THE ECONOMIC PROBLEM

Let us look, first of all, at the economic problem of African countries today. All these countries, independent or still dependent, are ‘develop­ing’ countries, by which is meant that their economies are growing i?4

LEGAL DEVELOPMENT AND ECONOMIC GROWTH IN AFRICA and must be rapidly expanded if the new-found wants of their peoples are to be satisfied.

The development of a new economy inevitably means a break with the past: a break both with the traditional peasant economies of subsistence agriculture and local markets, and with the colonial-style extractive or monoculture economies which relations between colony and mother-country too often implied.

What are the legal implications of this quest for economic growth? They arise in several different ways: first of all, any major change in

economic or social arrangements which a government wishes to introduce has to be procured by revision of the law; change of the law is thus an instrument or consequence of economic change. For example, the movement towards consolidation and registration of individual African titles to land in Kenya was inspired by economic considerations; it was intended to increase the economic potential of land in African occupation. To carry this policy out, radical changes were required in the whole structure of the law governing land tenure in the African-occupied areas; a new substantive law of land had to be created and machinery had to be devised for passing from the old system of tenure to the new.¹ Here legal development follows economic change.

But there is another and more subtle way in which law reform may be tied up with economic growth; and that is where change in the law is seen, not as a mechanical consequence of economic development, but as a stimulant to economic development. The existing law, it may be felt, restricts economic growth in one way or another: for example, the traditional systems of land tenure may be thought to inhibit efficient use of the land; or the absence of legislation on bankruptcy inhibits the supply of credit; or the out-of-date character of the commercial law deters foreign concerns from investing in the country.

The indirect promotion of economic development by legal change can proceed even more generally than that, as where it is felt that the whole legal climate or structure of the law is a deterrent to economic growth. One or two instances which occur to me are: (:) in East Africa, the Royal Commission’s¹ desire to create an individualistic and competitive society inspired by the profit motive (but not too much, like the famous advertisement for shaving soap!), which led them to attack the existing features of the customary law which they thought were anti-individualistic and ‘communal’ in tendency; (ii) in West Africa, a book I was reading the other day on the economic develop­ment of French-speaking West Africa, which placed among the obstacles to economic growth the customary institutions of polyga­mous marriage, the giving of bride-price, and the family system; and (i«) in Northern Nigeria, the advice of the Panel of Jurists convened

* For which see F. D. Homan, ‘Consolidation, enclosure and registration of title in Kenya' (1962), 1 J. Local Admin. Overseas 4.

¹ Em Africa Royal Commission 1953—1955 Report (London, 1955, H.M.S.O., Cmd. 9475).

to examine the penal law of the Region, which felt that foreign investors might well shrink from commercial contact with countries with an out-of-date criminal law.*

How do particular economic changes affect the law, or particular legal changes affect economic growth? What are the legal obstacles to economic growth? I propose to answer these questions through three case-studies, which reveal how African countries view the existing state of their legal systems when examined through economic spectacles. After this, I hope we shall be in a position to define more clearly the sort of law and the sort of lawyer that are capable of meeting the novel challenges posed by these problems.

three case-studies: (a) land law

The first problem that I turn to is that of the land law, which is surely the most pressing of all the economico-legal problems in every African country.

What is wrong with the existing land laws? Many things. I shall overlook the purely political defects, such as under the Land Apportion­ment Act in Southern Rhodesia, and concentrate on the legal and economic deficiencies. First of all, there is the fact that in practically every territory there is not a single system of land law: most territories have at least two kinds of land law—a territorial law of European origin or inspiration, and African customary land laws applying to the African section of the population. But even this simple picture is obscured, since in some territories there is a multiplicity of different statutory regimes governing the tenure and transfer of land in different parts of the country or for different kinds of property (e.g. in Ghana² and in Kenya); and in Tanganyika one finds it necessary to have a knowledge of the German and English law relating to title and

¹ See J. N. D. Anderson, ‘Conflict of laws in Northern Nigeria: a new start’ (1959), 8 I.C.L.Q. 442, at p. 452.

¹ The position in Ghana has very recently been changed with the enactment of the Administration of Lands Act, 1962.

conveyancing, as well as of the locally enacted Land Ordinance, before one can appreciate what is the general law relating to land. Yet another complicating factor is the multiplicity of customary land laws, and in West Africa at any rate one has all the uncertainties caused by the possibility of combining English and customary land laws in a single transaction, or of converting an interest held under the one system into an analogous one under the other system and back again.

