Africa’s rise is real and credible – Independent Online

IOL SI Afriq investJacoline Schoonees
Minister of International Relations and Co-operation Maite Nkoana-Mashabane leads the South African delegation in meeting with Chinese Minister of Commerce Goa Hucheng in Beijing, China where trade between the two countries was discussed.

The continent is proving critics wrong and the time is ripe to foster sustained growth, writes Ajen Sita.

Africa’s rise over the past decade has been very real. While sceptics still abound, and there are people who still seek to debate the point, the evidence of Africa’s clear progress is irrefutable.

Over this period, a critical mass of African economies have grown at high and sustained rates; so much so that, despite the impact of the ongoing global economic situation, the size of the African economy has almost quadrupled since 2000.

Looking forward too, forecasts indicate that many parts of the region will continue to experience relatively high growth rates, with a number of African economies predicted to remain among the fastest growing in the world for the foreseeable future. The sceptics will most often point to the widespread perception that most of Africa’s growth has been driven by resources.

Due to the volatile nature of commodity prices, an over-dependency on a few key resources clearly raises questions about the sustainability of growth.

The subtext of such scepticism is also often one tainted by negative historical beliefs about Africa as a conflict-ridden, politically unstable, hopelessly corrupt basket case.

However, a far more positive story has emerged in the post-Cold War and post-apartheid era: one of significant economic, political and social reforms; of a process of democratisation that has taken root across much of the continent; of ongoing improvements to the business environment; of exponential growth in trade and investment; and of substantial improvements in the quality of human life.

These fundamental improvements have provided a platform for robust economic growth in a large number of African economies. And despite perceptions to the contrary, we estimate that less than one-third of Africa’s growth has come from resources.

The rest has come from a range of other sectors, including agriculture, manufacturing, construction, and, in particular, services.

For companies seeking to grow and investors seeking higher returns, the African growth story is a compelling one. While most developed economies continue to struggle, Africa clearly offers an exciting opportunity for investment, and an alternative to the ultracompetitive Asian and other emerging markets. It is little surprise, therefore, that investor interest in Africa has been on the increase.

Our 2014 Africa attractiveness report shows that perceptions of Africa’s relative attractiveness as an investment destination have improved dramatically over the past four years, while FDI projects into sub-Saharan Africa grew at a compound rate of 19.5 percent between 2007 and last year.

Looking forward: towards inclusive, sustainable growth

There is therefore good reason to pause and celebrate the progress of a region that was dismissed by The Economist at the beginning of the 2000s as “the hopeless continent”. That said, it is important, too, that we do not get caught up in a latter-day “gold rush” mentality. Most African countries still have a long way to go to emulate Asia’s sustained growth path.

In many respects, Africa is perhaps today at a point where many of the east Asian economies were in the 1970s, and the likes of India, Mexico and Turkey were in the 1980s.

Looking forward over the next decade and beyond, Ernst & Young’s (EY) scenario analysis suggests that a success story for Africa will be one that leads us on an inclusive, sustainable growth path; one in which economic growth remains robust, but with a far greater emphasis on enterprise development, job creation and human welfare.

It is clear that the potential exists for us to be part of an African future that would have been virtually unimaginable a generation ago. The reality though is that this future is neither inevitable nor will it happen without active participation and commitment from multiple stakeholders. As a large, global multi-national, strongly committed to Africa, we are particularly focused on the role and responsibility of business in helping to realise the possibilities for inclusive, sustainable growth on the continent.

Besides investing in our own growth in Africa, part of our commitment has been to leverage our brand and global reach to promote the African investment agenda.

With our flagship Africa attractiveness survey, we have been among those at the forefront of highlighting the African growth narrative. Since 2012, we have also convened the Strategic Growth Forum Africa, a platform for dialogue and collaboration among business and government leaders.

Its focus is exclusively on Africa: on the strategic growth opportunities that the continent offers and the challenges that need to be addressed to realise these opportunities.

This year, the third edition of the EY Strategic Growth Forum Africa will be hosted at the Sandton Convention Centre on October 7-9.

The previous two events focused both on a fuller articulation of the African “growth story” – moving beneath the headlines – as well as key challenges that companies have faced as they execute their growth strategies in Africa.

This year the focus will shift towards the future of Africa: what it will take to achieve the success story of inclusive, sustainable growth, and what the responsibilities are of leaders in private, public and social sectors in realising Africa’s possibilities.

Realising the possibilities: five priorities for action

Underpinning this year’s EY’s Strategic Growth Forum Africa are the five priorities that we believe are going to be the most critical drivers of a successful African future:

n Embracing shared value: The central premise behind creating shared value is that the competitiveness of a company and the health of the communities and economy around it are mutually dependent. It is a fundamental business philosophy that recognises that profit and purpose can co-exist and be mutually reinforcing.

For EY, a philosophy of shared value is underpinned by core purpose as an organisation – building a better working world – a working world with increased trust and confidence in business and capital markets, the development of talent in all its forms, greater collaboration across private, public and social sectors, and inclusive, sustainable growth at its heart; a purpose that is more relevant in the African context than ever before.

n Promoting partnerships: The relationship between government and business across many parts of the continent is not always as engaging and productive as it could and should be.

Too often business is viewed as part of the problem. In contrast, government and business, both local and international, need to become partners both in embracing a philosophy of shared value and driving a common agenda of inclusive, sustainable growth.

Partnership, co-operation and collaboration across the private, public and social sectors could be a powerful force for transformative change and growth.

n Fostering entrepreneurship: Entrepreneurs provide one of the main engines of growth in any healthy economy.

They act as vital agents of change by developing new products and services, implementing more efficient production methods, and creating new business models and industries.

Perhaps most importantly, small- and medium-sized enterprises (SMEs) will be the main drivers of the job creation required to realise inclusive, sustainable growth.

For organisations genuinely committed to shared value and collaborative partnerships, the promotion of local content and enterprise development should clearly be a key business priority.

n Accelerating regional integration: With the shifting dynamics in the global economy, Africans have a unique opportunity to break the structural constraints that have long marginalised the continent. This will, however, only be achieved by driving greater regional coherence from the current patchwork quilt of 54 sovereign states. Regional integration and stronger regional institutions (such as the African Union and Regional Economic Communities) are key to promoting greater levels of regional investment and trade, because it will make it much easier and more efficient to conduct cross-border business, and will create markets with greater critical mass, coherence and density of economic activity.

n Bridging the infrastructure gap: Ultimately, though, regional integration will be enabled by sufficient investment in infrastructure; road networks, electricity access, telecommunications, and trade infrastructure (such as ports, highway corridors and railroads) will physically connect markets, reduce the cost of delivered goods, facilitate the mobility of people and products, remove productivity constraints, and enhance the overall competitiveness of the region.

What is clear – both in the context of the EY Strategic Growth Forum Africa and more broadly – is that we Africans are presented with a wonderful opportunity to make a genuine difference in our working lives. This is the time and place for Africa’s future; it is our generation of leaders that can make it happen.

* Arjen Sita is CEO of EY Africa.

** The views expressed here are not necessarily those of Independent Newspapers.

Sunday Independent

Africa’s rise is real and credible – Independent Online

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