The paradigm of informal politics has fundamentally shaped the study of political power in sub-Saharan Africa over several decades. Writing in the early 1980s, as many countries were falling into crisis, Robert Jackson and Carl Rosberg argued that African countries were best understood by focusing on the personal rule of their leaders rather than on the functioning of their institutions. African leaders, in their view, were unconstrained by ‘the assured mediation and regulation of effective political institutions’ (Jackson and Rosberg 1982: 12). On the eve of the twenty-first century, Patrick Chabal and Jean-Pascal Daloz (1999: 16), reaffirming this view, contended that institutions across Africa remained ‘a pseudo-Western façade masking the realities of deeply personalised political relations’, despite the political and economic transformations that followed the end of the Cold War. Countless studies have followed these foundational works in repeating their argument without amendment: the formal institutions of African countries, whether described as dysfunctional, incoherent or weak, have little to no impact on politics in the region (for a comprehensive discussion see Chapter 1).

This chapter challenges the conventional wisdom associated with the paradigm of informal politics by focusing on the role of financial institutions in systematically coordinating the political behaviour of African elites. Although the analysis of formal institutions often focuses explicitly on political organisations, such as parties or governmental administrative structures like bureaucracies, I examine the relationship between economic institutions and the political behaviour of entrepreneurs (e.g. businesspeople, merchants and traders). African leaders have long perceived entrepreneurs as a political threat, fearing that their financial capital could be transformed into political influence. My argument is that leaders have sought to contend with this threat by relying on the commercial banking sector – banks are the principal institutions of finance in African countries – to regulate capital accumulation among entrepreneurs and thereby constrain their potential support for regime opponents. I advance two specific claims in this regard.

My first claim is that Africa's first post-independence leaders created financial reprisal regimes to control the business community in their countries. Financial reprisal regimes comprise a set of institutions and regulations – such as maintaining state ownership of banking, channelling credit to privileged sectors and restricting access to foreign exchange – that enables leaders to exercise political discretion in determining who can access capital.

This chapter examines how the private resources of the business community can influence the process as well as the outcome of coalition bargaining among opposition politicians from different ethnic groups. Previous chapters have shown that African entrepreneurs had sufficient cause to oppose entrenched incumbents who had mismanaged their countries’ economies for decades. But it was only in countries where cash-strapped leaders were obliged to adopt financial reforms that entrepreneurs were subsequently able to reconsider their political alignments. My claim is that business’ campaign contributions – rather than the arrangement of electoral rules, the intensity of ethnic competition, or the intervention of civil society – determines the likelihood of successful coalition bargaining among opposition politicians, particularly when those donations are concentrated on select politicians.

The bargaining episodes that took place in the run-up to presidential elections held in Cameroon in 2004 and Kenya in 2002 are the focus of this chapter. The principal opposition parties in each country had previously insisted on competing independently. And the cost of such fragmentation had become obvious to all the parties involved: had opposition politicians been able to unite in any earlier election, they would have been assured victory. In Cameroon, “a bewildering fragmentation of the opposition set in, reducing its chances for success” (Takougang and Krieger 1998, 147). In Kenya, it could be said that “Daniel arap Moi did not really win these elections, a divided opposition lost them” (Grignon et al. 2001, 15). Yet, despite facing similar incentives for electoral coordination, the opposition politicians in these two countries arrived at different outcomes by their third multiparty contest. The Cameroonian opposition remained fragmented after engaging in protracted coalition negotiations, while the Kenyan opposition successfully managed to bargain themselves to a multiparty coalition with a single presidential candidate.

This chapter explains how the political alignment of business in Africa has continued to be shaped by the state’s influence over capital despite the adoption of democratic constitutions in the 1990s. The onset of multiparty competition, if anything, has underscored the political import of the private resources in the hands of entrepreneurs. If the resources of business could be brought to bear on the electoral process, opposition parties would be more likely to mount a viable challenge against incumbents who are able to fund their own reelection campaigns through the state’s coffers.

The evidence presented in the following pages shows how African leaders have prevented entrepreneurs from deploying their private resources toward political ends. Incumbents in most countries can leverage the state’s financial instruments and regulations to induce the acquiescence, if not active support, of business. Entrepreneurs are often obliged to publicly endorse the incumbent in an election or risk losing access to financial capital. But, in the African countries where liberalizing reforms have been undertaken, entrepreneurs are able to bypass the state in securing credit through multinational banks or locally owned private banks. No longer required to resort to political connections, these entrepreneurs are free to follow their partisan preferences, diversifying their political donations without fear of reprisals from the ruling party. It is under such conditions that business provides the opposition with the resources needed to become a viable alternative to the incumbent.