The next thing that is wrong with the territorial laws is that they are often out of date. The conveyancing law imported into most of the common law West African countries (excluding the Western Region of Nigeria) and into Tanganyika was the pre-1926 law of England.

The conflicts which can arise between one sort of law and another, and the difficulties in finding out the details of the correct law, whether statutory or customary, are productive very often of uncertainty as to the law or as to the validity of a particular title. Such uncertainty is undoubtedly increased by the restricted use made of registration of title as guaranteeing the interest which a holder of land may possess and which he may wish to market, or at least to use as security.

The defects which I have so far mentioned are technical defects, which one might well expect a competent property lawyer, given the necessary time and information, to be able to put right without too much difficulty. But the next problem is of quite a different character. It has been suggested, especially in East and Central Africa, that the whole system under which peasant farming has hitherto been carried on is basically unacceptable in a modem economy, and that this system must be radically modified, or even abolished altogether, in favour of a new approach to land-holding and exploitation. The most articulate expression of this view is to be found in the Report of the Royal Commission on Land and Population in East Africa,¹ which reported in 1955 (though its sentiments have been echoed by other commissions and government spokesmen from time to time). What is the burden of the East African Royal Commission’s criticisms?

In the cattle-keeping societies, the major criticism of customary law is that it permits so-called ’communal’ grazing, i.e., that grazing land is open to all members of a particular local community or kinship group, whilst ownership of cattle is ‘individual’.

In the agricultural societies, the main alleged faults are: drifting * Supra, Chaps. 21, 22.

cultivation; the vesting of land-rights in the so-called clan or tribe, with, as stated consequences,

‘the unrestricted right of the individual to run stock on what is held to be the common asset of land; the right of all in the clan to claim to be supported from the clan’s land; and the understanding that ownership, if such an idea exists at all, is vested in the com­munity, so that sale, mortgage, capital value, lease and rental were terms unknown.’

And next there is a wide variety of authorities controlling the administration of the land of various groups, including religious and chiefly authorities. In modem times, new deficiencies have appeared, it is suggested: the divisory system of succession, coupled with expansion of population, leading to fragmentation and sub-division of holdings; insecurity of tenure; a vicious struggle for survival due to the growing of cash-crops and the realization that land has a cash-value; tribal parochialism and exclusiveness; and all the ills traceable to the uncon­trolled evolution of customary land laws in the direction of greater individualization of land-rights.

What does the Royal Commission recommend? ‘The smallness of the monetary needs of the pastoral tribes’ is seen as a major difficulty (fortunate people, we might well say!); therefore a commercial instinct must be encouraged among them. Restriction of cattle numbers is one of the solutions, together with improved marketing of stock

It is in regard to the agricultural societies that the major recom­mendations are made. The technical agricultural faults are isolated as: erosion; lack of integration between stock and the carrying capacity of the land they occupy; insufficiency of the resting period in the culti­vation cycle; and fragmentation. The answers to these problems, the Commission says, mainly lie in integrated, consolidated, planned holdings run on a more scientific basis. There must be an encourage­ment of individual tenure, as this gives the proprietor a sense of responsibility, an interest in improvement of his land, and a feeling of security. At the same time the Commission wisely recognizes that:

‘From a land usage angle there is nothing necessarily associated as more beneficial either with a communal or an individual approach. Neither individual tenure nor co-operatives, nor collective farming necessarily make crops grow better.’

What counts, said the Commission, is that there should be some form of control and planning of land use. But equally there ought to

be encouragement of die ‘progressive individual’, who may pioneer new ways of land use.

Views such as these have been influential in East and Central Africa. In Kenya the process of consolidation and registration of holding under African occupation is in close conformity with the Commission’s proposals; in Southern Rhodesia something similar has been introduced by the Native Land Husbandry Act; in Uganda there has been a cautious acceptance of some of the major planks in the ‘individualizing’ platform; while for Basutoland the Morse Commission¹ said that ‘traditional law and custom concerning the tenure of land throughout Africa appear clearly to be out of step with the requirements for a modem cash crop agriculture, where the individual must take certain risks and therefore be assured that the reward of so doing will fall to him. In many African countries changes have already been made (e.g. Southern Rhodesia and parts of Kenya), apparently with considerable success. It may not be too optimistic to hope that by the end of the present century these traditional tenure systems will be only a memory in every progressive African country.’

