To do business well in Africa today requires more than traditional economic analysis. It requires an understanding that Africa is a very diverse continent, with a vast array of different social structures, political systems, economies, products and markets.
For this reason, there is no single African growth story. And no business that seeks to operate across the continent can pursue a single African growth strategy. Africa is simply too large and too diverse. Yet, despite all this variety, most African economies share common features. Most are reliant on the extraction and export of raw materials. Most are constrained by inadequate infrastructure, low skills levels and limited industrial capacity.
This exposes many African economies to fluctuations in commodity prices and depressed global demand. The lack of industrial capacity means that many African countries are unable to extract sufficient value from their natural resources. They are not able to realise the potential benefits for job creation, improved export earnings and inclusive growth.
That is the part of the African story we know well. But the African story is changing. Africa’s future depends not so much on the rise of commodity prices but on the expansion and development of its human capital. A continent of over a billion people, Africa is said to have the fastest-growing middle class in the world. Opportunities that were not available a mere generation ago, are now within reach of millions more people.
More Africans are educated, more are employed, more own assets. Africa has a young and rapidly expanding workforce. Over the next few decades, as many other countries grapple with the challenges of an ageing workforce, Africa has the potential to become the most vibrant, innovative and productive region in the world. But to achieve this potential, African countries – individually and collectively – need to pursue deliberate political, social and economic measures. Many of these measures are described in the African Union’s Agenda 2063. And many of them are being implemented.
Even as many economies still rely on commodity exports, there is significant investment in other sectors. The growth in retail banking, telecommunications, information technology, niche and finished goods has been remarkable. African economies are becoming more diverse, more industrialised and more innovative. Today a large proportion of transfers in foreign currency are not carried out through the international banks, but through mobile money remittances from the African diaspora. Several African airlines, led by the likes of Kenya Airways and Ethiopian Airlines, are becoming more commercial viable, investing in new aircraft, opening up new routes and increasing intra-Africa commerce and trade.
In countries like Nigeria and Kenya, even with limited internet connectivity, innovative technological solutions are improving the lives of rural communities. Cellphone-based technologies are revolutionising the practice of medicine. Thanks to apps being developed on this continent, a health worker at a rural clinic can refer an issue for specialist diagnosis, in real time, by simply taking a cellphone photo of a patient’s eye.
African economies have both the potential and ability to leapfrog advanced economies in developing technologies suitable for local conditions and needs. Economic change in Africa is taking place alongside political change. Governments are increasingly concerned with need for stability as a precondition for economic growth and social development.
African countries are more united than ever before in promoting good governance, regional integration and multilateralism. Through our work in the African Union we are steadily establishing an integrated community that values accountability, good governance and transparency. Through a strong peer review mechanism we are seeing less conflict. With some notable exceptions, changes in government take place through the ballot box and not through the barrel of a gun. More than ever Africa is resolving its challenges through mediation, peace and dialogue.
African countries are working hard to transform their economies. Governments are supporting programmes that promote manufacturing and competitiveness. They are encouraging new growth opportunities by investing in economic and social infrastructure. Importantly, African countries are collaborating on cross-border infrastructure projects that foster greater integration and trade.
Many of these fall under the auspices of the Presidential Infrastructure Championing Initiative headed by President Jacob Zuma. This initiative is providing political leadership to projects such as the trans-Saharan highway between Algeria and Nigeria, the Grand Inga Dam in the DRC, and the North-South Corridor in Southern Africa.
At a national level – in South Africa – we are undertaking a massive infrastructure investment programme overseen by the Presidential Infrastructure Coordinating Commission. It is improving the capacity of our economy through better roads, ports, railways, electricity generation capacity and water infrastructure. It is improving people’s lives through new hospitals, clinics, schools and bus rapid transit systems. It is part of a broader economic strategy that seeks to grow the economy by increasing investment in productive economic sectors like manufacturing, agriculture.
Central to the economic future of our country is the development of the skills of its people. Nowhere has the impact of apartheid been more keenly felt than in education. By depriving generations of black South Africans of a decent education, the apartheid government sought to deny them and their descendants a prosperous future. We have allocated R640 billion to basic education over the next three years. Much of this will go to improving school infrastructure, ensuring all learners receive suitable learning materials, and improving teacher training. We have significantly expanded access to higher education, and have increased the funding available to poor students through the National Student Financial Aid Scheme (NSFAS). The amount disbursed annually by NSFAS has grown by approximately 270% since 2008, and is budgeted to grow even further in the next few years.
But what has been made very clear by events over the last few weeks is that the funding of higher education remains a critical problem. We need to ensure that no-one is excluded from higher education because of an inability to pay. At the same time, we need to find funding mechanisms that are sustainable and ensure a high quality of education.
No country has managed to achieve what we are seeking to achieve without affordable, accessible, quality higher education. Through their actions, the students of South Africa have, quite correctly, underlined this critical imperative. As a country, we must now move with speed and purpose to address these fundamental issues of access, transformation and quality outcomes.
There are many ways to describe Africa’s recent progress and the expectations that many have of its imminent economic and social emergence. I would now like to turn to what I referred to as mega-trends that business needs to address and pay attention to. EY has produced a report setting out five mega trends, to which I have added my own five. The 10 trends are:
6.The level of consciousness of the people of the world is rising; people are becoming more discerning and are not prepared to accept shoddy service;
7.Growth of the middle class, and on the African continent in particular;
8.People’s demand for good governance;
9.Innovation, particularly the grasp of technology in Africa
10.Hope for the future: people are more hopeful about the future; (even) when they protest, they are doing so to secure a better future.
I would like to conclude with what I consider to be one of the most compelling accounts of what we are witnessing in Africa today. It was written over a century ago by Pixley ka Isaka Seme. He said: “The brighter day is rising upon Africa. Already I seem to see her chains dissolved, her desert plains red with harvest, her Abyssinia and her Zululand the seats of science and religion, reflecting the glory of the rising sun from the spires of their churches and universities.
“Her Congo and her Gambia whitened with commerce, her crowded cities sending forth the hum of business, and all her sons employed in advancing the victories of peace-greater and more abiding than the spoils of war.
“Yes, the regeneration of Africa belongs to this new and powerful period!”
By H.E. Cyril Ramaphosa
Deputy President f the Republic of South Africa at the opening of the 2015 EY Strategic Growth Forum on Africa Sandton, Johannesburg.