Institutions and Capacity Building: The African Economic Development Potential Revisited

Abstract: Risks faced in African agriculture and industry reduces the dynamic rate of return in these industries. Supply and demand constraints like scarcity of human capital and low effective demand further reduce the scope of industrialization. Institutions have to be developed to share the risks in consumption and production and thus achieve equity and efficiency. Capacity building through investment in the education, health and the public sector can bring about an efficient supply response. Monetary and fiscal intervention can ensure that such a supply response is met effectively and the benefits are passed to consumers, labor and entrepreneurs through a regulated market.