Africapitalism: A philosophy for the era of sustainable development

By Tony O. Elumelu

 

(being text of a paper presented at the 2015 Liberation Forum in Libreville, Gabon)

 

2015 is an important year. It is the year when the Millennium Development Goals (MDGs), first announced in the year 2000, come to a close, focusing the world’s attention once again on Africa and global policy relating to our development. I am an African, a private sector leader and a father, so the business of African development is extremely important to me. Only two weeks ago, I had the privilege of travelling to New York at the invitation of the UN Secretary General to witness global leaders adopt a new set of 17 Sustainable Development Goals to build on the successes, as well as address the deficits, in achieving the MDGs. And from Libreville, this evening, I will travel on to Lima, Peru, to participate in discussions with top global economists, business and political leaders at the World Bank/IMF meetings on ‘Implementing the SDGs’ to give an African private sector perspective – a perspective which I will share with you first, this evening.

Working together, the world has recorded many successes relating to the MDGs, including:

Providing more than 14 million people with access to life-saving treatment; 91% of the world’s population having access to clean water; and 43 million kids attending school for the very first time.

However, the painful truth is that with the exception of high performing countries like Ghana, Burkina Faso, Mozambique and Namibia, Africa is the region that has made the least progress in achieving the targets set forth in the MDGs. This means that in the era of the SDGs, more resources, more innovation and more scrutiny are required to ensure that our region delivers on the 17 Global Goals. It also means that Africa must decisively take charge of its own development. I am, therefore, proposing Africapitalism as one helpful approach to consider in achieving the SDGs.

Africa is a continent of 54 countries that have complex and varying dynamics, but in many cases, common challenges to which I believe there should be common solutions. I also believe that Africapitalism, a philosophy that centers around the private sector’s critical role in driving economic and social development, can be applied to all countries in Africa, and is even applicable well beyond our shores for the benefit of people in other regions of the world. The private sector has an imperative to be involved in the business of development because:

First, for decades African governments have strived to achieve developmental aspirations and put their countries on course to catch up with developed economies but they have not succeeded. Therefore, it will take more than the efforts of African and donor governments and multilateral agencies to achieve the expected outcome. It will take all of us – governments, civil society and, most importantly, the private sector working in A Common cause to create truly transformative change.

Secondly, the United Nations estimates that the SDGs will cost $170 trillion over 15 years. Current global GDP annually is only $73 trillion. That means each and every year 15 per cent of the world’s GDP may have to be dedicated to financing the SDGs, assuming this cost is accurate. African governments certainly don’t have that kind of money. Nobody but the private sector can help with mobilising the kind of huge resources which may be required. But let us not be pessimistic. Practically speaking, what these figures mean is that:

We need to marshal massive amounts of resources – financial and otherwise. We need everyone to participate – and by “everyone” I mean the public sector, the private sector and the non-profit sector – and

We need to innovate.

Since the majority of government revenues that will be allocated to achieving the SDGs will come from taxing the commercial activities of the private sector – it’s in the self – interest of governments to see their private sectors thrive.

Because the private sector holds most of global capital, and because it is the sector that has the greatest capacity for innovation, our governments must develop the enabling environments that help businesses in their countries to succeed.

 

Role of the private sector

But the good news is that the world is beginning to appreciate the role of the private sector in achieving these goals. The inclusion of the private sector in the consultations that led to the selection of the new Global Goals and the fact that I and a few other global private sector leaders were invited to witness their adoption alongside global political leaders, shows this realization.

In fact, at a private sector lunch during the just concluded United Nations General Assembly, even Bono, the world’s leading champion of foreign aid to Africa, conceded that the key to ending extreme poverty in the world is more private sector investments than aid.

 

Africapitalism as an approach to achieving the SDGs

Africapitalism is an economic philosophy that promotes long­term investment in strategic sectors that will create economic and social wealth. It includes financial returns for shareholders as well as development dividends for society. At the core of Africapitalism is development. Conventional development practice prioritizes the provision of basic health, feeding and education programs to poor and under-­ privileged people in the hopes that they will eventually have the tools to lift themselves out of poverty.

 

Economic opportunity

But, I believe that if we also help people make something of themselves by providing access to economic opportunity, they will be able to purchase food, healthcare, education, and clean water for themselves and their children. From my perspective, humanitarian aid and economic opportunity are two sides of the same development coin: international development assistance focuses primarily on helping the poor meet their basic needs, whereas Africapitalism promotes inclusive economic expansion in a way that creates new opportunities for people to help themselves.

