REVISITING THE FOUNDER IN A FRACTURED CONTEXT
Adam Smith is remembered as the intellectual progenitor of modern capitalism. In The Wealth of Nations (1776) he made the case for free competition, the division of labour, and institutions that prevent the abuse of power. Yet Smith was not a defender of commerce without restraint. He warned repeatedly that the greatest danger to markets came from within: from merchants and states that collude to restrict competition for private gain.
Read in the context of Africa’s present, Smith’s warning takes on a different weight. Here, capitalism did not arrive as a neutral set of market rules. It arrived intertwined with colonialism, and in the post-colonial period it has fused with corruption. When these three Cs work in concert, they do not build wealth. They extract it. The result is a system that bears the language of markets while undermining their function.
The Smithian Premise: Competition as the Moral Foundation
For Adam Smith, the legitimacy of a market rests on three irreducible conditions:
• Entry must be free and unobstructed,
• The governing rules must be impartial in application, and
• No participant may wield the power to dictate terms to others.
In the presence of these conditions, self-interest is not indulged but disciplined. Competition subjects it to constraint. Impartial rules subject it to law. The inability of any actor to set terms subjects it to other actors. Under such pressure, private motive is converted into public outcome. Resources are allocated by efficiency, productivity is rewarded, and the system generates wealth beyond the intention of any individual within it.
The system collapses at the point where this architecture is violated:
• When power is used to write the rules rather than to be bound by them.
At that juncture, self-interest is liberated from discipline and repurposed. It ceases to be productive and becomes extractive.
When rules are authored by the powerful, competition is not abolished but circumvented. Efficiency is not disproven but bypassed. The criterion of allocation shifts. The market no longer distributes resources according to cost, skill, and innovation. It distributes them according to access, affiliation, and the capacity to coerce.
This is the precise moment at which, in Smith’s account, capitalism negates its own purpose. The market does not fail in the technical sense. It continues to function. But it functions to concentrate rather than to create, to protect privilege rather than to reward merit, and to serve the interests of those who command the rules rather than the interests of the system as a whole.
THE THREE Cs: CAPITALISM, COLONIALISM AND CORRUPTION
To understand Africa’s dilemma, we must examine how these forces have interacted.
Capitalism, as Imported and Distorted
The variant of capitalism that consolidated across much of post-colonial Africa did not conform to the competitive model articulated by Adam Smith. It conformed instead to a mercantilist structure, one in which the state functioned as the principal distributor of economic opportunity.
Entry was not free. It was mediated. Concessions were issued by decree. Licences were granted on an exclusive basis. The export of primary commodities was consolidated within the hands of a narrow set of actors, often with direct ties to political authority.
Under these conditions, competition was not a constitutive feature. It was excluded by design. The central mechanism of accumulation was not innovation, productivity, or efficiency. It was the monopolization of access. Profit did not derive from the creation of new value. It derived from control over a bottleneck: the right to extract, to import, to export, to operate.
This is not market failure. It is a market constituted on different premises. Where Smith’s market allocates by merit and price, this variant allocates by proximity to the state. Where Smith’s market disciplines self-interest through rivals, this variant rewards self-interest to the degree that it can capture and defend a concession.
The result is a system that bears the language of capitalism but operates according to the logic of rent. Wealth accrues not to those who produce most effectively, but to those who are positioned to grant or withhold permission.
Colonialism as the Original Architecture of Extraction
Colonial rule did not merely exploit African economies. It institutionalised a distortion and embedded it in law, in property, and in the architecture of the state.
The organising principle was not domestic development. It was extraction for export. Colonised economies were configured as appendages: to supply raw materials, and to absorb finished goods. Colonised land was surveyed and titled for concession. Colonised minerals were mapped and licenced for removal. Colonised labour was mobilised and disciplined for commodity production. None of this was arranged to serve local industrialisation. It was arranged to serve the colonising metropole.
The institutions followed the function. Legal systems codified property in ways that privileged export enclaves over communal tenure. Fiscal systems taxed trade, not production. Infrastructure was built radially, from mine or plantation to port, not laterally between regions. The state was not a neutral arbiter. It was an apparatus for securing access, enforcing contracts abroad, and suppressing dissent at home.
Political independence altered the personnel of the state. It did not alter the structure. At independence, the new governments inherited economies whose incentives, legal codes, and physical infrastructure were all calibrated to export. They inherited bureaucracies trained to licence and control rather than to regulate competitively. They inherited property regimes that made access, not enterprise, the primary path to wealth.
