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The Indigenous Economic Institutions
George B.N. Ayittey
The Free Market, Free Trade and Free Enterprise Traditions
Africa's indigenous economic system is probably the area least understood. The myth of "hunters and gatherers" persists; giving the impression that Africa had no economic institutions or culture before contact with the Europeans. Trade and exchange were supposedly unknown, since self-sufficiency and subsistence farming were the operative commands. Books on precolonial Africa dwelt excessively on the "backwardness" of African technology. But Africa did have economic institutions.
West Africa was particularly noted for its indigenous economic development. As Elliott Skinner (1964) put it: "The peoples of [precolonial West Africa] had economies which made agricultural produce available in amounts large enough to be sold in rural and urban markets; craft specialization often organized along the line of craft guilds, whose members manufactured goods to be sold in these markets; different kinds of currencies which were nearly always convertible one to another and, later, to European denominations of values; and elaborate trading systems, external as well as internal. Goods produced in even the smallest West African societies were circulated in local market centres, and ultimately by porters, caravans, and boats, to the large Sudanese emporiums from which they could be shipped to Mediterranean areas in exchange for foreign products" (205).
Africans engaged in a wide variety of economic activities. Although mostly primary - agricultural, pastoralism, hunting, fishing, and woodworking - there were also crafts and other industries such as clothweaving, pottery, brass works, and the mining and smelting of iron, gold, silver, copper, and tin.
What a person grew on the land was his own free decision to make. The produce was private property. Even among the Kalahari Bushmen, "all that a woman gathered belonged to her alone, and of course was shared with her family" (Marshall, 1973, 113). How much a person shared with his kinsmen and how much he kept for himself was an individual decision to make.
Africans engaged in several industrial activities in the precolonial era. In Benin, "the glass industry made extraordinary strides" (Diop, 1987, 136). In Nigeria, "the cloth industry was an ancient craft" (Olaniyan, 1985). Kano attained historical prominence in the fourteenth century with its fine indigo-dyed cloth that was traded for goods from North Africa.
There were banks in colonial Africa, but the natives lacked the collateral to obtain credit. To secure initial start-up capital for fishing and commercial operations, they turned to two traditional sources of finance. One was the "family pot." Each extended family had a fund into which members made contributions according to their means. The fund was used for both consumption and investment. For example, it was used to cover funeral expenses, weddings, the educational costs of the more gifted among them, extension of the family house, or as capital.
The second source of finance was a revolving credit scheme that was widespread across Africa. It was called susu in Ghana, esusu in Yoruba, tontines or chilembe in Cameroon and stokfel in South Africa. Typically, a group of say ten people would contribute perhaps $100 into a fund. When the fund reached a certain amount, say $1,000, it was handed over to the members in turn. To be operational, such a scheme required a liberal dose of trust among members and somehow the natives managed to make it work. In fact, for many businesses in the indigenous and informal sector, the loan club was the primary source of capital.
One could also borrow money by pledging farms, a practice common in Ghana and Nigeria (Hill, 1987). Profit was never an alien concept to Africa. Throughout its history, there have been numerous entrepreneurs. The aim of traders and numerous brokers or middlemen was profit and wealth. Profit calculations were always on the mind of African traders. For example, "The Nupe saw to it that the prices of goods corresponded closely variations in supply and demand, above all, to seasonal fluctuations. They also made sure that distance between the area of production and market, and the additional labour and loss of time involved in transport, enter into the calculation of price and profit" (Skinner, 1964, 218).
Profit made was private property; it was for the traders to keep, not for the chiefs or rulers to expropriate. The natives chose what they did with their profit. The traditional practice was to share the profit.
Property Rights
Looting and arbitrary seizures of property by undisciplined soldiers was not a feature of traditional African society. Even the chief could not dispossess someone of his property without a full council hearing. When disputes pertaining to property arose, a chief's court adjudicated the matter. On precolonial African law and custom, Frances Kendall and Leon Louw (1987) observed that: "There were no powers of arbitary expropriation, and land and huts could be expropriated only under extreme conditions after a full public hearing" (18). This view is corroborated by Koyama (1980): Only in cases of, for example, the commission of a grave offence against the community, abandonment of the land, or when the chief required the land for himself or for another chief, was this right exercised. There could therefore be `despotic acts' giving evidence of an unbridled exercise of power, but there was always the safeguard that the powers were not exercised recklessly. Public opinion would always be taken into account. There were also always the councillors whose advice was as a rule taken into account by the chief."
Free Market, Free Trade Tradition
Some goods produced by the natives were traded or sold in markets. A market was simply a place where exchanges could be made more easily. Where exchanges occurred regularly, a marketplace would naturally develop. The institution of a marketplace, then, evolved naturally. As Skinner (1964) remarked: "The markets served as local exchange points or nodes, and trade was the vascular system unifying all of West Africa, moving products to and from local markets, larger market centers, and still larger centers" (215). Many of the precolonial rural markets of West Africa provided for the needs of local producers, consumers, and traders and also served as foci for long-distance traders.
Market Regulations and Controls
Generally, political authorities did not control economic activity in African markets. Existing rules and regulations were aimed more at the preservation of law and order, the collection of market tolls, the use of standard weights and measures and the supervision of the slaughter of cattle. Traders generally sat with others of their village-groups. There was no strict regulation as to where they should remain, and there apparently were no price controls.
Kojo Yelpaala (1983) found that, in Dagaaba markets, "There was the freedom to buy and sell any commodity within the market environment (daa). Free and voluntary interaction between buyers and sellers produced a market-determined price. When this condition was violated, the transactions were said to result in fao (robbery) in the sense that the buyer or seller might extort a price lower or higher price than the market-determined price, thereby reducing social welfare" (370).
The Importance of Markets
The village market performed vital economic, social, and political functions that were well understood by the chiefs and the people. The marketplace was the central nervous system of the community. In fact, as Skinner (1962) observed of the Mossi of Ghana, "whenever and wherever there is a large gathering of Mossi there is a market. The rural market is the center of Mossi social life, and friends as well as enemies meet within its confines. Among the Akan of Ghana, Daniel F. McCall (1962) noted that the marketplace was not only "the source of food and clothing for the family, it is the place where the wife and mother spends most of her waking day" (65).
In East Africa, studies by Gulliver (1962) also showed that markets were extremely important to the Arusha because markets provided them their "main opportunity for personal contact with the Masai in the conscious efforts to learn and imitate all they could of Masai culture" (46). Clearly, the marketplace was the heart of indigenous African society, the center not only of economic activity but also of political, social, judicial, and communication activities. Perhaps the easiest way to annihilate an ethnic group was to destroy its markets.
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