The bottom-up approach of the African private sector makes all the difference

African success stories are multiplying in the private sector, each more inspiring than the next. A striking fact explains some of the dazzling successes whether start-ups, telecommunications companies or banks: a bottom-up approach, which starts from the realities on the ground to design solutions adapted to needs, from the most local to the most global. And not the other way around, which consists of plating imported goods or services without adapting them to demand.

Indeed, an object such as the razor has the same use all over the world. But the way it is sold will change everything in Africa, where you have to consider the pace of transactions and maturities, which are not necessarily monthly as in Europe. The logic is rather that of “daily expenditure”, the famous “DE”* as it is called in Senegal. This DE ensures that purchasing power is adjusted on a day-to-day basis for products sold at retail. That’s why a bag of 10 razors is less likely to be purchased than each piece individually.

In other areas, market adjustment leads to perfectly innovative products on a global scale, as seen with M-Pesa, the e-wallet that has made the Kenyan mobile network operator globally known. In doing so, the solution invented in Kenya has been replicated in much of the continent. It is part of the daily lives of Cameroonians and Malagasy alike, not to mention the African diasporas who send money to their families back home. As indicated in the latest GSM Operators Association (GSMA) report on the digital economy in sub-Saharan Africa, the continent hosts nearly half of the world’s active mobile money accounts.

Microfinance and meso-finance allow telecommunications companies and banks to reinvent themselves, as seen in Senegal and Zimbabwe, with the respective examples of Wari and Econet Wireless. The main lesson of these successes is that the potential of the informal sector should not be underestimated, a word that has a pejorative connotation in itself, while it is synonymous with remarkable dynamism.

“The private sector is currently the main source of employment on the continent”

These initiatives contribute to an ad hoc regional integration, which is carried out on a daily basis in economic terms. An online trading company founded in Nigeria and later expanded to other countries made headlines this year due to its listing on the New York Stock Exchange. Upstream, many other African private groups are advancing telecommunications infrastructure. Tens of thousands of kilometres of fibre-optic cables are being laid across the continent to link countries together, with a vision that does not care about linguistic or cultural borders, but relies on a demand that can only be exponential.

Internet access, which stood at 23% in sub-Saharan Africa in 2017 according to World Bank figures, is expected to jump to 39% by 2025 according to the GSMA report. The expansion of this access not only makes Africa a new frontier for global growth. It is also one of the Sustainable Development Goals (SDOs), and nourish high hopes for faster growth through digital technology.

The private sector is currently the main source of employment on the continent. The extent of these successes in this sector must be appreciated by policy-makers and the great lesson to be learned from the African private sector for policy-makers in Africa can be summed up in these few words: starting from the field to identify needs. There is not necessarily a need to call for help, but to consider actions in a sustainable way, with future generations in mind. There is only profit to be made from it, from every point of view.

*DE: daily expenditure

Q&A: The African Union’s first ever Development Agency

Question: Please take us through the journey that the led to the creation of the African Union Development Agency-NEPAD.

Dr Ibrahim Mayaki: The African Union Assembly of July 2018 approved the establishment of AUDA-NEPAD as the technical executive agency and development anchor of the continent with its distinct legal identity and defined by its own statute, to deliver on the development priorities articulated by the African Union. Its establishment is part of the overall institutional reforms of the African Union. 

At the 31st Ordinary Session of the Assembly of African Union Heads of State and Government in Nouakchott, Mauritania, a decision was officially adopted to transform the NEPAD Planning and Coordination Agency into the African Union Development Agency (AUDA-NEPAD).

The vision of AUDA-NEPAD is to ‘Harness knowledge to deliver the Africa we want.’ The mission of the organisation is to provide a platform for African countries in order to ensure the effective and integrated planning, coordination and implementation of programmes and projects aimed economic integration and development, and embracing of AUDA-NEPAD’s principles and values.

Read the full article here.

Positive discrimination in favour of major African companies is needed

What concrete changes will result from the transformation of the New Partnership for Africa’s Development into an AUDA?

