How the private sector is transforming Africa

In 2000, there was the famous cover of the Economist that read “Africa: The Hopeless Continent.”  In 2010, a complete reversal of tone: “…Africa Is Becoming the Next Asia” and “Africa Is Investing’s Final Frontier.” Whilst in a New York Times editorial “Africa Reboots,” Bono wrote that his March 2010 trip across the continent left him with “a deep sense that the people of Africa are writing up some new rules for the game.”  It would appear that reporting on Africa is finally starting to achieve balance with such headlines heralding a significant shift in perceptions of the continent.  But these perceptions are, in turn, founded on hard facts.  Going forward to 2014, Africa is the region in the world with the highest concentration of high growth economies – Ethiopia at 10%, Ghana at 9.9% – while the rest of the world is still floundering and reeling from the effects of the financial crisis.  Africa is also the region in the world that yields the highest returns on investments.

So, to what can this African economic renaissance be attributed?

In a globalised world, Africa is not impervious to new trends and influences that are fast shaping consumer behaviours and consumption patterns.  African consumers want the same as consumers elsewhere – a mobile phone, a bank account, and the latest Beyonce CD bought in a store at a shopping mall.  It helps, too, to have a critical mass of such consumers!   With a total market of almost 1 billion people, Africa’s growth is primarily driven by the consumption of goods and services – retail, financial services, telecommunications – on the back of growing urbanisation and a burgeoning middle class. Consumption actually accounts for two thirds of Africa’s GDP growth.

The private sector players, in seizing the opportunity that Africa represents, are also promoting Africa’s development.   The telecommunications industry serves as a particularly useful illustration for this.   Indeed, there is an established correlation between mobile phone uptake and socio-economic development.  A 2007 Deloitte Consulting study, for example, found that a 10% increase in mobile phone penetration is linked to an increase in a middle/low income country GDP of 1.2% due to the ensuing economic activity that people engage in as a result of being ‘plugged in’ and connected (yes, pun intended!).   In Africa, the mobile phone is a tool that is, at once, equalising and empowering and has allowed those marginalised in society to participate in the mainstream economy.  Current applications of mobile telephony in banking include innovations such as M-Pesa, the mobile money transfer service and M-Kesho, the micro-lending mobile platform in Kenya.  In yet another example from Kenya, farmers interact proactively with commodity exchanges and track prices with their phones so that they can make informed decisions about the right time to take their produce to market. In the future, we should expect to see exciting examples in other areas with the potential to address some of Africa’s key developmental challenges, primarily, the lack of access to health and education.

While the role of the private sector has been much lauded here, this is not to deny government it’s role.  Governments create the enabling environment for the private sector to function optimally.  Rwanda’s progress in creating a stable environment for doing business has been impressive.  In just one year, the country jumped 76 places in the World Bank’s “Doing Business” 2010 report to number 67 by undertaking reforms in seven key areas: dealing with construction permits, registering property, getting credit, employing workers, protecting investors, trading across borders and closing business. And going back to the M-Pesa and M;Kesho examples, Kenya had to, firstly, put into place the regulatory framework that would allow a cellphone company to act as a bank.  The agility and creativity exhibited by the private sector needs to be mirrored in the public sector.

Now, more than ever, when Africa finds herself on the cusp of realising her greatness and improving her economic competitiveness, African governments need to rise to this challenge.  The private sector should, rightly, be viewed as a partner in development within an appropriate, not stifling environment.

Jacqueline Chimhanzi is an Archbishop Tutu Leadership Fellow[/EXPAND]


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