BLOG | Investing in Africa's futureThursday, May 17, 2012 in Africa Governance Initiative
After attending Tony Blair's speech on Africa at Stanford University, Graduate student Seun Oloruntimehin shared his reflections on the continent's development with AGI.
Many people when asked about the top challenges facing Africa are likely to list the usual suspects: corruption; high incidence of life-threatening diseases; sectarian conflicts; multiple (artificial) borders that restrict trade etc. While inadequate governance capacity is not likely to top the list, it manifests itself in many ways that stifle development. These range from poorly negotiated resource investment agreements, to blanket adoption of policies better suited for advanced economies or inefficient procurement of goods and services at above market rates. That was why I was very pleased to attend Prime Minister Tony Blair’s speech at Stanford University on the work of the Africa Governance Initiative (AGI).
AGI has, since its founding 4 years ago by Mr Blair, been assisting a new generation of reform-minded African leaders in translating their visions into effective policies. AGI’s close work with the government of Rwanda, a nation in the throes of genocide only 18 years ago, become the world’s 2nd best reformer over the last five years according to the World Bank. AGI has also supported the Sierra-Leonean government in instituting free healthcare for children and pregnant mothers and worked side by side with the President of Liberia to improve the quality of her cabinet’s decision making process. Mr Blair while discussing AGI’s goals did not downplay the threats from corruption but described corruption and governance in a more holistic way. As he said: “An honest government is a good step in the right direction, but it's not enough. A government also has to be effective“.
AGI’s work in Africa is coinciding with the long-awaited emergence of Africa as a more integral part of the global economy on the back of strong political & economic fundamentals. Since 2000, the continent has managed an average annual GDP growth rate close to 5% (even with the global recession of 2008). In addition, the World Bank estimates that eight out of the ten fastest growing economies in 2011 were African. This impressive economic growth coupled with attractive demographics has led to a consumption profile which, while still evolving, has become increasingly compelling. In 2011, Africa crossed the 500 Million mobile subscriber mark and became the 2nd largest mobile phone market in the world (behind Asia). This improving consumer story goes beyond telecoms and is driven by increasing disposable income. The consulting firm: McKinsey & Co. estimates that 85 Million African households in 2008 had disposable incomes, up from 59 Million in 2000. 128 Million of such households are projected to exist by 2020. The continent is also rapidly urbanizing with the number of African cities with at least a million people now exceeding 50. With the link between productivity growth and urbanization being a fairly well established one; we can expect productivity gains across the continent in the future.
In addition to the consumer story, Africa is shaping up to be a key part of the global production process. Every year brings news of sizable oil & gas discoveries in countries hitherto thought to be devoid of the vaunted “black gold”, while Chinese and other investors ink multiple deals to mine much needed solid and rare earth minerals. Even the basic business of feeding the world will eventually come to involve Africa as the continent is estimated to hold between 50-60% of the world’s uncultivated arable land. Given the young profile of the continent’s population (70% under the age of 25), it is reasonable to expect some labor intensive light manufacturing to move to Africa as wages rise in South Asia. This youthfulness, while providing a ready work force, also demands that African nations educate and provide jobs for their young.
While the reaction of the global investment and business community to the positive changes in Africa may not be as rapid as some of us would want, we are nonetheless witnessing the early shoots of a brighter future. A few pioneering African companies have listed their shares on the London Stock Exchange and raised money on global bond markets. Major multinational firms such as Diageo, Heineken and Wal-Mart have committed billions of dollars in acquisitions and investments over the past 24 months to tap into the growing consumer markets in Africa. This trend is growing stronger as anyone who has been on the popular flight routes into the continent will witness with the smartly dressed, Blackberry toting financiers crammed into first and business class in search of deals to be brokered and fortunes to be made.
It is in light of the renewed global optimism about Africa that Mr. Blair’s speech came to resonate greatly with me. The journey to a new and prosperous Africa is one that African governments, western governments, NGOs, and the global business community must embark on jointly to create shared prosperity. The road will not be smooth and will require the sort of pragmatic and inclusive solutions AGI has been championing. As Mr. Blair noted in his speech: “the gap between promise and delivery is an agonizing one”. Africa’s new breed of leaders are committed to the agonizing but greatly rewarding task of bridging this gap and it makes me really happy to see that AGI is supporting them in moving from knowing what to do to knowing how to do it.