Africa can lead the way out of the global economic crisis by becoming more competitive
Governance is improving in Africa. In 2008, more than half the continent’s countries improved their performance.
Liberia, once an epitome of bad governance and mired in conflict for many years, shows what can be achieved – in just a few years – with the right mix of good policy and committed leadership.
The bad news is that Africa’s competitiveness is lagging. According to the Global Competitiveness Report, eight of the world’s ten least competitive countries are from sub-Saharan Africa.
Africa is filled with hard working, innovative entrepreneurs. The success or failure of their businesses will determine whether Africa prospers or falters.
But they face an uphill struggle. Few businesses have adequate skills or access to sufficient credit and good advice.
Many are forced to cope with weak infrastructure, predatory governments and unforgiving geography.
No wonder Africa’s prosperity largely depends on commodity prices – it is uncompetitive in much else.
As investor risk aversion grows, the current economic crisis exaggerates such weaknesses.
Yet business growth, both big and small, is fundamental if African countries are to tap into globalization. It is essential for job creation and social stability.
Last year the Danish government established an ‘Africa Commission’. The aim was to come up with new and innovative recommendations for economic growth in Africa.
Yesterday in Copenhagen, the Commission delivered its recommendations on how African entrepreneurs can move from surviving against the odds to becoming the drivers of positive change.
The Commission proposes a fresh approach to international development cooperation with Africa. The continent’s dependency on development aid is not sustainable, and aid is no panacea.
The time has come to focus on improving Africa’s competitiveness, in so doing setting the stage for private-sector led growth.
After all, if growth through business has proven the principal means of development elsewhere, why should Africa be any different?
By 2025, one in four young people worldwide will be from sub-Saharan Africa. Africa’s women have long been marginalised, today working longer hours than any group across the continent, yet owning just one-tenth of its combined economies.
There is more to this than percentages and indices. Meeting this challenge is imperative if Africa’s youth and women are to realise their potential and the continent is to harness their energy.
It is necessary, too, if Africa is to diversify its economies away from the current model of commodity exports.
To do so, entrepreneurs should be nurtured by governments, not strangled by cumbersome and unnecessary procedures and corruption.
Transforming the opportunities facing Africa’s future generations hinges on raising skills standards and improving their relevance to business.
One of the Commission’s five international initiatives aims to increase the quantity and quality of artisans through apprenticeships, especially in the rural areas.
And it will link tertiary research and business practices especially to expanding agricultural output, moving away from subsistence to promoting commercial agriculture.
Africa’s small and medium-size businesses provide 80 percent of output and jobs. While their growth is stunted by lack of access to finance and basic business services, the Commission has also proposed the creation of an Africa Guarantee Fund in partnership with the African Development Bank aimed at leveraging $1.5 billion to reduce the cost of finance for SMEs.
Money is never enough, of course, which is why the Commission also advocates the training of bankers to expedite such finance.
A related initiative aims to unleash the power of African entrepreneurship specifically in start-up enterprises by creating advisory innovation centres in which business-people can translate good ideas into practical plans.
To improve the business climate, by collaborating with the World Economic Forum, the Commission will ensure that the Global Competitiveness Report covers all African countries.
More than that, the Commission will work with a range of Africa-based entities to ensure the findings of this benchmarking process is complemented by the development of detailed policy responses to address any shortcomings.
Africa needs much better access to energy. More than three-quarters of Africans lack access to electricity – a major constraint to economic development, doing business and diversification.
Africa would benefit from the deregulation of small-scale energy producers, as it would the use and integration of various sustainable energy technologies.
The Commission’s fifth initiative proposes a combination of policy advice, technical assistance and finance to realise this brighter future.
The Commission realizes that development assistance to Africa has failed to meet expectations because, in large part, the principle of local ownership has been neglected.
All initiatives will be African-owned just as their identification and formulation has been African-led.
The current global crisis is a wake-up call for all. Those countries that respond best will lead the process of global economic recovery and growth. Now is the opportunity for Africa to cast away old aid stereotypes and show the way. To assist, the Africa Commission proposes a hand-up not another hand-out.
Ulla Toernaes is Minister of Development Cooperation of Denmark, Mo Ibrahim is founder of Celtel and the Mo Ibrahim Foundation, Greg Mills heads the Johannesburg-based Brenthurst Foundation. All are members of the Africa Commission.