Here are reasons for Mauritius to connect more efficiently with the region
By Anil Gujadhur
Umpteen articles have appeared in almost all places about all that has been going wrong in Africa. Only a week ago, a local newspaper referred to what it called a Mobutu-style mis-governance pertaining to the issue of freedom of the press over here. It is all too easy to paint Africa black; it may well be black but, as the article ‘Uncaging the lions’,
from the last issue of The Economist points out, there are a number of glimmers of bright sunshine which nurture hopes for the better.
Europe and America progressed because they were self-confident, asserting and imposing their ways of doing things on the rest of the world; Africa rarely has had the chance to feel that it is doing well and that it can be a global leader if only in certain fields. It is not surprising it has lagged behind. But that seems to be changing.
There are African companies which are global achievers. There are world class economic partners in Africa which global economic giants have been joining together with. Africa also has technology and that is not limited to South Africa. If top-seed American, Chinese and Indian companies have been associating themselves with African enterprise, why do we have to search far out to diversify our markets?
We must be failing to see opportunities to tie up in business next door because we have been used to the glamour of travels to more distant places which will offer us nearly no opportunity to expand within their space. It is always a case of Foreign Direct Investment in, not out. Many African countries have for a long number of years appreciated our governance and dynamic drive in various domains; instead of our cashing in on this excellent perception concretely, we have flattered ourselves about the high respect in which we were being held, not translating the same into strategic business partnerships. In the circumstances, Africa cannot be blamed if it were to take off without us.
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Uncaging the lions
Business is transforming Africa for the better
— Schumpeter, The Economist – Jun 10th 2010
For once an investment fad seems justified: the 21st century is shaping up to be that of the emerging markets, just as the 20th was America’s century and the 19th Britain’s. But that leaves open the question of which countries, exactly, will emerge. Will Asia and Latin America mark the limits of the spreading prosperity? Or will the boom reach the perennial laggard, Africa? Will a new pride of economic lions take their place beside the Chinese dragon and the Indian tiger?
Ten years ago The Economist dubbed Africa “the hopeless continent”. Since then its progress has been remarkably hopeful. In 2000-08 Africa’s annual output grew by 4.9% (adjusted for purchasing-power parity), twice as fast as in the 1980s and 1990s and faster than the global average of 3.8%. Foreign direct investment increased from $10 billion to $88 billion—more than India ($42 billion) and, even more remarkably, catching up with China ($108 billion). The Boston Consulting Group notes that, since 1998, the revenues of Africa’s 500 largest companies (excluding banks) have grown at an average of 8.3% a year.
But is this growth sustainable? Or is the current fad for Africa just another bubble? The pessimists have always had three strong arguments. One is that African politics is dysfunctional. Warring strongmen can undo the progress of decades in weeks. A second is that the African economy is unduly dependent on the resource sector. A third is that Africa’s growth does too little to benefit the poor. But over the past decade, all these objections have weakened.
The numerous examples of government failure can now be weighed against examples of success. The continent’s inflation rate has been reduced from 22% in the 1990s to 8% since 2000. The World Bank’s annual “Doing Business” report ranked Rwanda as the world’s top reformer this year, based on the number and impact of steps to promote entrepreneurship there. Mauritius was ranked 17th of the 183 economies covered by the report, ahead of lots of richer places.
It is true that Africa has depended on its abundant natural resources; and they will be a growing advantage in years to come. The hectic pace of growth in the emerging world is not only pushing up commodity prices but also intensifying competition for the right to drill the continent’s oil and mine its minerals. Chinese companies in particular are wooing African governments with lavish expenditure on infrastructure.
McKinsey points out that the natural-resource sector accounts for only about a third of the continent’s growth. Africa is producing a growing number of world-class companies outside the resource industry, from South African giants such as SABMiller, the world’s second-largest brewer, and Aspen Pharmacare, the largest generic-drugmaker in the southern hemisphere, to niche players such as Tunisia’s Coficab, one of the world’s most successful suppliers of wiring for cars.
As to the poor, McKinsey points out that, thanks to rising living standards, some 200m Africans will enter the market for consumer goods in the next five years. The consultancy also notes that the continent’s working-age population will double from 500m today to 1.1 billion in 2040. Consumer-goods companies ranging from Western giants such as Procter & Gamble to emerging-market car companies such as China’s Great Wall and India’s Tata Motors are pouring into Africa. Foreign firms are likely to start using Africa as a base for manufacturing as well, as Europe’s population shrinks and labour costs in India and China rise.
Africa is also seeing the benefits of “frugal innovation”—inventions that are designed to serve the poor. Mobile-phone companies, which have done more than anybody to improve the lives of poor Africans, are continuing to innovate. Kenya’s Safaricom and its rivals are pioneering money-transfer by mobile phone; mobile savings and agricultural-insurance schemes are next. Companies from other emerging markets are also expanding into Africa. Bharti Airtel, which completed its $10.7 billion acquisition of Zain Africa, is a world-leader in improving services while reducing costs.
Nor is innovation confined to telecoms. Vijay Mahajan of the McCombs School of Business at the University of Texas, Austin, produces a long list of innovators in everything from the design to the distribution of products. Nakumatt, a Kenyan retailer, allows people living abroad to buy vouchers for its stores and then transfer them to their African friends and relatives, making remittance payments smoother. Other bottom-of-the-pyramid innovations include the Jiko, a portable charcoal stove that can reduce fuel consumption by 30%; the Q-drum, a doughnut-shaped plastic container that can be used to transport water by rolling it along the ground; the Weza, a foot-powered generator that can be used to charge cell phones and radios; and a $20 washing machine made from discarded motors and iron.
Lions and bulls
A decade of growth has also given Africa’s business people a new élan. Mo Ibrahim, a mobile-phone pioneer, has established an index to measure governments’ performance and an annual prize of $5m, plus $200,000 a year for life, to an African leader who rules well and then stands down. He has also founded a venture fund which plans to invest $200m in Africa this year.
Such successful entrepreneurs can point to countless examples of how business can improve people’s lives. In Kenya, where the government has removed its dead hand from the telecoms market, mobile phones are ubiquitous; in next-door Ethiopia, where the government’s grip is as tight as ever, only 2% of the population has phones. A few African lions are beginning to take their place next to the dragons and tigers.
* Published in print edition on 17 June 2010