Africa is not a single country but a continent, one that is a place
of real business opportunity that the world should be alive to. I know,
having built businesses that now operate in 20 African countries and
through creating a programme over 10 years that is funding and mentoring
10,000 African entrepreneurs.
I have witnessed first hand the infectious enthusiasm of African
entrepreneurs, and my businesses demonstrate the potential of Africa if
you invest for the long term and act strategically. In 1997, I had a
vision of democratising African banking, seeing financial services not
only as a vehicle for financial inclusion, but as a critical enabler of
cross-border trade and value creation on the African continent.Diverging Fortunes
Since the end of the commodity supercycle, growth paths in Africa
have diverged.
Oil-exporting countries, such as Algeria and Angola, and
non-energy mineral exporters, including Botswana and Zambia, have
experienced substantially weakened growth. Economic giants Nigeria and
South Africa have entered recession. However, economies not based on
commodities have continued to demonstrate robust expansion. Côte
d’Ivoire, Ethiopia, Rwanda and Tanzania enjoy gross domestic product
(GDP) growth rates of 6% and above.
This diversity teaches us the important lesson that Africa should not
be treated as a single economic unit and also shows how governments
must create the enabling environment that will allow the private sector
to act as the engine of economic and social growth.
The economic progress of the latter countries is unsurprising. Their
growth is a result of patient investment in infrastructure to grow the
real sector of the economy, and a sustained focus on institutionalising
that enabling environment – with business incentives, transparency,
safety and policy stability – to allow the private sector to flourish.
These factors foster the growth of local value creation, which resolves
Africa’s historical over-reliance on raw material and commodity exports
that leave their economies susceptible to cyclical boom and bust.
In 2015, Ethiopia launched a light rail project in Addis Ababa, the
first metro service in sub-Saharan Africa. As it is now building a $5bn
Grand Renaissance dam with a generation capacity of 6000 megawatts and a
projected $1bn in revenues from electricity sales, the World Bank
recently named it as the world’s fastest growing country. Ethiopia’s big
investments in infrastructure have resulted in pay-offs, including
double-digit economic growth (averaging 10.8% since 2005).
Tanzania has also made significant investments in infrastructure –
particularly in power – strengthening its manufacturing and construction
sectors. Construction alone accounted for 13.6% of GDP in 2015, further
fuelled by investments in transport and port developments.
The diversity of economic outcomes on the continent illustrates my
belief that three interdependent ‘pillars’ for economic and job growth
are required: policy reform and a commitment to the rule of law;
investment in infrastructure; and a commitment to developing Africa’s
manufacturing and processing industries. All three pillars reinforce
each other, help to unleash the African private sector and increase both
foreign and local investment.
Private Sector Importance
I firmly believe that only a developed and well-capacitated private
sector can unlock economic prosperity and widespread opportunity in
Africa. To advance bottom-up economic development, and create jobs and
employment for Africa’s exploding population, the private sector must
flourish, with a focus on supporting entrepreneurs and small and
medium-sized enterprises (SMEs). After all, governments and corporates
alone cannot create the millions of jobs that the continent desperately
needs; only small businesses can.
The best-performing countries on the continent are those that have
keenly supported entrepreneurship and enhanced the business climate. The
Rwanda Development Board, created to boost entrepreneurship and grow
the private sector, has been effective in increasing investor interest
in the country. The World Bank’s Ease of Doing Business Report now ranks
Rwanda second in Africa, as a result of its reforms that have reduced
administrative and operating costs for all businesses via streamlined
licensing and permitting processes; reduced tariffs; and ease in
registering a new business, accessing credit and paying taxes.
In Côte d’Ivoire, improvements to the business environment continue
to attract investment. For example, a reduction in government
bureaucracy now allows new businesses to be registered within 24 hours.
Tax waivers, exemptions and a 40% cut in custom duties have spurred new
investments. The Mauritian government has launched an ambitious SME
scheme backed by a bank focused on SMEs with a capitalisation of Rs10bn
($751.6m) over the next five years. The goal is to become a “nation of
entrepreneurs”.
It is encouraging to see Africa’s public sector recognise that
Africa’s future will be determined not simply by economic growth, but by
how successful we are in creating accessible pathways to economic
prosperity for all Africans everywhere. It is in those communities where
opportunities are the most scarce that social issues are most
prevalent. Given the recent commodity crash and subsequent shortfalls in
government budgets across the continent, these massive investments in
infrastructure and structures to support entrepreneurs may be
unfeasible. This calls for a new approach to development assistance.