The consequences were continuity beneath the changes of flags. The extractive logic persisted. What had once been concessions granted by colonial offices became licences granted by ministries. What had once been monopolies held by chartered companies became monopolies held by politically connected firms. The direction of trade remained outward. The reliance on scarce access as the source of profit remained intact.
In this sense, the post-colonial economy was not a departure from mercantilism. It was its domestication. The stateschanged form. The logic did not.
Corruption as the Bridge Between the Two
In the post-colonial period, corruption ceased to be a deviation and became the operating mechanism that sustained the extractive system.
Political office was converted into a distributive instrument. Licences, contracts, land allocations, and access to foreign exchange were not awarded by competitive process. They were allocated to networks defined by loyalty, kinship, and patronage. Public revenue was not reinvested. It was diverted. Regulatory agencies were not autonomous. They were captured and repurposed to ratify decisions already made in private.
What Adam Smith termed a “conspiracy against the public” did not disappear. Its venue changed. It was no longer conducted in merchant guilds seeking monopoly charters. It was conducted in ministries, in procurement committees, and in the informal corridors of the state. The actors changed. The structure remained: the use of power to write rules that exempt the powerful from competition.
The United State of Cs
When capitalism, colonialism, and corruption operate in concert, they do not merely coexist. They reinforce one another and close the system.
• Colonial-era institutions provide the infrastructure of extraction: the legal forms of concession, the export-oriented economy, the state as gatekeeper rather than referee.
• Capitalism provides the legitimating language: investment, growth, private sector, development. It allows extraction to be described as enterprise.
• Corruption provides the enforcement mechanism: the ability to keep entry restricted, to nullify impartial rules, and to ensure that no actor outside the network can dictate terms or challenge terms.
Under this arrangement,
• The market does not allocate by efficiency.
• The state does not govern by law. And
• Politics does not mediate by representation. Instead, the three fuse into a single circuit.
• Access is monetized.
• Power is capitalised. And
• Competition is systematically excluded.
This is not a failure of markets or a failure of governance in isolation. It is the successful fusion of both into a system whose purpose is no longer the creation of wealth, but the preservation of control over its distribution.
External Capital as the Fourth Force
Colonialism built the infrastructure, corruption operates it, and a distorted capitalism legitimises it.
But the circuit is not closed domestically. It remains tethered to global actors who profit from the same architecture of extraction. Multinational firms, commodity traders, and financial centres continue to reward raw export over local processing. Concessions are financed in London, Dubai, and Hong Kong. Profits are booked in jurisdictions where beneficial ownership is hidden. Illicit
Illicit financial flows drain an estimated ZAR1,28 trillion to ZAR1.47 trillion annually from the continent, more than Africa receives in aid and Foreign Direct Investment FDIcombined.
Trade rules and development finance still privilege the export of primary goods and the import of finished products. In this sense, the mercantilism Smith condemned did not end. It was internationalised. The merchants and states that collude to restrict competition are no longer only in the capital city. They are also in boardrooms abroad. Until this external dimension is confronted, domestic reforms will keep leaking into the same offshore reservoirs.
HOW THIS WORKS OUT FOR AFRICA
The concert of these three forces has produced distinct outcomes across the continent.
Enclave Economies
In strategic sectors,across Africa the pattern persists with little modification. Mining, oil, ports, and telecommunications remain concentrated in the hands of a small number of dominant firms.
These firms are not dominant by accident. Many trace their origins directly to colonial concessions, when rights to extract and to control infrastructure were granted by imperial authority. Others maintain dominance through contemporary political alignment, where proximity to the state secures licenses, blocks rivals, and guarantees contracts. In either case, entry is not determined by capability. It is determined by inheritance and access.
The consequence is structural exclusion. Local firms are not outcompeted. They are locked out. The barriers are not technical. They are regulatory, financial, and political. Capital requirements are set to favour incumbents. Procurement is directed to connected networks. Regulation is administered in ways that protect existing operators.
Value is therefore not retained. Extraction occurs domestically. Processing, refining, manufacturing, and high-margin services occur elsewhere. Raw materials leave. Finished goods return. Profits are repatriated. Technology is imported, not developed.
This reproduces the colonial trade pattern under new ownership guided by political leadership that the majority of the citizenry believes is capacitated to govern. The rent is derived from control of a bottleneck, not from innovation. The only material difference is that the concessionaires now hold domestic passports and sit in national boardrooms rather than foreign ones.
This is an economy organised to facilitate extraction rather than to compel production.
