Africa must avoid scoring own goals in its economic rise

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br lamidu Bloomberg Lamido Sanusi was suspended as governor of the Central Bank of Nigeria last month. The move spooked investors and prompted a plunge on the Nigerian stock exchange and in the value of the naira. Photo: Bloomberg

Africa’s moment of glory is now. The narrative on Africa has shifted from a “hopeless dark continent” to an “Africa rising”. Africa is reinventing itself from within. It’s as long overdue as it is a necessary precondition for the continent’s rise to being a First World continent within a generation.

Africa is basking in the glory of positive investor perceptions. This is a moment of historic and significant opportunity. Africa must leverage this to the maximum sooner rather than later as the world’s interest may not last long.

The challenge is to retain global investor interest on the continent and reinforce and deepen it. This can and must be done and requires bold, visionary and disciplined leadership.

Countries and continents compete fiercely for their share of global investment flows. Africa needs to craft and advance a compelling investment proposition on a sustained basis to attract and retain investment for generations.

African leaders in government and business across borders need to develop and promote a collective strategic concept and vision for the continent’s economic rise and triumph in a globally competitive investment and trade landscape that is in a state of constant, if not chaotic, flux.

Investors are spoiled for choice. Capital has no border restrictions and moves with fickle investor sentiments at the click of a button. Managing investor perceptions should be one of the core skills all leaders in government and business in Africa should have. This is an area that needs improvement. Leaders must avoid scoring own goals through irresponsible public utterances or policy interventions and actions, such as Uganda’s unhelpful anti-gay legislation, which will inevitably limit the global/geographic mobility of gay professionals employed by foreign companies in that good and lovely country.

There is a compelling need for policymakers to learn to consider both the intended and unintended consequences of their policies. The reality is: what may be good in winning the next election may be bad for winning massive inflows of investment on a sustained basis.

There is a need for caution and balance as leadership is, in the ultimate analysis, about crafting a fine balancing act on controversial issues.

The dismissal of the Central Bank of Nigeria governor, Lamido Sanusi, spooked markets and sent shares tumbling on the Nigerian stock exchange as the country’s currency, the naira, also took a pounding.

South Africa’s protracted strike on the platinum belt is another own goal that does not help in inspiring confidence.

With the improving fortunes of the US and EU economies comes a golden opportunity for Africa to position itself to produce and export more to these traditional markets and, in the process, grow its economies.

If we do not get our act together we run the risk of missing out on opportunities presented by improving growth prospects in our traditional markets in the developed world. Other countries and continents will seize the moment and gain and retain market share. It is easier to lose market share than to regain it.

The Brics (Brazil, Russia, India, China and South Africa) and other key emerging markets such as Indonesia, Turkey, Thailand and Mexico, are facing challenges as investors are beginning to look for value opportunities in the developed markets, whose fortunes look rosier this year and beyond than those of emerging markets.

Tapering of quantitative easing by the US Federal Reserve has created new categories such as the “Fragile Five”, a concept coined by Schroders to refer to the five emerging markets that are most exposed to tapering: Turkey, Brazil, Indonesia, India and South Africa.

These are tough times indeed. Leadership is required. Statesmanship is required. South Africa needs to lead the charge in co-ordinating Africa’s strategic response to global economic trends.

Lack of co-ordinated smart action at national and regional levels will result in suboptimal benefits that won’t move the dial in terms of our global competitiveness and ability to win the economic wars of the 21st century.

What then must Africa do to advance a co-ordinated economic project to position the continent as an attractive investment location of choice?

First, massive investment in human capital to turn Africa’s largely youthful population into a demographic dividend is urgently required. Africa’s growing young population can be a massive source of the continent’s global competitiveness, if it is equipped with the skills and knowledge required to modernise and grow Africa’s economies.

However, if Africa fails to strategically and effectively invest in its youth, that can be a recipe for instability, poverty and crime. We need centres of global excellence at all levels of the education value chain across the continent to make quality world class education and training available to all Africans, to prepare them to lead and manage world class companies not just in Africa but also in London, New York, Paris, Tokyo and elsewhere in the developed world. We need to be outward looking as much we are inward looking.

Second, there is a need to build institutions that work and deliver to ordinary people. This has to be tied to actively combating the cancer of corruption creeping in and threatening to undermine Africa’s rise. A lot of countries have done well to establish anti-corruption bodies. This is a good start. However, anti-corruption bodies need to be given autonomy to take on corrupt vested interests without fear or favour. They shouldn’t mainly be used to deal with enemies and adversaries. Institutions must be depoliticised and be free from manipulation by dominant and powerful individuals and groups.

Third, Africa needs a geographical division of labour, in which regional centres of excellence are established and promoted. In the EU, for example, London is the undisputed centre of excellence in finance, Germany in manufacturing, France in wine, Brussels in policy and administration.

In southern Africa, South Africa can be the centre of excellence in mining and financial services. In east Africa, Kenya can be the centre of excellence in IT and telecommunications. In west Africa, Nigeria can be the centre of excellence in oil and gas, and agriculture.

Having these centres of excellence spread across the continent will encourage and foster collaboration and avoid duplication and wastage of resources.

Africa’s rise is real, but not inevitable. It requires well orchestrated and co-ordinated results-oriented action, underpinned by focused and effective execution. This can and must be done.

* Kuseni Dlamini is the former head of Anglo American South Africa. This article is an adapted version of a speech he delivered recently at Harvard Business School’s Africa Business Conference at Harvard University.


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