The Morse Commission went on to suggest that there might be introduced ‘a system of tenure based on conditional individual tenure’. At the same time their advice was festina lente, at least till there had been an expert study of the whole problem.

I am afraid that it is not possible to document my criticisms of these attitudes and recommendations in detail here; but let me summarize my general position by saying that I feel that many of these criticisms of existing customary land tenure systems are exaggerated or ill-informed, and rest on insufficient knowledge of how the systems function in practice today (for example, there may be a very wide variation in the structure and details of the land law from one part of a single territory to another, let alone as between different territories; and die assumption that there is some common factor labelled ‘com­munal customary land tenure’ betrays a gross misunderstanding of the customary laws). Whilst one would concede that in some areas the faults mentioned by these critics exist—e.g. insecurity of tenure is undoubtedly a difficulty in some places, overcrowding conspicuous in others—it is doubtful how far these faults are due to deficiencies in the land law, as opposed to backwardness in land use, or whether it is justifiable to criticize the whole of a customary land tenure system

¹ Basutoland, Bechuanaland Protectorate and Swaziland—Report of an economic survey mission (London, i960, H.M.S.O.), pp. 242-5.

because one of its features is unsatisfactory (e.g. where the system of intestate succession is divisory, and where there is no fresh land available for occupation, the continual sub-division of holdings cannot be avoided if the population continually expands; but this is just as much the fault of the British, for introducing peace and medicine, as it is of the customary law; and the remedy lies in a voluntary or compulsory change in the succession law rather than in an alteration of customary land law as a whole).

Again, much of the criticism of customary land law for its alleged failure to adapt to new economic demands, and its resistance to indi­vidual interests, strikes me as wide of the mark; customary land law has changed radically in many areas in response to the arrival of commercial crops, and individual interests of a strong and durable kind have appeared spontaneously and without benefit of Royal Commissions in various regions of Africa (a short look at the land law of West Africa might have been a help here). Indeed, one of the criticisms of customary land law, as we have seen, has been of its over­successful adaptation to the business of making money rather than keeping alive.

And, finally, it seems to me that these critics often fail to consider, because they are not technically equipped to do so, how to build on the good features of existing customary land laws, while eliminating those which are definitely inimical to the increase of yields and the protection of natural resources. This lack of specialist knowledge is compounded, perhaps, by a certain psychological reluctance to look beyond the rather narrow prescriptions of the western-orientated expert in economics or agriculture.

(b) credit

The second field which I wish to use as an illustration of the ways in which law and economic development are intermingled is in some respects connected with that which I have just been discussing: it is the law governing the supply of credit, prescribing what security can be given in return for credit, and what is to happen to the debtor who does not pay.

The function of credit in a modem economy cannot be over­estimated. Allow me to quote a few words from the admirable report of the Commission appointed to investigate insolvency law in Ghana:

‘Credit is the lifeblood of the Ghanaian economy. It flows through every sector of the economy. Without credit the economy would come to a standstill... For the economy to expand at the rate envisaged in the Second Development Plan will need considerable and increasing infusions of credit both from abroad and at home.... It is often said of the Ghanaian economy that the whole economy runs on credit. Taken literally this is an exaggeration... Nevertheless, in relative terms, credit transactions, though a minority of all trans­actions, probably bulk larger in the Ghanaian economy than they do in many other countries.’¹

One could in this context speak of the legal machinery governing the formation of capital, of investment and lending for development generally; or of the importance of the structure of the law relating to banking, insurance, friendly societies, stock exchanges, and so on in so far as it favours or impedes the dynamic growth of the economy. But I have chosen to restrict what I have to say about credit to those aspects which most intimately affect the individual African, however humble his circumstances; and I shall speak mainly about two aspects of credit supply: (i) the nature of the security that can be given for it, and (it) die legislation for the enforcement of debts and the super­vision of the insolvent debtor.

Security. Borrowing requires or implies a willing lender, and hence usually a credit-worthy borrower. A borrower is credit-worthy if he can assure the lender (a) that he will get his capital back at the time agreed for repayment, and (i) that the loan will be serviced, i.e., that instalments of interest where payable will be met at the due time. Usually a lender does not trust a borrower to pay back the capital, and demands some form of security for his loan against which recourse may be had if the borrower fails in his obligation to repay. The East African Royal Commission assumed, in their interesting study of this topic, that the security must be ‘negotiable’, as they called it; in so far as lending on land was concerned, they stated that persons can only expect to borrow on the security of land ‘if the land is a negotiable asset, and... the value of land as a security increases in proportion to the absence of restraints on its disposal’.²

’ Report of the Commissioners appointed to enquire into the insolvency law of Ghana (Accra, 1961), at pp. 18-19.

