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How big firms rip off African consumers

KOKO MINGI VIII, king of the Nembe people, had a vigorous approach to trust-busting. In 1895 he led a pre-dawn raid on the headquarters of the Royal Niger Company, a British firm that had monopolised the palm-oil trade in the Niger delta. Koko captured 60 hostages and demanded to be allowed to trade freely. The British sent in the gunboats instead, and monopolists have had the upper hand in Nigeria ever since: the country did not enact an overarching competition law until last year.

King Koko’s trust-busting heirs have their work cut out, and not just in Nigeria. In much of Africa formal economies are dominated by large firms that rip off consumers. The IMF reckons that firm markups are about 11% larger in sub-Saharan Africa than in other developing regions, and that prices are 20% higher. The challenge for African governments is not only to make markets more efficient, but also to undo a history of economic exclusion.

Colonial economies were built around European trading firms, with licensing rules that hindered the emergence of black African capitalists. That logic was taken to extremes in South Africa, where just six conglomerates controlled 87% of the stockmarket at the end of apartheid. “The structure of our economy was designed to keep assets in a few hands,” noted Cyril Ramaphosa, the president, in his state-of-...

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