The agency has autonomy of execution and freedom to mobilise resources, for example, with advisory services to states and regional organisations. Thus, the African Union Commission is delegated certain tasks of implementing development policy and will be able to focus on political orientation, governance, peace, security [and so on].

Read the full interview on Africa report website.

How Africa should prepare for the new industrial era?

Is the industrialisation that Africa so strongly advocates just taking time to happen or indefinitely postponed? Is the continent today likely to enter a new industrial era, without any prior expansion of manufacturing? These questions should be asked. By focusing on a model that dates back to the rise of manufacturing in Europe with electricity at the end of the 19th century, we would almost forget to see what is happening before our eyes. Africa, which has moved directly to mobile phones without developing the fixed-line network, has made a unique technological leap. His invention of the electronic wallet has changed the daily lives of millions of mobile phone users who are not necessarily banked. 

The “Fourth Industrial Revolution”, as defined by Klaus Shwab, a German economist and founder of the World Economic Forum (WEF), is driven by artificial intelligence, 3D printing, virtual reality, blockchain and “cobotics”, the interaction between a man and a robot system. It follows the three previous revolutions, induced by the advent of the steam engine in 1760, then electricity and mass production at the beginning of the 20th century, before the advent of computers in the 1960s.

Today, there are countless remarkable African inventions such as Askwar Hilonga’s, the Tanzanian who solved the problem of access to drinking water by setting up the NanoFilter. Indeed, this is a cheap water filter based on nanotechnologies, or the Zimbabwean service that “uberises” household waste collection. In other words, a truck platform travels to 32 cities across the country at the request of users who want to dispose of their waste for a small fee. From Dakar to Djibouti, logistics hubs are being developed throughout the continent.

Some Experts such as Carlos Lopes think it is mistaken to complain about the lack of factories in Africa. Because industrialisation also takes place in the services sector, the one that dominates most of the continent’s fast-growing economies. This is not bad news in itself: tourism, for example, is part of the industry, as are the creative industries, which also create jobs. The proof? Nollywood, this huge Nigerian film factory, is the second largest employer in the country after agriculture with 1 million people.

“Industrialisation is not limited to manufacturing. It refers to a whole ecosystem of modern transactions, capable of serving sophisticated economic fabrics and value chains”

Manufacturers no longer provide jobs in Europe, nor in Africa, as robotics develops. It is therefore necessary to consider this secondary sector, which is often considered as a “necessary step”, a required condition for development. Do we know what impact artificial intelligence will have tomorrow, as well as new technologies that are still beyond our imagination today? The “leapfrog” that has occurred in telecommunications could be replicated in many areas, including those on which current delays act as barriers – such as access to electricity and refrigeration.

Industrialisation is not limited to manufacturing. It refers to a whole ecosystem of modern transactions, capable of serving sophisticated economic fabrics and value chains. From this perspective, several countries are already industrialised in Africa, apart from leading countries such as Egypt and South Africa. Côte d’Ivoire, Ethiopia, Ghana, Morocco, Mauritius, Rwanda, Togo… These are all countries that have undergone structural transformation of their economies, with massive investments in a more modern and partly industrialised productive fabric. As for countries with large rural populations, which will remain so for the next 30 years, any industrialisation will necessarily involve the diversification of the rural economy.

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The growth of foreign direct investment in Africa also depends on our progress with regional integration

The latest report of the United Nations Conference on Trade and Development (UNCTAD) on world investment confirms the renewed attractiveness of Africa in 2018. While foreign direct investment (FDI) fell by 13% worldwide last year, foreign direct investment to the African continent jumped by 11%. In a gloomy global economic context, troubled by the threat of an escalation of the US-China trade war, Africa is escaping the protectionist storm by continuing to attract a growing share of investments. 

It would be easy to miss the forest for the trees. It should be remembered, however, that Africa continues to capture a tiny share of FDI in the world, only 3.5%, or $45.9 billion. In comparison, India alone received nearly $42.3 billion in FDI in 2018. In 2018, FDI in Africa remained below the level of 2014-2015, following the fall in commodity prices. Natural resources also continue to be the main vector of investment on our continent – allowing the Republic of Congo, for instance, to move up to third place in the African ranking thanks to investments in oil exploration and production – with a few exceptions in some more diversified economies. 

