DIRECTIONS IN DEVELOPMENT _~~~ /5-:o (a Africa's Public Disclosure Authorized Management in the 1990s and Beyond ReconcilingIndigenous and TransplantedInstitutions MAMADOU DIA Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized DIRECTIONS IN DEVELOPMENT Africa's Management in the 1990s and Beyond Reconciling Indigenous and Transplanted Institutions Mamadou Dia The World Bank Washington, D.C. O 1996 The International Bank for Reconstruction and Development / THE WORLD BANK 1818 H Street, N.W. Washington, D.C. 20433 All rights reserved Manufactured in the United States of America First printing January 1996 The findings, interpretations, and conclusions expressed in this study are entirely those of the authors and should not be attributed in any manner to the World Bank, to its affiliated organizations, or to the members of its Board of Executive Directors or the countries they represent. The cover photograph by Margaret Courtney-Clarke shows schematic representations of daily life among the Igbo people of Nigeria. At the center is a yam beetle with llli motifs-symbols named after objects, animals, or plants-on its back. The narrow horizontal panels at the top bear abstract patterns derived from ritual cloths. Librarq of Congress Cataloging-in-Publication Data Dia, Mamadou. Africa's management in the 1990s and beyond: reconciling indigenous and transplanted institutions / Mamadou Dia. p. cm. - (Directions in development) Includes bibliographical references. ISBN 0-8213-3431-X 1. Civil service reform-Africa, Sub-Saharan. 2. Public administration-Africa, Sub-Saharan. 3. Management-Africa, Sub- Saharan. 4. Africa, Sub-Saharan-Economic policy. 5. Indigenous peoples-Africa, Sub-Saharan-Economic conditions. 1. Title. ll. Series: Directions in development (Washington, D.C.) JQ1876.ZID527 1995 350'.000967-dc20 95-49805 CIP Contents Foreword vii Acknowledgments ix Abbreviations and Data Note xi Executive Summary 1 Part I. Institutional Capacity and Economic Performance in Africa Introduction: Unbundling Capacity Building 25 The Importance of Capacity Building 25 The Weakness of the Institutional Side of Capacity Building 28 Note 35 1. Institutional Disconnect and Economic Performance 36 Introduction 36 The Disconnect between Central Government and Civil Society 38 Negative Effectsof the Disconnect on the Management of the Economy 44 The Disconnect between the Formal and the Informal Private Sectors: The Crisis of the Institutional "Missing Middle" 48 The Disconnect between Corporate and Societal Cultures: Performance Accountability and Incentives 51 The Need for a Paradigm Shift 58 iii iv AFRICA'S MANAGEMENT IN THE 1990S AND BEYOND Part II. Reconciling the State and Civil Society 2. Client-Stakeholder Assessment of the Quality of the Civil Service 63 Survey of the Zambian Civil Service 63 A Management Audit and Self-Assessment of Education in Zambia 76 User and BeneficiarySurvey of Public Services in Ghana 82 Conclusion 85 3. Improving Governance and Macroeconomic Management 86 Improving Macroeconomic Management 86 Improving the Rule of Law and Other Functions 105 Notes 114 4. Capacity Building for Poverty Reduction 115 Contracting Out Project Execution to the Local Private Sector:The AGETIPS 115 Empowering Local Communities and NGOs to Deliver Public Services 118 Building a Triad among the State, Civil Society, and the Private Sector for Service Delivery in South Africa 133 Conclusion 151 Notes 152 Part III. Reconciling the Formal and Informal Private Sectors 5. Developing the Indigenous Private Sector: Microenterprises to Formal Enterprises 155 Lessons to Be Learned from Successful Microenterprises 156 Twinning and Capacity Building between Informal and Formal Enterprises 170 Notes 176 6. Developing the Indigenous Private Sector: Reconciling the Needs for Saving and Sharing Capital 177 The Survey 178 The Survey Results 182 Policy Implications 191 CONTENTS v 7. Developing the Indigenous Private Sector: Filling the Financial Missing Middle 194 The Survey of Financial Institutions in Mali 195 Operational Implications 211 Notes 218 8. Enhancing African Enterprise by Reconciling Corporate and Societal Cultures 220 Adapting Management to Culture: The Case of Electric Power in CCte d'lvoire 222 The Importance of Procedure in the Cultural Adaptation of Management: The Togo Water Supply Company 228 The Use of Group Dynamics to Foster Greater Efficiencyand Productivity: Quality Control Circles in Burkina Faso 229 Notes 237 Part IV. Conclusions: Process and Institutional Requirements and Operational Implications for Reconciliation 9. Process and Institutional Requirements for the Reconciliation Paradigm 241 Participation beyond Consultation 241 Adaptation of the Communication System 247 Building Political and