Adopting the Concept of Social Capital Stocks Can Enhance the Quality of Public Service Provided

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Saturday, December 04, 2021 / 12:55 PM / by Dr. Akinwunmi A. Adesina / Header Image Credit: iStock

 

Being Lecture delivered by Dr. Akinwumi A. Adesina President, African Development Bank Group at the 51st Annual Accountants Conference held Tuesday, November 30, 2021.

 

'Trust in Governance'

 

Protocols:

Excellencies, distinguished Chartered Accountants, Ladies and Gentlemen,

 

It is a tremendous honour to be with you today on the occasion of the 51st Annual Accountants Conference of the Institute of Chartered Accountants of Nigeria (ICAN).

 

I wish to express my sincere appreciation to the President of ICAN, Mrs. Comfort Olajumoke Eyitayo, members of the Board of Trustees, and Executive Officers of ICAN for graciously extending this invitation to me.

 

I have been asked to speak today about 'Trust in Governance.' It is a weighty subject and one that is timely and expedient.

 

The Latin word for trust - 'Fiducia' is one that as Chartered Accountants you are well familiar with. From fiducia is coined the word 'fiduciary' - which connotes a relationship between a trustee and a beneficiary.

 

Leadership is an investiture of trust.

 

But what is trust?

 

Trust is a powerful, evocative, and multifaceted word. At the level of federal, state, and local governance, 'fiducia' (trust) implies confidence and faith in, and reliance on government, by the people. It is an assurance that what leaders and government officials promise, they will of a certainty deliver. When leaders waiver, or do not deliver on promises and legitimate expectations, trust is broken, and becomes difficult to regain.

 

Trust is the certainty that expectations based on promises, will be met.

 

Trust is integrity - that is, "the quality of being honest and having strong moral uprightness," according to the Oxford Dictionary. When we say someone or an institution has integrity, we are saying they embody the qualities of honesty, reliability, patience, and hard-work; and that they adhere to what is right, even when a price has to be paid for foregoing immediate gain."

 

When I was appointed Minister of Agriculture in Nigeria in 2015, I knew that I had to make major transformations of the agricultural sector. I did not see agriculture as a sector for poor people. My perspective was different. I saw agriculture as a wealth creating sector that can lift millions of people out of poverty. I was guided by my own upbringing growing up in a low-income family, struggling, as we moved up the income ladder with incredible sacrifices by my father. I do not believe in poverty alleviation nor accept that poverty is normal or that we must get used to it.

 

We must eliminate poverty. After all, no good medical doctor will tell you he or she just wants to alleviate your malaria. Therefore, as leaders, we must not get used to abnormal things. The abnormal must never be normalized.

 

As the grandson of a farmer, I was committed, to ensuring that Nigeria's hardworking farmers were put at the heart of government policies.

 

And that is exactly what we did.

 

I was then and I still am convinced that the most important part of leadership is the heart. When the heart is right, right decisions are made. When the heart is not right, or seeks only personal benefits, the leader easily gravitates towards self-adulation, neglects the primary needs of society, and becomes self-serving. I told my wife before taking the assignment: the most important thing in my hand is my pen. With it, I can change the destiny of millions of people, so I must use it rightly. And that is what we did. From my very first day at my desk, I was driven with a very clear purpose: transform the lives of people.

 

The agricultural policies were designed with people accountability in mind, to bring in transparency and quality service for people. Within 4 years we reached 15 million farmers with seeds and fertilizers. That was unprecedented. We deployed the electronic wallet system to deliver farm inputs to farmers, via mobile phones, the first in the world. Food output rose by an additional 21 million metric tons in four years.

 

Just to give you a perspective: that is the equivalent of food enough to fill up 213, 000 Airbus 380 aircrafts. Even in a period of severe flood, the worst in Nigeria's history, Nigeria produced more food, as we took advantage of modern science, water management and technologies.

 

In an economy where Banks were not lending to farmers, we attracted $5.6 billion in investments to the agricultural sector, and expanded lending by banks from 0.7% to 5%.