 

Attributes of Africapitalism

Africapitalism is defined by a particular set of characteristics that are key to unleashing the potential of African countries to take charge of their own destiny and achieve their own development aspirations, specifically the SDGs. These characteristics include:

Shared Purpose: This is at the heart of fostering collaboration between government, business, and other stakeholders to achieve development ends. No single sector or entity can achieve the kind of transformative change we need in Africa on its own. A key feature of this is the creation of national plans and supporting policies around specific sectors and related targets where the private sector can step in with capital and expertise dedicated to achieving set targets. For instance, the Nigerian government set a target of achieving 40,000 MW watts of electricity by 2020 and in partnership with the private sector, enacted key reforms that made the sector attractive, and the private sector stepped up with billions of dollars of investment in power generation and distribution towards meeting that target. My company, Heirs Holdings, committed $2.5billion to invest in the power sector with a goal of generating 25% of the Nigerian government’s power generation target. That is “Shared Purpose” in working towards SDG 7 (Access to Affordable and Sustainable Energy).

Long-term Investments: Development is never a short-term project or goal and yet private sector capital, particularly in what is described as “frontier markets” or developing countries, tends to be very impatient, seeking rapid returns and quick exits.

 

Rapid returns

Long-term planning by governments and the deployment of patient capital by the private sector will together create greater and broader economic value as opposed to being merely focused on the extraction of resources. for too long African countries have benefited far too little from our own natural and human resources as global interests have extracted primary resources only to export them at a fraction of their eventual value.

Strategic Sectors: Government and business leaders need to define sectors where their countries have an inherent and unique competitive advantage and then jointly agree a strategy to capitalize on it. Government and business also need to be aligned in order to identify policies and regulations that unnecessarily, and perhaps unintentionally, stifle private sector growth.

In Africa, the universal strategic sectors are agriculture, natural resources and healthcare. However, each country has opportunities specific to it. In Nigeria for instance, the film industry or Nollywood is a strategic sector that has created millions of jobs and generated billions in revenue through production and distribution and this addresses for instance, SDG 8 (that is Sustained Economic Growth and Decent Work for All).

This makes the case for us Africans to take charge of our own development agenda because well-meaning donors tend to focus on life-saving assistance and are less likely to recognize, much less prioritize, the development potential of industries like entertainment, despite the fact that it is an important part of the Nigerian economy.

One need look no further than the U.S. state of California, which is the epicenter of the global film industry, and the industry’s role in making California the 8th largest economy in the world.

Value-­Added Growth: A key feature influencing the under-­ development of the African continent is the manner in which natural resources are extracted at low cost and then processed outside of the continent where the vast majority of the value is realized. And in many cases, the finished product is reimported to the very African nation it came from and at much higher cost. This is particularly apparent across industries where we export crude and import petrol; export timber and import furniture; export cotton and import apparel and, of course, export cocoa, only to reimport it as chocolate.

This is costing us millions of jobs and billions of dollars in revenue that we could be putting towards the attainment of the SDGs. It has also cost us our self-­ esteem by creating dependency on compassionate capital that often comes with cumbersome or distasteful strings attached, although we are more than capable of generating much of that capital ourselves.

In a continent of young people that will require tens of millions of new jobs by the year 2020, we cannot afford to continue this practice. Africapitalism encourages companies to locally process raw materials and other inputs in order to create local value in Africa.

Competitiveness: Africa as a region ranks lowest in the World Bank’s “ease of doing business” report, with only South Africa and Rwanda showing up among the top 50 places globally. The agricultural sector is a good example to examine when looking at this thorny issue of a lack of competitiveness. Let me explain what I mean the key drivers of competitiveness in any modern economy especially for a sector like agriculture are: Access to markets; Infrastructure and by this I mean transport/power/storage facilities etc; Supportive and consistency of government policies; The nature of the government bureaucracy and the extent to which this is supportive of business. When you examine or dive deeply into each of these areas and ask how African economies compare with countries elsewhere, you begin to understand why it is possible for more farmers in developed countries to have commercially viable businesses whilst African farming is still largely at a subsistence level and most African countries like mine and indeed Gabon are net importers of food when both should be net exporters. I cite the example of Agriculture because 70% of our people are employed in this sector and it remains an area that can become an engine for job growth/creation, which is an urgent need right across the continent.

The concept of Africapitalism advocates that governments working in partnership with the private sector, create policies and the environment that improve our overall competitiveness.