The theory of pecuniary coalition formation suggests that the central problem for today’s opposition politicians is the fact that business cannot freely serve as a campaign financier in many African countries. This chapter examines the historical origins of this dynamic. I argue that two features of the late colonial period – the position of the state in mediating access to capital and the role of resources in mobilizing nationalist campaigns – shaped the relationship between politicians and entrepreneurs over subsequent decades. These features provided Africa’s post-independence leaders with the capacity and motivation to create financial reprisal regimes, that is, to transform the access to financial capital into a privilege that could be extended or withdrawn at a leader’s discretion.

I present in this chapter a narrative that reinterprets the historical record to highlight the interest of African leaders in suppressing the ability of business to act politically. While standard accounts of the late colonial period emphasize the role of the “new men” – Western-educated clerks, lawyers, and teachers – in leading the nationalist cause across Africa (e.g., Kilson 1970; Lloyd 1966), indigenous entrepreneurs also “constituted a major force in the rise of nationalism” (Markovitz 1977, 232). Indigenous entrepreneurs forged close ties with nationalist politicians as they sought to advance their respective interests vis-à-vis the colonial state. Just as entrepreneurs required political intervention in order to expand their restricted participation in commerce, politicians needed resources to build the movements they hoped would one day take control of the state. Merchants and traders played a crucial linkage function in this respect: they facilitated the coordination of nationalist parties across ethnic, linguistic, and regional cleavages. Nnamdi Azikiwe, who led one of Nigeria’s first nationalist parties, made this relationship explicit when addressing his party’s annual convention in 1957: “If some of us had not accumulated wealth in the dim and distant decade when the oppressor was in his heyday, it would have been impossible to found this great Party, and it would have been an idle dream to achieve the measure of political success that has come our way” (quoted in Sklar 1963, 230).

Independence represented a critical juncture at which Africa’s founding leaders chose the political strategies that would set their countries on distinct trajectories of financial system development. The previous chapter suggested that these leaders were concerned with regulating the access to capital for fear that such resources could be turned against them. This chapter now nuances that claim by demonstrating that African leaders responded differently to the perceived threat of capital accumulation, depending on whether it would benefit their own constituents or those of rival politicians. I argue that a leader’s constituency type, exporter versus nonexporter, affected the severity of that perceived threat and thereby the extent to which leaders would seek to directly control commercial banking. Limiting the number of banks provided these leaders with a mechanism for institutionalizing executive discretion over the flow of capital.

My claim is that founding leaders who emerged from constituencies that directly profited from increased access to the financial sector were more likely to use inducements to bind business to their regimes. Their constituencies were composed of ethnic groups that grew cash crops for export; they could readily amass a bankable surplus that would enable them to enter other sectors of the economy. The leaders from these groups provided a form of constituency service by allowing the number of commercial banks to expand over time. The easy accumulation among such groups, however, posed a threat to leaders whose own coethnics did not produce cash crops and would therefore not immediately benefit from increased access to financial services. I maintain that founding leaders from nonexporting constituencies – whose economic activities focused on subsistence agriculture or the production of food crops for domestic consumption – responded to that threat by limiting entry into commercial banking. Fearing that resources accrued by protocapitalists from other groups could be used to mobilize opposition, these leaders were motivated to closely control banking and impose constraints on credit provision.

The argument developed through the previous chapters attributes opposition behavior in Africa’s multiparty elections to the state control of capital. My general claim is that the liberalization of finance enables opposition politicians to pursue a pecuniary coalition-building strategy by using the resources of business to secure cross-ethnic endorsements. I have provided both qualitative and quantitative evidence at each link of the causal chain to explain the conditions under which incumbents relinquish their control over the financial sector; business chooses to defect from the incumbent regime in support of the opposition; and opposition politicians successfully bargain across ethnic cleavages to form electoral alliances.

In this chapter, I now seek to establish whether the outcomes traced through the cases of Cameroon and Kenya are consistent with the electoral strategies pursued by opposition politicians across the region. I test my argument with a sample of all African countries that held executive elections between 1990 and 2005. The indicators that were examined in previous chapters to assess the politicization of finance – the total number of commercial banks (Chapter 4), the availability of credit to the private sector (Chapter 5), and the tenure of the chamber of commerce president (Chapter 6) – are used here as explanatory variables. Through this empirical analysis, I show that the state control of capital significantly affects the likelihood of multiethnic opposition coalitions being formed for executive elections. The ability of entrepreneurs to diversify their campaign contributions under conditions of financial liberalization appears to account for much of the variation in opposition coalition building across countries and within countries across time. Indeed, the empirical results show that the variables linked to the openness of the financial system are more consistent predictors of opposition behavior in Africa’s multiparty systems than either electoral rules or ethnic cleavages.