Several factors may contribute to an increase in FDI in 2019: the hypothesis of stable commodity prices; increased US investments in the African continent to compete with China (including the creation of the U.S. International Development Finance Corporation (USDFC) which should be able to mobilize 60 billion mainly for the African continent); and the ratification of the Agreement on the African Continental Free Trade Area, that is boosting the continent’s attractiveness as a large economic area in the process of creating a big continental market.

While most regional groups are for the most part weakened by internal tensions – even the European Union can no longer act as a model with Brexit and the rise of populism – only Africa is strengthening its integration within the framework of a common economic and political project. On May 30, the Continental Free Trade Area officially came into force, laying the groundwork for a single market of 1.2 billion people with an estimated GDP of $2.5 trillion. At the same time, the business climate on the continent continues to improve, facilitating investment and supporting the development of small and medium-sized enterprises. In the Doing Business 2019 ranking, Africa shines by the number of reforms carried out, even in countries that are subjects to conflicts.

Nevertheless, while it is true that African States must continue to improve their attractiveness to foreign investors, one of the priorities must remain the mobilisation of our domestic resources. It is not FDI that will bring structural transformation of our economies. The average tax-to-GDP ratio on the African continent remains low compared to the average ratio of OECD countries and other regions of the world. This loss of income is more than harmful to development policies, while the United Nations Economic Commission for Africa estimates that our continent could earn $99 billion a year by adopting better tax policies. 

Our challenge to emerge in a globalized world is not without obstacles: our continent is leading an unprecedented range of reforms, but it is only by combining regional integration, improving the business climate and diversifying our economies that we will make Africa a global economic power.

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Pharmaceutical industry: how to respond to health-related challenges in Africa?

The pharmaceutical market in Africa is one of the fastest growing in the world and one of the most dynamic high potential growth and economic drivers in Africa; and is expected to reach $52-60 billion by 2020. Local production represents a huge potential to stimulate economic and industrial growth on the continent, while providing a local, secure and sustainable response to Africa’s significant health needs.

The growth of the pharmaceutical industry in Africa was at the heart of the Africa Pharma Conference, organized last month in Johannesburg by AUDA-NEPAD. Indeed, this meeting focused on best practices, progress and the road ahead. Significantly the Conference highlighted the huge market potential, with the attendant benefits of driving economic development and ensuring pharmaceutical security for the continent. In this regard the conference came up with a set of clear recommendations for the continental leadership that are required for local industry to realise its huge potential. The message of the conference was real and unambiguous. African markets are not destined to cannot remain prey to traffickers of expired or substandard medicines, or a competitive ground for foreign firms alone. The reducing international donor commitments, and recent supply shocks provide ample evidence for why it is time Africa took its destiny into its hands.

“The Africa of the future will not depend on donors for its medicine needs, but on its own internal resources”

Strong political will has already enabled North Africa to set an example. Morocco, Algeria, Tunisia and Egypt cover 60% of their essential medicines needs and now export the medicines they produce including to the highly regulated markets of the west. South Africa has also led the way, developing its local production of cheap generics and creating in Aspen, a top ten global generics player.

Ghana, Côte d’Ivoire, Kenya, Nigeria, Tanzania… All these countries are developing local production capacities, with Nigeria for example having over one hundred and fifty local manufacturers. Out of 55 countries, Africa has 37 countries with national pharmaceutical industries. It is also worth noting the efforts made by States to establish health insurance systems. From Benin to Tunisia, through Djibouti, Côte d’Ivoire, Ethiopia and Rwanda, often cited as examples, all these insurance schemes will increase access to medicines.