Hollowing of the state
When the central purpose of the state shifts from the provision of public goods to the distribution of rents, governance ceases to function as administration and becomes allocation.
The budget reflects the reordering. Expenditures on roads, power, health, and education are treated as costs to be minimized. They produce no direct return to the networks that control the state. Expenditures on procurement, subsidies, and discretionary projects are treated as investments. They produce loyalty, they produce contracts, and they reproduce the patronage base that sustains power.
Service delivery collapses not because resources are absent, but because incentives are inverted. Infrastructure deteriorates because maintenance yields no rent. Hospitals and schools are underfunded because their output is diffuse and long term. Regulatory bodies are hollowed out because enforcement would interfere with the distribution of favors.
At the same time, the mechanisms of patronage expand. Public office becomes a site for dispensing access. Procurement becomes the primary channel for accumulation. The state is no longer judged by its capacity to deliver services. It is judged by its capacity to channel resources to connected actors.
For citizens, the lived result is a market experienced not as opportunity, but as exclusion. Entry requires a sponsor. Contracts require a connection. Growth requires permission. Where Smith’s market disciplines self-interest through competition, this market disciplines citizens through dependence.
The outcome is not simply poor services. It is a redefinition of the relationship between state and society. The state does not exist to enable production. It exists to mediate access to extraction. And the public is left outside both the market and the institutions that are meant to serve it.
The Suppression of Entrepreneurship
For young African entrepreneurs, the market presents a different calculus of success.
Competitive advantage is not determined first by product quality or price. It is determined by access: to permits, to credit, to foreign exchange, to contracts, and to political protection. The decisive factor is not whether an enterprise can produce efficiently. It is whether it can secure the permission to operate without being undercut, delayed, or excluded by those who control the gateways.
This structure exerts a powerful selection effect. Talent is not rewarded for innovation. It is rewarded for proximity. As a result, productive energy migrates in two directions. It migrates into rent-seeking, where returns are faster and less contingent on market discipline. Or it migrates out of the country entirely, to jurisdictions where rules are impartial and entry does not require a patron.
Industrialisation stalls under these conditions for a structural reason. The incumbents who dominate protected sectors do not face pressure to reduce costs, improve quality, or develop new processes. Their margins are secured by barriers, not by performance. They do not need to innovate to survive. They need only to preserve the concession, the license, or the regulatory advantage that keeps rivals out.
In such a system, entrepreneurship is not extinguished. It is misdirected. The most capable actors are pulled away from production and toward the administration of access. The economy therefore reproduces itself without transformation: the same commodities, the same bottlenecks, the same dependence, and a generation of talent trained to navigate the state rather than to compete in the market.
There is, however, a parallel movement. Technology has created domains where the state’s gatekeeping power is weaker. Mobile money moved payments outside the banking licence regime. Digital platforms allow a designer in Accra or Lagos to sell to a customer in Nairobi without clearing customs. Renewable mini-grids allow communities to generate power without waiting for the national utility. These spaces are not free of politics, but they lower the cost of entry and reduce the premium on connection. If protected, they represent the closest approximation to Smith’s free and unobstructed entry that Africa has seen in decades. The policy task is therefore not only to dismantle old monopolies. It is to ensure that new ones are not erected around data, platforms, and digital infrastructure.
The erosion of legitimacy
Adam Smith placed trust and the rule of law at the foundation of a functioning market. Exchange, he argued, requires the expectation that contracts will be honored, property will be protected, and no actor can arbitrarily rewrite the terms to his own advantage.
When that foundation erodes, the market does not merely become inefficient. It becomes illegitimate.
Across many African economies, citizens observe wealth accumulating not through production, but through connection. Fortunes are traced not to innovation or risk in the marketplace, but to the acquisition of a license, a concession, or a contract allocated by the state. The visible mechanism of enrichment is access, not enterprise.
The consequence is a loss of faith on two fronts. Faith in the market declines, because the market is perceived not as a domain of open competition but as a gated system where outcomes are pre-determined. Faith in the state declines, because the state is perceived not as a neutral enforcer of rules but as the principal distributor of privilege.
That loss of legitimacy has material effects. It fuels instability, as excluded groups conclude that the system cannot be reformed from within and must be contested. It raises the risk premium on long-term investment, because investors cannot rely on stable rules, impartial courts, or the protection of property against political reversal. Capital becomes short-term, speculative, and mobile. It seeks rents, not productive commitment.
In this environment, Smith’s mechanism reverses. Instead of self-interest being disciplined by competition and law, self-interest is channeled into capturing the institutions that are meant to discipline it. And when citizens no longer believe that effort and production will be rewarded, they withhold both effort and production. The market survives in form. Its moral and economic basis does not.
