Some Highlights From The Africa Attractiveness Survey 2013


 

Original post on Developed Africa

It’s always an exciting time of the year when the Ernst & Young Attractiveness Survey for Africa comes out as it offers some fascinating narratives about how Africa might be going forwards and how it might be going backwards. That being said, it is pretty long and number filled so I thought I’d do a brief highlight reel for the lazy busy people out there.

Seriously though, do read it if you get the chance – here’s the link.

The 2012 edition of the Survey focused on the huge jump in foreign direct investments (FDIs) in Africa – up 27% from the original survey in 2010 – and stressed that, despite the criticisms, the narrative surrounding the continent’s rise should be told “more confidently and consistently”. The new edition continues this bullishness, it’s Executive Summary titled, “Africa’s rise is real”. Ernst & Young focus on economic facts and dismiss any scepticism out of hand – this growth is consistent, it is diverse and it should be celebrated.

The story is not totally one-sided, however, as FDIs have decreased in the last year despite the ongoing rise in global esteem that the continent seems to be going through. Greenfield FDI projects were down 12% from 2012 – although, that is in a global context where all such projects were down 15%. There are other issues, too, such as the perception of conducting business in Africa. Again, despite Africa’s rise, many foreign investors remain unwilling to do business there. As it states on page 5,

However, the big take away for us from this year’s survey is the stark and enduring perception gap between those respondents who are already doing business in Africa versus those that have not yet invested in the continent… those with no business presence in Africa are far more negative about Africa’s progress and prospects. Only 47% of these respondents believe Africa’s attractiveness  will improve over the next three years, and they rank Africa as the least attractive investment destination in the world.

As Developed Africa recently highlighted, the potential of African business is being severely limited by the lack of proper communication about how much commercial potential there is. Developed Africa seeks to directly combat that so do check out our homepage for more.

The good news is that the percieved attractiveness of various sectors in Africa has improved allowing for more diverse business models. As stated on page 41,

There has been a marked shift in perceived sector attractiveness; resources remain top of the list, but not by far, with infrastructure and some of the service sectors gaining considerably in prominence

Previously unheralded sectors like Education, ICT or Financial Services have become hugely more attractive, complimenting the long standing interest in commodities and energy related projects in the region. This is a terrific opportunity for entrepreneurs and established businesses alike to move into new and exciting ventures.

The survey ends with a section focused on how Africa can continue to grow in the next year. The first point this section makes is to stress the vital importance of FDIs to the region. These act as catalysts for intra-continental trade, improvements in infrastructure and job creation. Africa has the largest employable population in the world and will continue to grow with or without foreign investors. However, it will grow faster and more effectively with the injection of funds and the creation of international commercial partnerships.

The conclusion on page 64 puts it neatly,

Business has to be viewed as an essential partner in driving the growth and development agenda.

P.S.

I threw in that Eric Hersman talk as it fits E&Y’s bullish narrative and who doesn’t need an excuse to watch it again?

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No Child Left Offline


Originally posted on Developed Africa

In his successful run for the presidency of Kenya earlier this year, Uhuru Kenyatta has promised to deliver one laptop per child to those attending primary schools from January 2014. This scheme has been met with some scepticism, not least for the potential cost as this article from one of Kenya’s largest daily newspapers put it,

However, given the cost implications, the ministry has proposed to roll out the project in three phases. According to the estimates tabled by [Education Secretary] Kaimenyi, each laptop will cost Sh28,000, a sum that may be out of reach of many parents in public schools whose children are covered by the project.

There are other criticisms out there. A recent excellent blog post by Will Mutua (co-founder for Nairobi’s Open Academy) summed up the main areas of concern for such a scheme very succinctly,

Lack of Supporting Infrastructure: Many schools in rural areas have no access to electricity, some have dilapidated classrooms and other amenities, not to mention some extreme cases where learning does not even happen inside a classroom. What’s the point of giving these students laptops? Their schools have other more pressing needs.

Lack of Capacity: There are teachers who are computer-illiterate. What happens when computers break down, who will have the technical skills to troubleshoot these laptops?