¹ Supra, Chap. 9, pp. 97, 98.

The Commission further stated:

‘In the traditional subsistence economies these conditions do not exist; there is no negotiable security and, by its very nature, sub­sistence production precludes the possibility that any income above what is required for subsistence will be available for the service of the loan.’

And finally the Commission accused the Africans of misunderstanding the basic principles underlying the securing of loans.

I should like to lay the same charge at the door of the Commission. In its broadest sense security for a loan must mean some assurance independent of the good faith or will of the debtor that the loan will be duly repaid, to which recourse can be had by the creditor in the event of default. So-called ‘negotiability’ is by no means the only consideration here, and one can imagine forms of security which are not negotiable assets at all (e.g. a guarantee by a third party; judicial or administrative supervision of the debtor).

And, secondly, I do not think their criticism of traditional customary laws is generally merited. One of the commonest features of customary land laws in many parts of Africa is the pledge of land, where the lender goes into possession of the land pledged and works the land for his own benefit, taking the yield as die interest on his loan. As the land once pledged remains redeemable whenever the debtor can tender the capital sum he borrowed, the arrangement is in the interests of both creditor and debtor. It is only on an extremely narrow definition of a ‘subsistence economy’ that it could be said that such arrangements do not exist in traditional subsistence economies.

Not only are such customary pledges of land common in Africa, but we also find pledges of movables as well. In the developed customary laws (especially in West Africa) new forms of security are continually being devised. In Ghana I found, when I was conducting research into customary land law among the Akan there, that the ancient usufructuary kind of pledge was being largely superseded by new types of charge: for example, pledges with a fixed term with rights of foreclosure and sale as remedies for non-payment; self-liquidating mortgages where the debtor remained in possession as agent of the creditor and the annual yield of the land was divided into three parts, one of which went to the creditor to pay off the capital, one-third went as interest, and one-third to the debtor for his management services. The blanket criticisms made by the Royal Commission,

even if they are confined to East Africa, I do not therefore consider to be fair.

The reasons why commercial, especially non-African, lenders are reluctant to lend money to African peasant farmers lie mainly (i) in the uncertainties, as they see it, of the existing customary systems of land tenure, and hence doubts as to the validity of the title of the potential borrower; (it) in doubts as to the credit-worthiness of the applicant (which seem to me far more serious than the question of security as such)—doubts which arise mainly from the fact that the African farmer is undercapitalized, and that he is perhaps unfamiliar with the most fruitful ways of putting the money he borrows to work so as permanently to enhance his productive capacity; and (Hi) in the inter-racial legal difficulties which have in the past restricted both the grant of credit by non-Africans to Africans in East Africa and the enforcement of any real security in such circumstances. Uncertainties as to customary land law can be removed by various means, not all of which require changes in the land law so much as its clarification either generally or in particular cases. Registration of title is one such device; government guarantees another; while official bodies may themselves enter the market as lending agencies. It is noteworthy that a com­paratively large number of loans to African farmers in the consolidated areas of Kenya have been made by commercial agencies since con­solidation was introduced.

Enforcement of debts and insolvency legislation. One of the more peculiar features of the law of Ghana has been the absence of legislation governing insolvency (or bankruptcy), i.e., the administration of the affairs of insolvents. In the past there has been an almost universal distrust of any proposal to introduce such insolvency legislation into Ghana; recently the picture has startlingly changed, perhaps due to the educative work of the Insolvency Commission¹ itself. The Com­mission also found that the existing machinery for the enforcement of debts was inadequate and that there was an absence of effective remedies against defaulting debtors. The Commission commented:

‘One of the principal aims of Government is to create in Ghana a modem agricultural, commercial and industrial system. It is our considered conclusion... that adequate legal machinery for the determination and settlement of debts must play an important part in this.’

¹ Supra.