 

I tried to assess myself not in terms of what people think, but in terms of what God thinks, for all power comes from God, and so all accountability for what you do in power is to the one that put you there. Leaders are required and expected to do the right things. They must exercise power in a responsible manner. They are instruments to bring to pass the plans and purposes of God for people.

 

Ultimately, a leader must be driven by accountability to God.

 

Some felt the agricultural reforms were too audacious to be done, as they would involve stepping on the toes of very influential and powerful people. But I was not deterred. Government has to work for the voiceless. We worked day and night and within 90- days, powered by the revolutionary use of mobile phone technology, we brought in transparency and ended decades of corruption in the fertilizer sector that had marginalized farmers, enriched the powerful and undermined the emergence of a vibrant private sector. Farmers across the country were put right in the center of policy making with clear and transparent accountability to them.

 

Their lives changed.

Communities were revived.

Rural areas boomed and thrived.

Jobs were created.

Hope was ignited in long forgotten rural areas.

 

Similarly, when I was first elected as President of the African Development Bank six years ago, I set out on a mission for the Bank to more boldly help to accelerate Africa's economic transformation. We called the plan the High 5s: Light Up and Power Africa; Feed Africa; Industrialize Africa; Integrate Africa; and Improve the Quality of Life for the people of Africa.

 

My team and I recognised however that we would need more resources to have the kind of impact we envisioned for Africa. To do this, I needed the support of all our 80 African and non-African shareholder countries for a massive general capital increase for the Bank. At the time, several well-meaning people told me that it could not be done. One even said the idea was dead on arrival. Others said no first-term President of the African Development Bank had ever taken the risk of expending so much political capital with shareholders. But it was a risk I was willing to take to achieve greater impacts in the lives of people in Africa, and one that had to rely on trust. Trust in my ability as a leader to deliver results.

 

Finally, in 2019, Bank shareholders approved an increase in the Bank's capital from $93 billion to $208 billion, a 125% increase. It was the largest general capital increase since the establishment of the Bank in 1964. But it was not just about financial resources. It was also about integrity, transparency, efficient management, delivery, and impact for the people of Africa.

 

In the past five years, the Bank's work has impacted on the lives of 335 million people.

 

In 2020, Publish What You Fund ranked the African Development Bank as the 4th most transparent institution in the world out of 47 global development finance institutions on the Global Index of Transparency. And this year, the U.S. magazine Global Finance ranked the African Development Bank as the best multilateral financial institution in the world!

 

That, Ladies and Gentlemen, is a clear indication of trust gained at a global scale.

 

It is the same in every area of public and private enterprise. A leader's reputational equity rises or falls on the basis of results, trust and integrity. Consequently, leaders must mean what they say and say what they mean, as well as deliver on their promises. When the impact of your output is tangibly felt, trust is the end result.

 

Distinguished ladies and gentlemen:

 

We must earn the trust of the youth of Africa and use them as a potent force for national development. Forgotten, undervalued and underused, a lot of youth today have a high level of distrust for governments. That we must change.

 

Just think of the numbers and the implications. Today, 60% of Africa's 1.2 billion people are under the age of 25.

 

We must prioritise the youth because what we do with and to our youth will determine our future. We hold our positions in trust for the present and future generations.

 

We can learn from other countries. Consider Singapore.

 

In 2019, the deputy prime minister of Singapore was a guest speaker at the African Development Bank's Eminent Speakers' series. He said something that challenged me: that Singapore's most important asset was its human capital and that the most important position in the Government of Singapore was the Minister of Education.

 

Singapore prioritizes education for its youth to make them globally competitive in the world of technology and innovation to boost its leadership position in global markets. It trusts its youth, it values its youth, and it shows this by giving top priority to unleashing their potential.