Timing: It’s just not the right time for such an initiative. There are other pressing matters that can be dealt with instead of ‘throwing away’ money in an impractical project. How about jobs, healthcare etc.? And even if it is a matter of enhancing education – why not first hire more teachers, there’s clearly a shortage of them, or pay teachers better?

It is interesting that such problems have been highlighted for a government project – if you didn’t know what they were about you would be forgiven for guessing that Mutua was criticising a poorly planned charitable project. It lacks sustainability, it lacks a proper appreciation of local context, and seems to seek headlines more than anything else. These are all classic complaints of donor-driven development models.

Promoting computer literacy is a great project, particularly for Kenya as it looks to become the tech hub of Africa. Giving a laptop to every child is something that has been attempted before (see Mutua’s article for some good examples of similar schemes in East Africa in recent years) but often falls on the tertiary aspects of promoting computer literacy – you can’t just give the equipment, you have to support that equipment and its users as well. Governments and NGOs can start projects like this but it is through commercial partnerships that African nations can really build a lasting, economically functioning tech sector. The talent is there, schemes something like Kenyatta’s one laptop per child can open up the opportunity – now it is up to business investors to bring those things together.

Unpicking The 0.7% Aid Target


Original posted on Developed Africa

For many years campaigners have fought to set the minimum level of aid spending in the UK at 0.7%. This target was promised by the Cameron government but has yet to be delivered leading many to criticise the current UK government. But where exactly does the figure 0.7% come from and why has it become such a focused target on third sector pressure?

Richard Thomas at African Arguments has recently written a fascinating piece on the history of this target. This particular aspect of the aid agenda stems from the Pearson Commission, a World Bank investigation into the history and future of aid led by Nobel Prize winner Lester Pearson. In 1969, the report ‘Partners in Development’ was released. As Thomas explains it, this report set out a new paradigm for aid:

Pearson concluded that initially 0.7% should be official (government) aid flows and that approximately 0.3% should come from the private sector. The first part of this formula (0.7%) was adopted by the UN and later by the major donor countries.  Pearson expected that this ratio of 2:1 (government: private) would, within two decades, be reversed. He felt that a more natural relationship was 0.3% from government funded aid flows and approximately 0.7% or more from the private sector. Reducing poverty in Africa and Asia depended on investment, trade, better health and education, adding value locally to primary products etc. Not, in other words giving developing countries fish (aid), but giving ‘them’ a fishing rod so that they could develop themselves.

Private investment would flow, they believed, when internal capacity and investment-friendly institutions had been developed – partly by aid. But it was necessary to begin with a front loaded ‘Marshall plan’ approach, hence the 0.7%. The long term need for 0.3% was to help build and sustain local capacity.”

Private sector investment was always intended to become the major influence in development models. The huge amount of aid assistance currently offered is, as Thomas describes it, a misunderstanding of what Pearson recommended for long-term development in the Global South. Thomas argues that an enshrined governmental aid budget of 0.7% will almost inevitably fuel some of the major criticisms of aid – for instance, the problem of dependency and bad budgeting in recipient countries.

Unlike some critics, Thomas argues that cutting the aid budget isn’t the answer; promoting greater private sector investment is.

The piece on African Arguments continues:

A new Paradigm for Aid and Development assistance is needed. The 0.7% model encourages donors to focus on quantity rather than quality and discourages the kinds of reforms which would engender sustainable growth. The Chinese alternative, which is just as exploitative as the western neo-liberal model, appeals to many African elites who are neither reformist nor pro-poor.

Pearson’s expectation that the educational and structural investments achieved by aid would trigger increasing investment and trade has, thanks to the Chinese, been realised (although probably not in ways he expected). But bulk or wholesale aid, whether 0.7 or 0.3, is no longer the key to African development. It could be argued that small scale initiatives which act as a catalyst (adjusting the ‘rules of the game’, removing log-jams, increasing the role and influence of civil society, improving the capacity to audit flows of funds etc) are both cheaper and much more useful to developing countries in the long run.”

Governmental aid might serve a purpose but it is not the real solution to long-term development. The 0.7% debate should be diverted to reflect this – the UK government can and should fight for greater investment from British private sector organisations, bringing beneficial partnerships to everyone involved.