Much remains to be done, however, across a continent that carries 25% of the global burden of disease, although it represents only 16% of the world’s population. Malaria alone represents a huge public health challenge. It is the deadliest disease in Africa, ahead of tuberculosis and HIV/AIDS. According to the World Health Organization (WHO), sub-Saharan Africa accounts for 90% of the 212 million malaria cases recorded in 2015, and 92% of the deaths caused by this pandemic in the same year.

“Bad for business”, as Akinwumi Adesina, President of the African Development Bank (AfDB), so aptly puts it, and malaria costs Africa $12 billion a year, or 5% or 6% of GDP. Between 70% and 80% of the medicines consumed in Africa are imported, particularly from India and China. Hence the need to invest in local industries to supply a growing market, driven by the demographic boom, and the significant economic progress- the Africa of the future will not depend on donors for its medicine needs, but on its own internal resources. Consequently, it should also be prepared to procure from Africa based companies to create a virtuous cycle of economic development and good health.

Partnerships, including with the United Nations Industrial Development Organization (UNIDO), the World Health Organization (WHO) and UNAIDS, are essential. Even if the most important partner, in the end, is none other than the African citizen who does not have access to medicines. It is necessary to restore his confidence in local, and not only imported products that are not only accessible, but whose quality is adequately assured by the regulatory authorities.

For this reason, AUDA-NEPAD has published a “model law” on the regulation of medical products to inspire States that do not have or wish to supplement their national pharmaceutical laws. The objective is to establish a national regulatory authority, which can work in tandem with the soon to be established African Medicines Agency (AMA), launched in 2018 to harmonize existing regulations and improve access to safe products.

The Pharmaceutical Manufacturing Plan for Africa (PMPA), led since 2007 by the African Union and partners including UNIDO, UNAIDS, and WHO, also aims to harmonize national policies. This is what the countries of the Central African Economic and Monetary Community (CEMAC) undertook in 2013 to create a single market for medicines. A concrete progress towards sub-regional integration, that deserves to be welcomed. The time for Africa to take its destiny in its own hands. That time is now!

 

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Diaspora remittances are a key source of financing for Africa’s development

Whether formal or informal, remittances from the diaspora have long been undervalued. However, they characterize a large part of Africa’s financial life. These financial flows between individuals contribute significantly to the economic growth of African countries: between 10% and 20% of the GDP of some countries, from Senegal to Lesotho, thanks to remittances that are sent through formal channels. According to the World Bank, money transfers to Sub-Saharan Africa represent $46 billion for the continent as a whole in 2018. These transfers have become more important than official development assistance.

Donors have been slow to realize the importance of remittances. The first report was published only in 2010 by the World Bank and the AfDB. It estimated that some 30 million African nationals from the diaspora, including North Africa, made “formal” transfers through traditional banking networks. 

Another category of less documented flow, that is crucial in daily life, is the funds that flow between African countries, such as Nigerian operators who source agricultural inputs in Côte d’Ivoire, Somali expatriates who support their families from South Africa or Malian manufacturers who source cement in Senegal, for example. These exchanges do not necessarily involve direct transfers. They are based above all on a form of “relational” economy specific to our continent and is based on trust. (see below the main amounts of remittances in Africa).

We can also note that a significant proportion of money transfers are made through informal means. In reality, this money circulates through ingenious channels, aimed at circumventing exchange control regulations or fees charged on international transfers. A simple call between New York and Dakar is all it takes, through banks managed by the “Modou-Modou”, small traders belonging to the Muslim community of the Mourides. These dematerialized money transfers are based on trusted networks and intermediaries charging small commissions: for example, an informal operator in Morocco will take the money of a Senegalese in Morocco who would like to transfer it home, but keep the cash for a different transaction made by another Senegalese customer in Morocco. 

Commissions are half the amount of the 10% or so charged by some remittance companies that are deeply involved in Africa and are located in every cities from which migrants leave, such as Louga in Senegal or Kayes in Mali. The market is huge, since 80% of African migration takes place within the continent, according to the African Union.

These agencies share a rapidly expanding sector, with 61% of the market share of a $4 billion per year market according to the World Bank. This is a trend coveted by banks (32% market share), post offices (5%) and, increasingly, by mobile phone operators. Some operators, particularly in Kenya, have changed the situation, such as the M-Pesa electronic wallet. This approach has been adopted across the continent.