 

Think of the following: Singapore spent $12.8 billion on education in 2018 and $20 billion in 2020. Today, Singapore tops the rankings in global education. It's first-rate human capital, led by its young dynamic and well trained population, powers its knowledge economy, driven by high technology industries, electronics manufacturing including machinery and computers, medical equipment, shipping, and global financial services.

 

Nigeria has a huge youth asset, but they will simply remain illiquid assets until we unlock their full potential.

 

Therefore, we must invest in our youth. We must gain the trust of the youth, and place our trust in them by making them the best assets of the nation.

 

That is why the African Development Bank is exploring with countries, including Nigeria, the establishment of Youth Entrepreneurship Investment Banks - banks for young Africans, run by young Africans, that provide long-term financing that will help unleash the business entrepreneurship potential of Africa's youth.

 

We must see the future, and build it from today.

 

Distinguished Ladies and Gentlemen:

 

Leadership is a position of trust. This includes trust in the judicial system. The justice system is what sets the boundaries on acceptable conduct, for people, institutions, governments, and society in general. However, when judicial systems are subjugated to the dictates of the executive arm of government or controlled and manipulated by powerful individuals, trust is eroded. Any nation that does not respect and uphold the rule of law can never develop. It will only atrophy, or descend into chaos.

 

The symbol in the halls of the courts of justice, the blindfolded Lady justice is supposed to be blind, but when the blindfold has holes in it, justice is selectively dispensed to benefit the rich and the powerful, and trample on the rights of the poor.

 

There is a direct and strong correlation between the rule of law and investments. Think of it: who will want to invest in a place where there is no rule of law, respect for individual rights, freedom of speech, freedom of association, protection of property rights and intellectual property rights, copyrights and patents, and rights to legally acquire and dispose of assets?

 

GDP does not just grow. GDP grows because of economic activities, and economic activities thrive where there is a rule of law.

 

Distinguished ladies and gentlemen,

 

The public sector is vital for the private sector to thrive. You often hear theories that call for smaller governments, for governments to get out of the way, and to let the private sector do things. To some extent this is correct. However, the role of Government is not to produce anything other than the right policies, regulations, rules, laws, and procedures in order to catalyze economic growth and accelerate social development.

 

What is needed is not less government, but better and more accountable governments. The performance of governments therefore depends on the effectiveness of the civil service.

 

As an economist, I like to look at things in terms of input to output ratios. So, it is not how much input you get in; it is how much output you achieve. Ultimately, it is all about efficiency.

 

If the civil service, the engine room of government, is faulty, nations become faulty, and society suffers. We must revamp the public sector to make it leaner, much more professional, with transparent systems, enhanced public accountability, and a performance system where citizens rate the quality of services provided.

 

Distinguished ladies and gentlemen,

 

Adopting the concept of social capital stocks can enhance the quality of public service provided.

 

Let me explain:

 

Every society needs services such as education, health, energy, infrastructure, water, sanitation, housing, security, and social security. We can call these "social capital stocks". The higher the social capital stocks of countries, the wealthier, more-equitable and prosperous nations become.

 

We must think of and run the public sector just like you would run high-performing private sector corporations, which are held to high standards and accountability.

 

When CEOs go to work, the first thing they do is to check the state of their share or stock prices. They have to: they are hired and rewarded to ensure share prices keep rising. The same principle must be applied to the public sector, with leaders understanding that they are responsible and accountable for developing social capital stocks.

 

The current civil service model must give way to a new service delivery mindset focused primarily on building the nation's social capital stocks.

 

To improve morale, enhance effectiveness, expand service delivery, and reduce corruption, in the same manner that a CEO is rewarded when share prices rise, public sector workers that produce higher social capital stocks, should likewise be well remunerated. The best of the best must be attracted into revamped public sectors, with the explicit mandate of expanding the quality service delivery for the people and justifying taxes paid into the coffers of government.

 

Distinguished ladies and gentlemen,

 

Conventionally, one would expect that private capital would move to where the rate of return on capital is high. This, however, is not always the case. What is sure, however, is that private capital always would move to places where the social capital stocks are high. That is why someone can take funds from a developing country, where due to lack of infrastructure, returns on investment would normally be high, and put their funds in places such as Switzerland, where the returns may be low, but where the social capital stocks are higher.