Institutional Stability through Inclusiveness 249 10. Operational Implications for Donor Support 251 The Reconciliation Paradigm and the Creation of an Effective,Service-oriented Bureaucracy 251 The Reconciliation Paradigm and the Development of the Indigenous Private Sector 258 Reconciling Corporate and Societal Cultures 262 The Role of Donors and External Assistance 264 Appendixes A. Statistical Data Base for Chapter 6 271 B. Summary of Chilean Public Ethics Report 274 vi AFRICA'S MANAGEMENT IN THE 1990S AND BEYOND C. Framework for Civil Service Reform to Reconcile the State and Civil Society 277 D. The Reconciliation Process 282 E. Communique of the Expert Consultation on the Role of Independent Funds as Intermediaries in Channeling Money for Social and Economic Development in Africa 284 Bibliography 289 Foreword Contrary to traditional Afro-pessimism, the Africa's Management in the 1990s (AM9Os) research program illustrates that Africa pos- sesses a substantial reservoir of capacity endowments and best practices on which to build in order to improve the institutional and economic performance of the continent. While not denying the existence and extent of the economic crisis, the AM90s research il- lustrates that institutional reconciliation will be a key to the institu- tional and economic development of Africa. More important, the proposed solutions are mostly homegrown and are therefore likely to strengthen self-sufficiency and reduce dependency on for- eign assistance. The overarching theme of the research is that the institutional crisis affecting economic management in Africa is a crisis of struc- tural disconnect between formal institutions transplanted from outside and indigenous institutions born of traditional African cul- ture. Building on the findings and recommendations of the new school of institutional economics, the AM90s research posits that both formal and informal institutions are here to stay and are needed in Africa, but in a more flexible form: Formal institutions need to be adapted to the local context in order to build the legiti- macy needed for enforceability; informal institutions, although rooted in local culture, also need to adapt to the changing outside world to maintain their relevance in a more challenging and com- petitive global arena. It is through adaptation that formal and in- formal institutions can converge and build on each other's strength and that transaction costs can be reduced and institutional per- formance maximized. This process for building convergence is at the heart of the institutional reconciliation paradigm proposed in this report. The high-impact, low-cost examples of institutional convergence identified in the AM9Osresearch confirm that institutional reconcili- ation is not only possible but necessary to improving the perfor- mance of the civil service, developing the indigenous private sector, vii viii AFRICA'S MANAGEMENT IN THE 1990S AND BEYOND and making African enterprises more productive. The resulting op- erational implication is that the way to improve public sector man- agement and private sector development is by replicating or adapting these best practices for institutional reconciliation, rather than by transplanting new systems, organizations, and metlhods with a heavy dose of expatriate technical assistance. Where suc- cessful, cost-effective practices do not exist, prototypes of new ap- proaches would have to be developed and tested through pilot operations. The above results and operational implications clearly show that, contrary to general belief, it is possible to achieve quick results in the field while building sustainable institutional capacity. Further- more, the variety of high-impact, low-cost options for providing social services and infrastructure make the replication of these in- itiatives a powerful instrument for poverty alleviation. By building on homegrown best practices, local capacity, and institutions and by emphasizing a participatory process that puts the government and local stakeholders in charge, the proposed approach would help maximize the local ownership, commitment, and legitimacy needed for building enforceable, sustainable institutional capacity. Edward V. K. Jaycox Vice Presidenit,Africa Regioni Acknowledgments While I take full responsibility for the conceptual framework and the substance of this report, I would nonetheless like to acknow- ledge that completing the research program and producing the manuscript were made possible by the very useful guidance and contributions from many colleagues inside and outside the World Bank. Among those within the Bank are Ismail Serageldin, who sup- ported the initial concept of this work; Kevin M. Cleaver, Stephen Denning, and Katherine Marshall, who provided