Fractures and Exceptions – Where the Market Is Being Reclaimed
The system described above is dominant, but it is not total. Across the continent there are fractures where Smithian competition has reasserted itself, often in spite of the state rather than because of it.
In Mauritius, an economy diversified out of sugar and textiles because the state enforced rules rather than sold access.
In Botswana, diamond rents were partially converted into public goods because institutions insulated the revenue stream from direct patronage.
In Rwanda, the time and cost of starting a business were collapsed through digitization, reducing the power of the gatekeeper.
In Nigeria, Kenya, and South Africa, fintech and software firms scaled without needing a mining licence or an import monopoly because code does not require a concession.
Under AfCFTA, regional markets are beginning to reward efficiency at scale rather than proximity to a single ministry. These cases do not disprove the 3Cs. They show that the 3Cs can be broken where entry is protected, rules are applied, and no actor can dictate terms. Their existence matters because they demonstrate that the problem is political, not cultural, and that solutions are already being tested on the continent.
WHY THE 3C COMBINATION IS DESTRUCTIVE
Taken separately, each force is destructive. Taken together, they form a devil’s corner.
Colonialism constructed the physical and legal infrastructure of extraction: export-oriented economies, concessionary property regimes, and a state designed to license and control rather than regulate and enable.
Corruption keeps that infrastructure functioning, but redirects its output. It ensures that the channels built for extraction are operated not in the public interest, but for private networks with access to political power.
A distorted variant of capitalism supplies the ideological cover. It recasts extraction as investment, monopoly as enterprise, and patronage as development. The language of growth legitimizes a structure whose purpose is the preservation of control.
The outcome is precisely what Adam Smith most feared: capitalism without competition.
In such a system, prices do not signal scarcity and productivity. They signal influence. The cost of goods reflects who controls import licenses, not the efficiency of production.
Capital does not migrate to its most productive use. It migrates to its most connected use. Investment follows proximity to the state, not returns in the market.
Growth, when it materializes, is narrow. It is concentrated in enclaves tied to commodities and concessions. It is jobless, because rent does not require large-scale employment. And it is brittle, because it remains exposed to every fluctuation in global commodity prices.
What emerges is not a market economy. It is a marketized form of extraction. Competition is absent by design. Innovation is unnecessary. And development, in the Smithian sense of broad-based productivity and rising living standards, cannot occur.
CONCLUSION – AFRICA’S TASK
Adam Smith’s greatest adversary was not the market, but the capitalist who destroys competition through privilege and the capture of the state.
In Africa, that adversary has been amplified. Colonial rule bequeathed an architecture of centralised control over land, minerals, and trade. Corruption has kept that architecture in operation, ensuring that access, not production, remains the primary route to wealth. The result is a form of capitalism that preserves the language of enterprise while excluding the mechanism that ought to make it work – open competition.
The task is not to reject markets. It is to reclaim them.
That means dismantling the colonial-era monopolies that still dominate mining, energy, ports, and telecommunications. It means enforcing competition law so that no firm can sustain dominance through political connection rather than efficiency. It means making public procurement and beneficial ownership fully transparent, so that contracts and concessions can be scrutinised and contested. And it means protecting and expanding the space for small and medium enterprises to enter and grow on the basis of merit, not patronage.
Africa’s fundamental advantages have not changed. There is a young population, vast resources, and the emergence of larger regional markets. But those advantages will remain potential until the underlying system is altered.
As long as capitalism, colonialism, and corruption operate in concert, growth will be narrow, employment will lag, and investment will seek safety in access rather than in production.
The question for Africa is therefore political as much as institutional. Institutions are not built by declaration. They are built through contestation. Those who benefit from control over concessions, procurement, and licenses will resist their dismantling. Those who benefit from open entry, impartial rules, and transparent contracting must be organized to demand it. This requires independent courts that can enforce competition law against the powerful. It requires a press and civil society that can expose beneficial ownership. It requires a bureaucracy recruited on merit and paid to administer rules rather than sell them. It requires regional integration that makes the market too large to be captured by one network. Above all, it requires a political coalition that sees its future in production rather than in extraction.
Africa’s advantages remain. A young population, vast resources, and growing regional markets are real. But they will only convert into development if the concert of capitalism, colonialism, and corruption is broken, and if the global architecture that profits from that concert is also challenged. Until that is done, capitalism will continue to be viewed not as a path to broad prosperity, but as another mechanism of extraction.