The idea behind saving a beleaguered Africa was commendable. Nonetheless, the interventionists had a tunnel vision: they forgot alternatives, or probably discountenanced them. Until much later, when public outcry became loud, it did not seem appropriate – at first – that Africa needed trade, not aid. Reports from assessment studies tracking the aid distribution subsequently revealed that much of these aids never got to the intended beneficiaries. Since 1970, Sub-Saharan Africa has received over $1.071 trillion USD in Official Development Assistance (ODA).
Foreign aid, originally conceived as temporary assistance, was meant to support countries until they reach the points of development ‘takeoff.’ The long years of Sub-Saharan Africa’s experience as recipient of foreign development assistance has only brought disappointing impact of aid largely in terms of the degree of continued dependency on aid resources and poor economic growth performance. The right lessons were not learned early in many cases, or not at all in some others. The international business community also got it wrong by their uninformed aloofness, based on wrong assumptions that everything Africa was hopeless, damned and gloomy. The attraction of Asia was good enough. Nothing seemed better then.
Their failure to see the silver linings around the dark cloud over Africa had great consequences. Many innovative opportunities were missed. They were preoccupied with the red ocean of Asian market but ignored the blue ocean of Africa. They spent fortune in production, rising labour cost, product differentiation, aggressive marketing and advertising, benchmarking the competition, reinventing their products for marginal returns and ending up with gluts in many cases. On a regional scale, they had little or no idea of how to hedge their investment bets or how to wisely diversify their investment portfolios. The future looked too distant and prospects for elsewhere looked fuzzy. Many of them kept all their eggs in one basket, in Asia.
Without any argument, the prevalent governance system in most of Africa was deplorable, but so was much of Asia. Notwithstanding these, Western investors flocked into Indonesia, Pakistan, India and China for various reasons. Western governments maintained their diplomatic ties with key Asian governments led by despots and dictators. Meanwhile, Africa remained neglected. National governments from Europe and North America kept pouring fortune into development aid, with marginal returns in some cases and negative returns in most others in the hope that these will translate into human capital and economic development. While there may have been modest achievements in these directions, it’s debatable if the returns have significantly justified the spending.
If aid was considered wrongheaded, then what is right? For whatever the criticisms against China may be worth, its approach to development in African nations is a clear departure from the Western approach. China’s One Belt One Road (OBOR) initiative may seem overly ambitious on the surface, and may be construed as a brazen economic expansionist agenda, but reality indicates that it seems to be addressing some of Africa’s real need. Their borrowing terms on development loans to borrowing nations may seem skewed in China’s favour, but these financial facilities are beginning to have palpable positive impacts. They are boosting the local economies in some noticeable ways.
Consider the $1.6 billion investment in Ethiopia in 2013, worth $800 million deal with China’s ZTE Zhongxing Telecommunications Equipment, to expand mobile phone infrastructure and introduce a highspeed 4G broadband network in the capital Addis Ababa and a 3G service throughout the rest of the country, expected to achieve immediate transformative impacts on the telecommunications sector and the larger economy in Ethiopia. China Civil Engineering Construction Company too is constructing roads in Kenya, Nigeria and elsewhere in Africa, thus eliciting noticeable change in the socio-economic landscape.
A widening vacuum created. China is moving in to fill the widening socio-economic landscape. The Western business community, however, is yet to wake up to the reality of a growing African economy. They still look at the continent through the blurred lenses of the past. They emphasis certain aspects of policy and polity that must be in place before they move in, namely: democratic system of government, rule of law, transparency and low level of corruption. What is not thought through is that investments in fundamental aspects of modern life would contribute immensely towards the achievement of these.
But Africa presents immense and limitless opportunities for innovation, to leapfrog, cutting across off-grid power generation from renewable sources, in forms of solar, biomass, wind and geothermal. In the case of Naivasha, a small countryside community in Kenya, Africa’s first biogas-powered electricity producer sells surplus electricity to the national grid, cutting the carbon emissions. Leapfrogging in technology has wide application in Africa. Just as many countries and communities have leapfrogged from analogue landline telephony to digital and mobile telephone system, it’s appropriate to think of innovative opportunities bypass the old ways of mass electricity supply by giving greater emphasis on off-grid supply. This opens avenues for wealth creation all over the continent.
Transportation should create opportunities for enormous inflow of foreign direct investments into Africa. It should take advantage of the window provided by the African Continental Free Trade Area (AfCFTA) by promoting investment in the aviation sector to help reduce rational, regional and continent-wide barriers to trade. A road journey from Lagos to Accra in Ghana should take about seven hours, same as for Lagos to Owerri in Nigeria. While durations of flights out of Lagos to Owerri and to Accra are about the same 45 minutes, it takes in excess of 10 hours to travel by road to Accra due to delays at the borders between Nigeria and Benin, Benin and Togo, Togo and Ghana on account of immigration checks and customs procedures. In the same way, these affect movements of goods and services, leading rising costs and slowing down trades.
The deinstitutionalisation and privatisation of some critical services sectors present innovative opportunities for foreign investors in Africa. Education and healthcare sectors stand out as examples. Innovative means of service delivery will spur significant economic development and unlock the existing potential in these sectors. Entrepreneurial approaches that target specific customers and consumer groups will open a plethora of business opportunities. Nigeria, for instance, has about the highest rate of private medical tourism in Africa, with an expenditure of $1 billion annually, expended on a few medical conditions for seeking medical helps abroad. This is an innovative opportunity for foreign medical entrepreneurs to invest and get the patients to pay less for quality services at home. Same goes for education.
A recent publication from the Centre for Global Development (CGDEV) dismissed Africa’s prospects for industrialisation on the basis of rising labour cost. The report missed many things. It missed the nexus and interplay of various modern factors of production, regional economic integration, improved national fiscal and monetary policies that reduce inflationary pressures, favour lower costs of production and boost consumption. It missed the realistic possibilities of Africa’s exploitation of artificial intelligence and other advanced forms of labour-saving technologies in manufacturing and redirecting labour to other forms of services. It missed the calculations that improved infrastructure could trigger a reduction in cost of power, transportation of goods and services, thereby offsetting labour cost disadvantages.
Beyond CGDEV’s predictions, Africa presents a vast expanse of blue ocean for the business community to thrive and prosper, create economic goods, solve social problems and serve as innovation hub for the rest of the world. The “Africa Rising” narrative of the past couple of years was a consequence of the eye-opening “Lions on the Move: The Progress and Potential of African Economies,” a report of McKinsey, the global consulting firm, published in 2010, highlighting the changing fortunes of Africa’s economic and commercial prospects. Before this McKinsey report, most other consulting firms of global standing simply got paranoid, focused disproportionate attention elsewhere and dismissed Africa as a waste of time.
It was afterwards that some African countries began to be projected as being among the fastest growing economies year-on-year since the past nearly one decade. Then came the inclusion of at least one of the African countries in the BRICS bloc of nations. In 2016, IMF was quoted as saying that The IMF says “Africa will remain the world’s second fastest growing region” in the world. Africa will be more relevant as we march into the future. One of the industries that will drive the global economy in the future, irrespective of upturns or downturns, is transportation. And, since environmental considerations are already influencing the trend of automobile design and manufacturing, a major raw material that will power the future car and determine the consumer preference for it is in abundant supply in Africa. Cobalt, the major component of lithium battery has unparalleled deposits in Africa. The scramble for agricultural land in Africa by investors from various parts of the world is an attestation to the prospects of Africa as the global food basket of the future. Africa’s lion is awakening. Africa is a budding economic powerhouse and investors’ haven of the future. Africa is truly rising.
Frontpage February 24, 2020