Entrepreneurship: While other regions of the world have aging populations, Africa’s youth dominates its populations. This means that Africa is poised to become the engine of global economic growth – but only if the jobs are available. Otherwise, this same young demographic will likely spell major political instability for us all as the youth becomes frustrated by a lack of access to economic opportunity. We know that governments and corporations alone cannot provide enough jobs for the more than 122 million young Africans entering the workforce by 2020. Therefore, one of the keys to winning the demographic dividend is entrepreneurship.

At the micro-­ level, entrepreneurship is a bottom up approach to economic growth and development that empowers the individual to find and pursue the best opportunities in their current environment to improve their own economic circumstances. It also drives the creation of home-­ grown solutions to local problems in core areas such as education, health, water and sanitation, etc., all of which are SDG targets, so entrepreneurs will have a significant impact in achieving other SDGs as well. At the macro-­ level, it is the expression of African solutions to African economic problems. Entrepreneurship means Africans have options for advancement that are not limited to just finding a job. They can create their own employment opportunity, as well as for others, and transform their communities, and even the continent. My belief in the inherent capacity of Africans to be successful entrepreneurs -­ if they have the right tools – is so resolute, that through the Tony Elumelu Entrepreneurship Programme (TEEP) I have committed $100 million over the next 10 years to identify, mentor, train and provide seed capital of $10,000 each to 10,000 African start-­ ups. In 2015, the first year of the Programme, we selected the best 1,000 ideas from the more than 20,000 applications we received from nearly all of Africa’s 54 countries, irrespective of their gender, nationality, level of education or sector.

All selectees needed was a transformative idea and the drive to succeed, and we gave them a chance. The first batch have already completed their training and received their first tranche of seed capital. And I’m proud to say that three of Gabon’s finest young people, a male and two females are part of the 2015 pioneer Tony Elumelu Entrepreneurs. I’m also delighted to announce today that, going forward, all TEEP applicants will be required to demonstrate how their idea will specifically help to advance one or more SDGs. As happy as they are to be in the program, it can’t compare to how it felt for me to stand on a stage, similar to this one, and look out upon the 1,000 excited faces that will fuel the transformation of our continent. With ideas for Apps and apparel, food and films, entertainment and education, and life-­ style and life-­ saving products, some among these African entrepreneurs could become the next Tony Elumelu, Bill Gates, or even Steve Jobs. And there are many, many more aspiring African entrepreneurs out there who also deserve a chance, if only their governments would prioritize supporting entrepreneurship. Let me commend President Ali Bongo for what I understand his government is doing to support young Gabonese Entrepreneurs.

Regional Integration and Connectivity: The lack of regional connectivity has been a key feature and cause of under-­ development on the continent. With the exception of a handful of countries, African economies are small markets and many countries are landlocked, making trade and movement difficult. Particularly unfortunate are the self-­ inflicted wounds of mutually-­ defensive tariffs and visa requirements that African countries continue to impose upon each other a relic of the colonial era that even historically warring European countries have long since abandoned.

For example, just to attend the TEEP training camp in Lagos this past July, virtually all non-­ Nigerian and non-­ ECOWAS attendees required a visa and some even transit visas as well. For those who were able to get a visa, many had to fly further away from Nigeria in order to get a flight connection into Lagos. TEEP is but a microcosm of the barriers faced by entrepreneurs and businesses across the continent. We will never know how many business ideas and relationships have been extinguished across Africa due to these barriers, but we do know how to change this and what the result will be: An increase in the volume and profitability of trade.

Africapitalism advocates regional approaches to physical infrastructure, such as regional highways and railways, power projects and the harmonization of policies and practices to enable seamless trade. The rich mosaic that is the African continent is at the heart of her strength. With 54 countries, more than 130 major ethnic groups, roughly 3,000 languages, and all major religions as well as many more traditional belief systems, Africa is arguably the most diverse region of the world. However, our cultural and geographic diversity should give rise to policies that bind rather than divide us. The world has come together to develop common goals to save and sustain mankind. Africapitalism provides us with a common, homegrown philosophy to achieve those goals, reclaim our self-­ reliance and fuel the continued transformation of Africa. As a businessman, I have spent my career taking over distressed businesses and turning them around. I firmly believe that we can turn this continent around. We can also turn our demographic dividends into development dividends. We can achieve the SDGs and we can make aid history, restoring Africa to its rightful place in the global arena.

Thank you.

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