TRALAC - Trade Law Centre

Africa wants opportunities, not handouts

Wednesday, 09 January 2008

Source: Business Week

Anyone looking into the economic future of Africa is likely to be both inspired and confounded. Side by side with stories of increasing political stability, sturdy growth in gross domestic product, and entrepreneurial successes are tales of child soldiers, unchecked disease, and 4,000% inflation.

For that reason, many global enterprises have historically approached the African continent with caution, finding it too difficult to separate the hope from the hopelessness. But as technology enables global markets to become more seamlessly integrated, things are changing.

For the first time in decades, the African clouds are beginning to part, and it is becoming possible to see our way clear to a far more promising economic, societal, and environmental future for the continent. I believe this not because of what I read in Western newspapers and glossy magazines; I believe it because this is what Africans themselves are telling me.

The Distorting Effect of Aid

No longer content to rely on mixed media messages, IBM (IBM) has been hosting a series of dialogues around the world over the last few months, including in Nairobi, Dakar, Cape Town, Paris, Lisbon, Beijing, and Atlanta. We're bringing together business leaders, entrepreneurs, non-governmental organizations (NGOs), academics, students, and policymakers to explore new opportunities for innovation in the region and ideas for how the private sector might jump-start, enter into partnership with, and benefit from Africa's economic development.

These discussions, especially the one on foreign aid, contained some surprises. Going in, we expected to hear the all too familiar lament on the need for more aid. Instead, one participant after another cited the distorting effect aid has on African economies, and expressed a desire for more imaginative, market-based approaches.

"We have become dependent states and most of our governments look for handouts. That has got to change," I was told by Kingsley Fletcher, also known as King Adamtey I, the Suapolor or traditional ruler of the Se (Shai) state in Ghana. "We want to be partners. We don't want to be seen as those who only receive."

Looking For Skills and a Leg Up

Other leaders said aid destroys the incentive structure of free-market economies, furthers corruption, and draws Africa's brightest graduates away from promising business opportunities. These remarks came from both likely and unlikely sources, including government officials and staff members of NGOs.

Don't misunderstand me. Africans are well aware they need help. And clearly, the most urgent health needs can and must continue to be addressed through donations and charitable giving. But even more loudly, African thought-leaders are calling for applied investment, private-sector involvement, and entrepreneurial enabling. They want skills and a leg up, not handouts.

There are signs of hope too. Thanks to the African Growth and Opportunity Act of 2000 (AGOA)—the U.S. trade policy in sub-Saharan Africa that offers tangible incentives for African countries to open their economies and build free markets—business investment in Africa is showing progress. For example, in Mali, the textile sector is experiencing increased growth thanks to opportunities and investments created by AGOA leading to the rehabilitation of existing plants and construction of new factories. In Uganda, a flower producer is providing technical training to students and other flower growers in the region to take advantage of increased demand for Ugandan flowers in the U.S.

Innovating at the Intersection of Public and Private

"The new mantra is that there is no quicker way to deliver aid or support to the poor than through a paycheck," said Hubert Danso, vice-chairman of the African Investment Advisory Group, an advisory group established by NEPAD (New Partnership for Africa's Development).

"The current aid situation creates a bias against supporting African business growth, which in turn is killing the entrepreneurial spirit that is so critical to creating African enterprises that can access new markets and operate on a global level."

If Africa is to sustain wealth creation, improve infrastructure, employ its own, and fully participate in the global economy, it is going to require a dynamic combination of public and private sector involvement. We must innovate at that intersection. Large global enterprises will have to work in new ways with governments, universities, NGOs, and local businesses to cultivate the skills, the funding—and the hope—needed to launch and run businesses with growth potential.

For example, we heard the idea of aid that is actually designed to be loaned, at realistic interest rates, to the small and medium-sized businesses that right now fall between the microfinance and commercial lending strata: the so-called mesofinance gap. That would create real business incentives and accountability, and would encourage many informal businesses to enter the formal economy and begin paying taxes.

Learning the Language of Business

There is also ample opportunity for more public-private partnerships. For instance, IBM is initiating a mentorship program in conjunction with African universities, matching leading technologists with college students who expressed the urgent need for more private sector involvement in their curriculum. And IBM joined with the South African government to launch a $44 million integrated delivery center in Johannesburg. When it opened three years ago it had no employees. Today, with 250 clients, that center has grown to train and employ more than 1,250 Africans from all over the continent.

There are indeed many mixed messages surrounding Africa. But the message coming from Africans themselves is not the least bit ambivalent. They are desperate for opportunity, not aid. And they are eager to speak the same language as the rest of the world: the language of business.

Nicholas M. Donofrio is the executive vice-president, innovation and technology, for IBM.