Partners for the Long Term
Development partners must be willing to: work side by side with
African countries to invest for the long term in critical sectors of the
economy such as manufacturing and processing; lend technical support in
policy conceptualisation; and finance infrastructure projects such as
ports and roads – efforts that will create broad-based prosperity.
Assistance in this manner will radically transform the economy and
launch it on the path of sustainable development.
In mid-June, German chancellor Angela Merkel met African leaders
ahead of the July G20 summit to discuss the ‘Compact with Africa’, an
initiative to boost private investment in Africa, improve infrastructure
and tackle unemployment. Emphasising the importance of this different
style of partnership, Ms Merkel said: “Positive development in the world
will not work unless all continents participate. We need an initiative
that does not talk about Africa, but with Africa.” This has been backed
up by €300m agreement with Tunisia, Côte d’Ivoire and Ghana as part of
the recently announced Marshall plan.
Germany’s Marshall plan for Africa seeks to support the continent in
areas of economic activity, trade and development; peace and security;
and democracy, the rule of law and human rights. It is hoped that the
plan will accelerate the growth of the African private sector –
including entrepreneurs – to make companies more competitive, and to
enhance their ability to scale and create formal wage-earning jobs. It
also strives to bridge Africa’s $93bn-a-year infrastructure deficit, the
major roadblock in its path to prosperity.
I support this reimagined and innovative approach to development. I
applaud the well-meaning plans to forge stronger trading ties and
cross-border commercial relationships, to support African entrepreneurs,
to commit to more technical and knowledge support programmes. Above
all, I commend this recognition – though belated – of Africans as
befitting partners, capable of working alongside Western governments and
corporates to generate new wealth opportunities on the continent.
For me, this goes beyond mere talk. The Tony Elumelu Foundation has
committed $100m to support African entrepreneurs, based on our belief in
their potential and capacity to develop homegrown solutions to solve
the continent’s seemingly intractable economic problems.
My passion for entrepreneurship is rooted in the economic philosophy
of ‘Africapitalism’, a term that I coined to emphasise the role Africa’s
private sector must play in the socioeconomic transformation of our
continent. Africapitalism calls on the private sector – including
African entrepreneurs – to make long-term investments in strategic
sectors to create both economic profit and social prosperity.
To empower African entrepreneurs to take on this responsibility to
transform Africa, the Tony Elumelu Foundation has committed $100m over
the next 10 years to funding, mentoring and training 10,000
entrepreneurs whose businesses will create 1 million jobs and generate
$10bn dollars in revenue.
An Alternative Capitalism
At the heart of Africapitalism is the recognition that the private
sector is the main driver of growth in any economy. This confers on
businesses a critical responsibility and a commitment to prioritise not
economic profits alone but social wealth and broad-based prosperity.
Africapitalism advocates the need to enable the private sector to take
on a more active role in addressing economic imbalances in society. It
improves upon the traditional model of capitalism that centres on
extractive short-term gains and instead promotes a refined approach that
invests for the long term in strategic sectors for both economic and
social wealth.
Africapitalism puts people first and identifies entrepreneurship as
the solution to Africa’s biggest threats: unemployment and lack of
economic hope. Africapitalism advocates for the empowerment of
entrepreneurs to enhance job creation. Only small businesses – not
governments, not corporates – can create the millions of jobs needed to
leverage our youth demographic dividend to guarantee an economic
transformation.
The significant political and economic changes today – the backlash
against globalisation, anxiety over lost jobs, political upheavals,
deepening inequality – reinforce the urgency around rethinking
capitalism as historically practised. Africapitalism offers a compelling
alternative to modern-day capitalism, and when embraced will douse
societal tensions, create new social wealth, inspire renewed public
confidence in business, and make our world much fairer. Businesses will
be the better for it as bottom lines benefit when there is peace,
stability and prosperity.
It is true that Africa needs partners, but more critically, we need Africapitalist partners.
Tony Elumelu is an entrepreneur and businessman who is the founder of the Tony Elumelu Foundation and chair of Heirs Holdings, the United Bank for Africa and the Transnational Corporation of Nigeria.
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