Promoting Entrepreneurship in Africa – PART 4

By Tope Toogun

Refocusing our economic development agenda is the third crucial systemic challenge. With the exception of a few countries like Morocco, Egypt and South Africa, most African countries operate rent seeking, consumption driven and import dependent economies. Rwanda is a bright spot in this firmament, however. With a long term strategy, the right policies in place and a clear focus on priority sectors, the land-locked country is on its way to replicating the Singaporean economic miracle in Africa.

With the high number of jobs we urgently need to create in Africa, no country can afford to continue exporting raw commodities and importing everything else. The African Economic Outlook earlier referred to recognizes the drawback of this situation in stating that despite having the highest share in the world of adults starting and running new businesses, these are often “in sectors where productivity remains low”. We can attribute the cause to the fundamental distortions in the economies where there are low levels of industrial activity. This factor also partly accounts for the jobless growth we witnessed for several years, despite our economies growing annually.

The growth in the economy was driven largely by sustained high prices of commodities in the international market. Getting our priorities right requires that we beneficiate our commodities so we can earn much more from them, and create opportunities for businesses to participate in the economy as a result. To move away from relying on importation, Africa requires a new industrialization strategy. It is difficult to expand the opportunities in an economy without increasing the level of manufacturing that is taking place. China went from being a country with 80% of its populace living below the poverty line in 1980 to one in which 84% were living above the poverty line in 2005 (a mere 25 years). This occurred largely through industrialization and producing for domestic consumption creating job opportunities and increasing purchasing power, which helped to lift more than 400 million people into the middle class. On the back of the expansion in domestic consumption, Chinese manufacturers became very competitive and started an export drive. China is now regarded as the “manufacturer to the world” Brazil lifted more than 35 million people from poverty and into the middle class within 10 years as a result of carefully targeted social welfare programmes and boosting industrial production and job creation through technical skills development. The Brazilian model of massive job creation has been recommended for Africa by the World Bank and other agencies.

One other critical area of focus is to ramp up spending on infrastructure on the continent. It is estimated that Africa requires an annual spend of $93 billion for years to come, to close the infrastructure deficit. As had been pointed out earlier, stable power supply is a huge challenge. For a continent of more than a billion people, the total electricity supply generated on the continent is lower than that of Spain, which has a population of 46 million. Roads and functional railways are crucial components which enable access to markets at cost effective rates. The infrastructure challenges contribute significantly to why the cost of locally produced goods is higher than the prices of imported costs, even with shipping and clearing charges added. If the business environment is not friendly, it is difficult for new businesses to survive or be competitive.

Truth be told; it will be simplistic for anyone to assume that public officials in Africa are unaware of these options. There is a political economy lens through which we have to examine the issue at hand. Different and often competing interests are often at play (or war?) in the policy making environment. Short term goals and political expediency get in the way of proper implementation. The theory of prebendalism propounded in 1987 by Richard Joseph to describe Nigeria’s second republic, in which office holders conflated personal desires and national priorities can describe what takes place in most of Africa. For countries which go through periodic cycles of electioneering, the challenge is worse. In a typical 4 year term, office holders spend the first year settling down and rewarding supporters and political jobbers, two years to figure out what to do and get started, and the last year preparing for the next election. No serious long term planning and economic reform can be carried out in this environment. But that is exactly what we require……long term planning, economic reform and fidelity in implementation.

I shudder to think of what may happen if we do not address this challenge in Africa. With the increasing restlessness of our youth population and growing disenchantment with a system they appear to have been locked out of, we are sitting on a keg of gunpowder. And it needs not be so. Our large youth population is a demographic liability because we have not done the right things for years, so the chickens are slowly coming home to roost. With political will, reform minded leaders, sensible policies and effective implementation; we can turn this liability into a demographic dividend. That is the right thing to do.