 

Therefore, the necessary and sufficient conditions are that private capital will always flow to where social capital stocks are high. Understanding this linkage between private and social capital stocks is fundamental to re-thinking government and the public service - the engine-room of government.

 

Here is the lesson: the better the quality of performance of governments in building social capital stocks, the higher the trust of private sector in the society, and the higher the level of private capital formation.

 

Distinguished ladies and gentlemen,

 

The fundamental basis of any society is the social contract between the government and citizens. This social contract is embedded in the payment of taxes. Taxes form a significant part of government revenue. Governments are always eager to collect taxes, but the real question is whether there is congruence between tax revenue generation and accountability to citizens in fulfilling expected social contracts.

 

Think of the following:

 

While tax rates are relatively low in Nigeria, it simply is not an excuse to keep increasing taxes. Take the case of Norway for example. Its tax-to-GDP ratio is 39%. Singapore's tax-to-GDP ratio is 13.2%. And Nigeria's tax-to-GDP is 6.1%. It is easy to make the comparison and say Nigeria needs to raise its taxes to similar levels as in Norway or Singapore.

 

But also consider the following: In Norway, education is free through university. In Singapore, a country that had only 1/3 of Nigeria's per capita income at its independence in 1965, today has 100% access to electricity and 100% access to water.

 

While progress is being made the challenge, however, is that in many parts of Nigeria, citizens do not have access to basic services that governments should be providing as part of the social contract. People sink their own private boreholes to get water. They generate their own electricity oftentimes with diesel. They build roads to their neighbourhoods. They provide security services themselves.

 

These are implicit taxes, borne by society due to either inefficient government or government failure. As such, we must distinguish between nominal taxes and implicit taxes - taxes that are borne by the people but are not seen nor recorded.

 

It has become so common that we do not even bother to question it. But the fact is governments can simply transfer its responsibility to citizens without being held accountable for its social contract obligations.

 

When citizens bear the burden of high implicit taxes, and governments or institutions fail to provide basic services, trust in governance is eroded.

 

To build trust with the society, governments must fulfil their part of the social contract, and citizens must also pay their own fair share of taxes. There must be mutual accountability. We must enforce social contracts. .

 

Distinguished ladies and gentlemen,

 

Participatory governance demands open and transparent governance. Governments should be opened up! Citizens have a right to know how public finances are being used.

 

This is why I believe that we must develop a 'People's Index of Governance' with citizen accountability forums.

 

Lifestyle audits are needed for leaders. Leaders must live within their means, and their means must be honest means. When citizens see their leaders living transparently, being sensitive, not lavish in lifestyle but delivering good governance, they will trust governments. But when people feel that their resources are mismanaged or being used for opulence, widening the gap between the leaders and those they are leading, it builds distrust and despondency, which then permeates the fabric of society.

 

Distinguished ladies and gentlemen,

 

Leaders must not only be accountable, they must live simply. Power is not judged by wealth, but by transforming lives of people. To earn the trust of people, we must create people wealth, not simply personal wealth. Recently, Chancellor Angela Merkel of Germany - a dear friend and one of the people I admire the most in the world -- was speaking to us during a meeting with her in Berlin. She told me that she lives in a flat and that she does her own shopping. Startled, I asked her why a world leader like the Chancellor of Germany does not have a State House! She responded that a Chancellor would have to pay a lot of taxes for the privilege of residing in the State House! You can imagine: one of the most important leaders in the world lives in a flat, but her nation gives several billions of dollars in support to developing countries.

 

We must therefore re-examine the cost of governance, at all levels.

 

That is how trust in governance is built at all levels.

 

Thank you very much.

 

About the Author

Dr. Akinwumi A. Adesina is the current President of the African Development Bank Group and a former Minister of Agriculture and Rural Development from 2010 to 2015.

 

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