Two countries are leading by example. Ethiopia launched in 2002, a website, the Ethiopian Diaspora Directorate, which identifies investment opportunities in the country for the diaspora members. They are very involved in their home countries, the Ethiopian diaspora the Ethiopian diaspora has invested more than $56 million in the project to build one of Africa’s largest hydroelectric dams, the Great Renaissance. Rwanda launched the Agaciro sovereign solidarity fund in 2012, which has raised €51.5 million in four years.

In fact, African financial success stories are countless. The Dahabshiil remittance network, founded in 1970 in Dubai by Somali businessman Abdirashid Duale, has grown to the size of a multinational… It has more than 2,000 employees in 144 countries. They have the advantage of receiving declared salaries, with pay slips. A good way out of the informal sector, while taking advantage of the huge contribution of migrants, whether on the continent or elsewhere.

 

 

 

 

 

 

 

 

 

Source : The Global Knowledge Partnership on Migration and Development, 2019

Africa Day: Towards durable solutions to forced displacement in Africa

The commemoration of Africa day allows us as Africans to celebrate the founding of the Organisation of African Unity (OAU) on 25 May 1963. Indeed this date marks a clear point in the history of our continent, a point at which our founding leaders signalled to the world that Africans were ready to work in solidarity with one another. This is key to our future.

One of the most prominent leaders behind the founding of the OAU, Kwame Nkrumah, is quoted as saying, “The forces that unite us are intrinsic and greater than the superimposed influences that keep us apart”. This still applies now under the Africa Union, where the focus is on addressing not just political but also development and economic challenges, as well as creating current and future opportunities for Africa’s young population.

This year, the AU has decided to strengthen its action towards refugees and displaced persons in order to develop durable solutions for them, focusing on autonomy and resilience. The AU theme for 2019 is “Refugees, Returnees and Internally Displaced Persons: Towards durable Solutions to Forced Displacement in Africa’’.

Figures show that sub-Saharan Africa is home to nearly half of the 11.8 million new people displaced worldwide by conflict in 2017 alone, according to the International Displacement Monitoring Center (IDMC). The most affected country is the Democratic Republic of the Congo, with 2.2 million new displacements in 2017, out of a total of 4.5 million displaced people. Then come South Sudan, Ethiopia and the Central African Republic.

From the Lake Chad Basin to Somalia, conflicts are most often a primary cause, as are drought and natural disasters. It is too often forgotten that these natural phenomena represent a substantial part (2.6 million in 2017) of the influx of new displaced people on the continent.

The complex issue is of primary concern to the countries that signed the Kampala Convention on the Protection of Internally Displaced Persons in 2009, ten years ago. Africa has committed itself to providing responses, since displaced persons are in principle under the responsibility of their country’s authorities. In practice, the UNHCR is also concerned about rescuing them, but faces funding difficulties.

Long-term solutions can be summed up in a few words: conflict prevention, poverty alleviation and anticipation of natural disasters, which are always easier said than done in broad concrete action plans. Nevertheless, good practices were discussed in New York, for instance what has been done in Niger, the first African country to adopt a national law on the protection and assistance of displaced persons in 2018.

It is a good thing that the celebration of Africa Day allows us to continue to reflect on the best way for Africa and its partners to assume their responsibilities. And so as the African Union Development Agency-NEPAD, we would like to convey the best wishes to all Africans across all corners of the world. Together we will win this fight and achieve ‘The Africa We Want.’

Putting Africa’s Secondary Cities First

With Africa urbanizing faster than any other world region, governments there urgently need to craft national development strategies for harnessing the economic benefits that cities can provide. The key will be to focus not just on rapidly expanding megacities, but also on the intermediary cities needed to achieve inclusive growth.

In the latest Mercer Quality of Living City Rankings, the highest-ranked African city, Port Louis, Mauritius, comes in at 83rd out of 231. That appears to be in keeping with a broader pattern: in terms of the quality of life in its cities, Africa lags behind most other world regions.

