Africapitalism: Putting the Private Sector at the Forefront of African Development
Key Questions and Answers
What is Africapitalism?
Africapitalism is an economic philosophy: that the African private sector has the power to transform the continent through long-term investments, creating both economic prosperity and social wealth.
What are the key goals of Africapitalism?
Africapitalism is about creating value within Africa for the long-term. It is about transforming the continent in a way that is both profitable and sustainable. It is also a call-to-action for Africans to take primary responsibility for our own development and for non-Africans to evolve their thinking about how best to channel their efforts and investments in the region.
How is Africapitalism different to pure capitalism?
Africapitalism argues that all economic activity should be value-adding and have a social impact that creates wealth. Through long-term investment and the creation of social wealth, the private sector can solve Africa’s development challenges more effectively and with greater sustainability than either the philanthropic or public sector.
Is Africapitalism only for Africa?
Africapitalism is a transformation in the way business and investing are done, and we believe that this approach can help drive sustainable growth all over the world, not just in Africa. However, Africapitalism is currently focused on Africa because of specific challenges the continent faces, such as an economy that has traditionally been based on extraction and export; and misconceptions of risks that deter investors.
What is the origin of the idea?
The entrepreneur and philanthropist Tony O Elumelu developed the idea from his experience building one of the biggest banks in Africa – United Bank for Africa (UBA). The bank has created jobs, directly and indirectly, for tens of thousands of people. It also serves more than 7 million customers, empowering them to manage their own finances, as well as providing credit and capital to businesses. This thriving business is a model of how private sector investment can create catalytic and sustainable change at the local level, in a way that charity and aid cannot.
What problems can Africapitalism address?
By creating new economic wealth, Africapitalism can address almost every challenge facing Africa today, from healthcare, to education, to food security, and even national security and social stability. The more opportunity the private sector can provide, the more Africa will benefit from a stable and productive economic environment, as well as self-reliance in solving persistent socio-economic issues.
Why is Africapitalism important now?
For all Africa’s well-publicized growth over the last decade, much of it has been extractive and export-led, and it has had relatively little impact in terms of jobs and domestic wealth. Given current demographic trends—i.e., tens of millions of people will enter the workforce over the next decade—we are not creating private sector jobs nearly fast enough. We need a robust platform of private sector job growth and wealth creation within Africa, or we risk undermining Africa’s current growth trajectory.
Who is responsible for driving Africapitalism?
Africa’s business elite have the primary responsibility for implementing Africapitalism—it is on their shoulders. We believe that if the African business sector shows the way, governments and investors will follow, including Western and BRICs investors. We cannot expect non-Africans to act and invest differently if Africa’s own leaders aren’t.
Is there still a role for philanthropy in Africa?
Africapitalism is where philanthropy and business meet. Rather than rely on the good intentions and wealth required of philanthropy, Africaptialism introduces a business motive that ensures an inbuilt sustainability plan to the challenge being addressed. But there will always be a role for philanthropy. A more strategic approach to philanthropy allows for an element of risk which Africapitalism doesn’t, it also doesn’t require the same business accountability which means it can play a very different role. For example, philanthropy can be used to provide grants and subsidies that reduce costs and risks for new business. It can provide ‘free money’ to businesses to support their growth as well as co-invest with financial intuitions to provide guarantees and incentives. For some challenges, such as floods and other natural disasters, Africa will still need to rely on traditional philanthropy and relief aid because the private sector cannot solve 100% of our challenges.
What, if any, is government’s role in advancing Africapitalism?
It is government’s chief responsibility to create an enabling environment in which the private sector can engage in wealth-generating economic activity. Governments need to implement strong, long-term, stable policies, so that business leaders can invest for the long term. The right incentives from government will make short-termism unattractive and push business activity toward long-term investment and value addition.