It is our further conclusion that the need for this machinery is urgent and that its introduction cannot now be delayed without markedly retarding the healthy expansion of the economy.’¹

In making their specific proposals, the Insolvency Commission took special care to ensure that they would fit in with the two most relevant aspects of the customary law, that relating to the giving of real security, and that concerned with the liability of families and family and stool property for the debts of their members. The Commission also kept in mind the sociological fact that ‘many Ghanaians are dilatory about paying their debts and that a not inconsiderable minority default altogether in whole or in part’. (Let me add that this is a complaint by no means confined to Ghana.) The enactment of legislation with teeth in it was thus necessary to restore confidence in the credit­worthiness of the potential Ghanaian borrower, both at home and abroad.

(c) ENCOURAGEMENT OF FOREIGN INVESTMENT Finally, I wish to discuss the effect that the desire to encourage foreign investment may have on the demand for and scale of legal reform in the receiving countries. To examine this problem it is necessary to ask: who is the potential foreign investor? what is he looking for before he will agree to invest?

Much of the investment in African countries is coming from public sources of one kind or another—some national, some international. I would suggest that such investors or lenders are not particularly interested in the state of the law in the countries to which they lend; what they will look for is efficient government capable of making proper use of the money lent or invested, and some assurance (though this is sometimes weakened for political reasons to vanishing point) that the loan will be serviced and the money will eventually be repaid.

Private investors are in another category altogether. One might think that as commercial concerns they would be principally interested in the state of the commercial law, especially the company legislation. The terms of reference given to Professor Gower as Commissioner for the reform of company law in Ghana specially instructed the Commissioner when making his recommendations to ‘take into account the encouragement of foreign investment’ in Ghana. Yet the Com­missioner himself in his Final Report¹ rather doubted how far reform

* Op. tit., p. 23.

¹ Final report of the Commission of Enquiry into the working and adminis­tration ofthe present company law of Ghana(Accra, 1961, Government Printer), p.9.

of company legislation contributes specifically to the encouragement of foreign investment, or more generally to economic growth; and he suggested that other branches of the law, such as tax law, exchange control and immigration law, have perhaps a greater influence on potential foreign investors. For Basutoland the Morse Commission would add* that the system of land law (with its absence of formal security of tenure for non-Basuto) is a deterrent to commercial expansion.

This analysis is undoubtedly correct, though one must not carry the point too far. One could, however, go even farther and say that what principally influences the decision to invest are in fact non-legal considerations such as: (i) the economic and social climate in die country in question; (2) the attitude of the government now and in the foreseeable future to foreign investors as a class; and (3) the profitability of the particular enterprise under consideration. Stability and a friendly reception are thus more important than the details of the laws. This is not to say that a foreign company’s legal advisers will not scrutinize the legal framework under which the company will have to operate, and that where that law is manifestly uncertain, onerous, inflexible or out-of-date this may not act as a marginal deterrent. The mere bet that the law is foreign is usually no obstacle at all, provided —and it is an important proviso—competent legal advice is available to explain it. (This may well be a reason in some African countries either for training or evolving more local practitioners who are expert in commercial law, or alternatively for changing the law to one which is more generally familiar to lawyers in the great trading nations.)

The larger commercial concerns are already in many ways inter­national rather than national bodies; this fact, coupled with the ever­increasing interchange of practices and multiplication of contacts, naturally leads commercial concerns generally to welcome any step towards the unification on an international level of the laws under which they operate. Much has already been achieved in the unification of private law. The question of the harmonization of national laws has an additional interest in Africa today, however, since it may at the inter-African level contribute to a closer association, and eventually to a political unity, between African states on a regional or continental basis. From the standpoint of inter-African trade there is little com­pelling reason, of course, for unification of commercial law in Africa at present; on the other hand, there is equally no major technical obstacle to a harmonization of commercial laws. Such a harmonization

¹ Op. cit., p. 244.

involves in essence a reconciliation between the ideas and forms of two types of legal system: those systems of the common law tradition, and those which belong to the civil or Roman law tradition. Experience in the harmonization of laws in juridically mixed countries such as the United States and Canada (each with its civil law component)—or even as between England and Scotland, for that matter—will be useful here. Nor is this merely an academic exercise. As new bonds are forged between civil law and common law countries in Africa (e.g. as in the Cameroun and Somali Republics, and, though this problem has not yet come up, as between Ghana, Guinea and Mali), harmonization of laws becomes a matter requiring urgent administrative action. The Federation of Rhodesia and Nyasaland has a similar problem on its hands, owing to the fact that Southern Rhodesia has a Roman-Dutch type of legal system, whereas Northern Rhodesia and Nyasaland have systems based on English law.