of the 54 countries in Africa are unitary states – with all the powers of government vested in the central government – only Ethiopia and Nigeria are fully federal. Some features of federalism are present in countries like South Africa, the Democratic Republic of Congo, Somalia, the Comoros, Sudan, and South Sudan. The discussion concludes that constitutional dynamics – whether in unitary or federal systems – are complex.

Chapter 7: Structural Shifts and the Race to Net Zero: A Policy Diffusion Analysis

Transitioning towards sustainable energy systems often involves optimizing multiple pathways. As the digital revolution shifts the composition of trade globally, not only is diversification required to help reduce dependence on natural resources, but it is also needed to create an innovation ecosystem that enables digital innovations to create exportable high-value business services – beyond traditional resources and manufacturing. This chapter recognizes this. As the energy landscape continues to shift around the world, it is argued that policy incentives and pathways that may help strengthen Africa’s adaptive capacity need to be considered. Since differing economic structures and policy thrusts influence energy use and production patterns, the debate on energy system transformation will remain on the front burner of the global energy investment and policy agenda for years to come. Optimal outcomes will depend on how structural, efficiency, and jurisdictional nuances are balanced.

Chapter 8: Public-Private Policy Partnerships: A Policy Innovation Paradigm

Optimizing the interactions in the policy-market-society nexus can spread socially beneficial innovations. While public-private partnerships (PPPs) have for decades been a key tool in the delivery of critical public goods and other important interventions, this chapter makes a case for public-private policy partnership based on the notion that the public good construct in mainstream economic analysis has little or nothing to do with whether the public goods and services in question are in fact provided by the state or by private enterprises. PPPs as a policy approach combine the best of competitive market attributes and government operations in designs targeted at improving public policy. Given Africa’s peculiar structural and institutional dynamics, the chapter argues in favor of interventionist policies that recognize the microeconomic realities of the continent’s largely informal actors who constitute the backbone of the private sector.

Chapter 9: Development Finance and Venture Capital: A Policy Diffusion Model

The need for substantial investment to close Africa’s huge infrastructure gap has attracted considerable attention in the international finance and development circle in the last two decades. Closing this gap is important for the continent’s ability to achieve the Sustainable Development Goals (SDGs). While much progress has been made in the past two decades – due partly to improving economics and policy reforms – in attracting international private capital for the development of the continent’s transport, ICT, energy, water, and sanitation sectors, achieving financial close remains an issue. If properly harnessed, with the right policy mix and financing architecture, the digital revolution can transition Africa from the margins to the mainstream of global commerce. From a development finance perspective, the unprecedented influx of international private capital in Africa in recent years has major implications. This chapter makes a case for Startup Acts as a policy innovation tool for the continent’s burgeoning venture capital ecosystem.

Chapter 10: Tax Policy Innovation and Financial Inclusion

The core argument in this chapter is that efficiency gains from the increased adoption of digital technologies have reshaped fiscal policy through innovations in how information on public revenue is collected, processed, shared, and acted upon. However, while these innovations have drastically transformed fiscal policy formulation and implementation, existing institutional and capacity constraints mean there is more work to be done. Multilateralism and shared responsibility are needed to address the issue of revenue losses to tax havens and secrecy-based jurisdictions. To enable Africa reap more proportionate benefits from crossborder trade and investment transactions, policy innovation in the tax domain is in order. In the final analysis, this turn of event has implications for countries with a competitive advantage in tax havenry.

Chapter 11: Trade Policy Innovation and the AfCFTA Imperative

Orthodox economic prescriptions emphasize a reallocation of labor from low-productivity subsistence activities to high-productivity industrial activities as a precondition for structural economic transformation, but the global digital revolution has altered the economics of manufacturing. Africa’s services economy remains a key wealth generator. While agriculture remains the mainstay of the heterogenous economies on the continent, Africa’s young population and advances in technology are gradually reinventing its industrial structure to be less dependent on extractive industries. The implications of the African Continental Free Trade Area (AfCFTA) for deep reforms capable of driving long-term structural changes across African economies are examined. To foster economic self-sufficiency on the continent, the analysis suggests the AfCFTA could help expand fragmented markets and provide access to foreign capital which, often, is highly sensitive to technological innovations and economies of scale and scope in global value chains.

Chapter 12: Regional Innovation Engines for Development

Through efficiency gains and productivity increases from the interactions between firms and people located near one another, agglomeration economies remain the basis for innovation ecosystems in cities and industrial clusters. This chapter draws on Michael Porter’s thesis that nations and regions must compete to attract firms by offering the most productive environment. Porter, in essence, implies that to be competitive, regions must increase productivity in the use of human, capital, and natural resources. While the baseline for regional success is often available in many cases, policy innovations that can help sustain a robust innovation ecosystem would be important. This is the central tenet of this chapter. Considering Africa’s bourgeoning urbanization, manifest in the growth of its megacities and smaller towns and cities, innovation superclusters present a great opportunity. For success, it is imperative for policy paradigms, frameworks, and devices to be sensitive to Africa’s unique but heterogenous socioeconomic dynamics.

Chapter 13: No Foot-Dragging: Let’s Transform Africa

This chapter corroborates why the highly complex nature of society, contemporary policy problems, and the rapid advances in digitization significantly limit the ability of traditional policy devices and analytical paradigms to help in choosing the best policy among a set of alternatives, with implications for the formulation and implementation of effective policies. Both policy diffusion and policy innovation are advanced, partly, as the reasons why the higher the success rate of policies in other states, the higher is the likelihood of adoption. The chapter draws on lessons from several jurisdictions for Africa’s development. To achieve the Africa of our dreams, this chapter argues that policy innovation is key. While there is no one-size-fits-all template to reduce inequality and poverty, the potential of policy reforms targeted at broadening the continent’s economic base to diversify the structure of production deliver long-term economic growth is underscored.