African cities’ poor showing is a worrying indictment of urban planning on the continent, particularly given that urbanization there is barreling ahead, regardless of whether its leaders have plans in place to manage the process. According to the OECD, because “Africa is projected to have the fastest urban growth rate in the world,” its “cities will be home to an additional 950 million people” by 2050. Given these trends, African policymakers urgently need to make the region’s cities more attractive to international investors, business people, and tourists, while also ensuring that urbanization remains inclusive.

But there is another key trend that has been neglected: the growing importance of Africa’s secondary cities. Urbanization in Africa is not just about emerging megacities like Johannesburg, Kinshasa, Nairobi, Khartoum, Casablanca, and Greater Cairo, which alone will be home to an estimated 38 million people by 2050. Population is also booming in Africa’s “intermediary cities,” which link remote and rural areas to larger urban centers.

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Statistics, industrialisation and agricultural revolution, three challenges for the continent: my thoughts on Carlos Lopes’ Africa in Transformation

Africa and the statistical challenge
Africa must invest in the production of better quality data, because the lack of reliable and independent statistical systems can compromise diagnosis and forecasting. Many analyses are distorted by the lack of reliable statistics. Thus, in many countries, the Gross Domestic Product is underestimated, says Carlos Lopes. But if wealth is poorly measured, how can appropriate tax policies be developed? Africa’s ability to pay is undoubtedly diminished. An additional 1% tax effort, which may seem marginal, would nevertheless bring in more than all the public development assistance from industrialized countries! Let’s repeat it because this point is essential: strengthening Africa’s statistical capacity must be a priority, both for individual countries and for the African Union and its related bodies. This was one of the key points of Carlos Lopes’ strategy when he was head of the UN Economic Commission for Africa (Uneca).

Africa and the industrialisation challenge
Carlos Lopes’ book also provides a reflection on the development model that Africa must adopt to create the conditions for a structural transformation of its economy. Indeed, despite remarkable resilience since the 2008 financial crisis, despite some of the highest average growth rates in the world in the past decade, the continent has not succeeded in creating enough jobs or curbing extreme poverty. The dynamism of its domestic markets, the good performance of its exports and the significant increase in investment flows do not compensate for the lack of genuine industrial policies.

The examples of Brazil from the 1950-1980 period, China, which, after its agricultural revolution, became the world’s factory, and, more recently, Malaysia or the United Arab Emirates show that emergence is inseparable from the industrialization process. Carlos Lopes’ observation is worrying: Africa’s share of world industrial production fell by a quarter between 1980 and 2010, from 1.9% to 1.5%. The author calls for smart protectionism, inspired by the policies implemented in emerging countries, and for a proactive approach by public authorities on this subject. The failure of the industrialisation attempts of the 1960s and 1970s should no longer be used as an excuse for inertia, as contexts and objectives have changed radically.

Africa and the agricultural productivity challenge
It is urgent to change our view of agriculture and recognize that “the farmer is an entrepreneur like any other”, the expression I used in my book Africa’s Critical Choices. It is also the idea forcefully hammered out by Carlos Lopes, which underlines that the challenges of industrialization and the modernization of the agricultural sector are closely linked. While most countries on the continent doubled their average transformation rate after the CAADP was launched in 2003 and agricultural productivity increased by an average of 67%, this rate hides huge disparities. Progress remains insufficient, although Egypt, Ivory Coast, Nigeria or Ghana have performed remarkably well. The average yield of cereal crops in Africa represents only 40% of the average world yield.

Subsistence agriculture on small plots, characterized by very low productivity, remains the dominant mode of production (80%). It does not generate surpluses. Marginalized farmers have limited access to finance and are unable to integrate into the value chain.

However, a paradigm shift is required. African agriculture will have to support the continent’s exponential population growth and rapid urbanization: by 2020, 50% of Africans will live in cities. The agribusiness revolution cannot be postponed any longer and the leaders of this revolution must be those who are today called “smallholder farmers”.