This piece first appeared in Open Africa, a custom digital publication by Ornico that features interviews, insights and business lessons from some of Africa’s leading CEOs, innovators and decision makers. Download your free digital copy of Open Africa here or go to http://bit.ly/open_africa and share your feedback on social media using the hashtag: #OpenAfricaMag
Investor perceptions of Africa have slipped to their lowest level since 2011, according to EY’s attractiveness survey that benchmarks investor impressions of this continent. Here are the five leadership challenges that face Africa and the heads of public and private sector enterprises who want this continent to grow.
1. Overcoming Africa’s commodity dependence
Oil, metals and minerals — Africa has enjoyed the heady highs of a commodities boom, but needs to learn to become more resilient, and overcome low commodity demand. The United Nations Conference on Trade and Development reveals that commodities constitute as much as 95% of the export revenues of some countries on the continent. As a result, low commodity prices have affected growth.
The World Bank Reports that economic activity in sub-Saharan Africa slowed in 2015 off the back of commodities. The result? GDP growth averaged 3.0% last year, down from 4.5% in 2014. Last year’s GDP figures are a low last seen in 2009. Poor growth is compounded in some countries by political uncertainty, power shortages and drought.
To overcome this dependence, Africa needs to diversify beyond commodities, and invest in the long-term fundamentals for economic growth such as investments in energy and infrastructure. Instead of thinking of being facilitators of commodity-based economies, African governments will need to develop the capacity for a more-sophisticated and -technocratic economic policy. Patronage-based redistributive networks need to be replaced by evidence-based policy planning that harnesses the broad potential of economies beyond commodities.
2. Navigating the need for political reform amid social turmoil
The Arab Spring that started in Tunisia in December 2010 and that rapidly spread to Egypt, and then Syria, Libya, Jordan, Saudi Arabia, Bahrain and Yemen, speaks to Africa’s challenge of buoying voter expectation with political delivery. In Egypt, a technologically adept youth, fed up with unemployment and an oppressive regime, helped realise infectious, wide-spread protests that brought about a regime change.
Al Jazeera journalist, Fatima Naib, describes the virality of the insurrection: “Egyptian women, just like men, took up the call to ‘hope.’ Here they describe the spirit of Tahrir — the camaraderie and equality they experienced — and their hope that the model of democracy established there will be carried forward as Egyptians shape a new political and social landscape.”
A combination of high birth rates, improving education levels and the influx of connectivity through the likes of social media, has created a democratic class that is economically excluded. The challenge in countries faced with this situation is how to move towards a more-reformed democratic dispensation, while still dealing effectively with social instability in a way that doesn’t compromise economic investment or growth.
A case in point is the situation in South Africa, which has 7.5m voters, of whom more than half are unemployed. This country has successfully created a new elite, but has failed to implement growth policies that address economic distribution at a grassroots level. These are the kinds of issues that will fundamentally reshape the political landscape, unless they are dealt with.
3. Harnessing internet access for grassroots development
A new survey conducted by Strategy&, PwC’s strategy consulting business, for Facebook, indicates that global Internet inclusion could lift some 500m people out of poverty and add more than US$6 trillion to global GDP. This echoes 2009 World Bank Report statistics that have been used so often that they’ve become a cliché. The World Bank survey showed that a 10% increase in broadband penetration leads to GDP growth in developing countries of some 1.38%.
Despite the obvious, and proven, benefit of internet connectivity, internet access isn’t evenly distributed, and poorer households moreover rely on mobile communication. This means that accessing the internet for these households comes at a price premium. As a consequence, most of SA poorest people don’t have easy or affordable digital access to education, entrepreneurial or small business tools that could benefit them.
While increased connectivity brings with it economic opportunity together with opportunities for innovation around sectors in agriculture such as subsistence agriculture, it also enables freedom of expression. In societies unused to this freedom, the ability of government to harness these technologies will mean that they will have to harness the democratic pressures that pervasive internet access inculcates.
4. Scaling financial services for the small-business sector
SA has one of the most-robust banking and financial services and professional services sectors anywhere in the world; however, this country’s banking sector has been largely unresponsive to small-business sectors. As a result, entrepreneurs have built new businesses in a high-risk financial environment. The big challenge for banking locally, and across most of Africa, is to find a way of scaling services to meet the needs of entrepreneurs and small businesses, so as to unlock potential for these sectors. An inability to do this will see the rise of disruptors in the financial sector, as mobile companies or other players seek to fill this gap, and begin to edge into the financial sector.
5. Selling Africa to the world
The final challenge for decision-makers, influencers and those vested in this continent is to ask how Africa may successfully sell itself to the rest of the globe, and to own the continental narrative. The strategic-leadership challenge here is to demonstrate that Africa is an attractive investment destination. In order to be perceived as a good investment destination, Africa has to be a good investment destination.
To attract investment, leadership will be required to successfully implement policy that will see this continent become more competitive, sustainable and inclusive. Governments will need to tackle corruption more decisively, while ensuring political stability. From a narrative perspective, locally we’ve seen a finance minister who’s had to reactively go abroad to do damage control, and try and salvage this country’s reputation. Obviously, it is much more sustainable to have a proactive, planned approach.
Great work has been done by the African Union [AU] with its Agenda 2063, that speaks to an “Africa financing its own development”, as well as “the importance of capable, inclusive and accountable states and institutions at all levels and in all spheres”. The challenge now is to close the disconnect between this vision and pockets of presidential leadership across the continent. Not that the AU should set policy, but rather that this continent’s leadership will work together consistently to liberate the investment opportunity presented by Africa, through better leadership.
The story of Africa needs to become one where our populations are better educated; more affluent; engaged in the economy and productive; and where our resources are better beneficiated; where jobs are created; and we have good institutions. In terms of leadership, there needs to be agreement, and alignment, on where Africa is going in coming years, while allowing for policy diversity in the different countries as they grapple with their respective legacies.
About Marius Oosthuizen
The head of the GIBS “Future of Business in South Africa Project”, Marius Oosthuizen is a strategist and entrepreneur with a background in theology. Oosthuizen has held board positions in the civics and non-profit sector, and enjoys helping leaders think about the future in ways that integrate strategy and ethics. His focus is upn looking at the future of key industries and sectors within the South African economy, within their larger political and social context nationally, regionally and globally. The principal at CUSP Consulting, Oosthuizen offers organisational development and training interventions, research and policy analysis to the public and private sector.
Follow Marius Oosthuizen on Twitter: @marius_oost
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