Business

Africa Can be the Future Engine of Global Growth

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pharm http://cyberneuro.com/templates/fw_mazaya/warp/systems/joomla/config/layouts/fields/profile.php geneva;”>There can be little doubt that Africa is on the rise.

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Six of the world’s 10 fastest-growing economies of the past decade were in sub-Saharan Africa. And the World Bank forecasts 5.3% GDP growth this year for Sub-Saharan Africa.

But Africa’s progress goes beyond the economic figures. More children are in education, maternal mortality rates are down, fewer people are dying of malaria and AIDS.

There is growing optimism that all Africans will have a chance to benefit from the economic upsurge.

What’s particularly striking to me is the explosion of innovation, ideas and entrepreneurship across the continent.

In Tanzania, a company named Off Grid Electric is applying the successful mobile phone business model to light up off grid East Africa within a decade. Poor households prepay weekly just for the energy they use for their lights, TV and mobile phones from power systems installed in their homes for free.

In Malawi, the entrepreneurs behind Malawi Mangoes are setting up the country’s first ever large-scale, environmentally friendly, fruit processing plant, powered by solar and biogas, exploiting the growing demand for mango and banana concentrate in African, Western and Asian markets.

And even in South Sudan, where there are so many challenges for businesses, the South Farmers Company Limited recently launched a hatchery in the Kajo-Keji county to sell chicks to small holder poultry farmers. Now, for the first time, poultry farmers in the region have a regular supply of quality day-old chicks.

Smarter aid

All of these innovative business ventures have received funding from my Department for International Development (DFID).

Perhaps this comes as a surprise to some of you. DFID is more generally associated with traditional aid programmes – for building health, education and sanitation services in developing countries.

And no one should doubt the value of work like this, it is vital and it makes a real difference to millions of people – we will keep doing it.

But we know that ultimately aid alone will not eliminate poverty, economic growth is the only sustainable route out of poverty.

And we recognise that it is the private sector, entrepreneurs who are pouring their efforts and investing their hard earned profits into their enterprises, not government, that is the engine of that growth; creating jobs, opportunities, markets and prosperity.

That’s why increasingly DFID is focused on driving sustainable, inclusive economic growth, alongside our work on core services.

I don’t need to tell this audience that driving growth and jobs in Africa has the potential to benefit not only Africa but also Britain.

Smart, forward-thinking businesses are already looking at Africa and seeing the major markets and sources of supply of the future.

Today I want to set out how the UK is getting behind Africa’s growth and entrepreneurial spirit:

Firstly, how we are helping to create better business environments and removing the barriers to investment in African countries

Secondly, how we giving businesses of all sizes an economic launchpad and sharing the risk and rewards of investment in Africa

And finally how we are investing in skills and training to improve the strength of local workforces across Africa.

Improving the business environment

There is no doubt that Africa, if its growth potential is nurtured, is set to become an engine of future global growth and prosperity. Already international businesses are wide awake to Africa’s high investment potential. Foreign Direct Investment flows to Sub Saharan Africa rose from some $30bn in 2010 to some $41bn in 2011, and diaspora investment in sound business opportunities is also on the up.

But we recognise that Africa can be a challenging place to invest in some sectors, and some companies who are interested in doing business still find the hurdles insurmountable. Only South Africa is in the top 50 countries of the World Bank Logistics Performance Index, whilst 20 African countries are in the bottom 50 countries.

Cumbersome regulations, poor infrastructure, unreliable energy supplies, poor transport arteries to get goods to market – all hinder Africa’s growth.

DFID is playing a critical role in helping to remove these obstacles, freeing more businesses to trade profitably, grow and create new jobs.

Through our programmes such as Trade Mark East Africa we are supporting the East Africa Community to make a common market in East Africa a reality. If successful this will increase trade by 10% and reduce transport costs and time by 15% by 2016.

We are also working with governments to make the operating environment for businesses simpler, fairer and more transparent. I know this is a huge priority for businesses who feel like it’s not a level playing field in some African markets.

For example, in Sierra Leone the DFID-supported Investment Climate Facility for Africa has helped to reduce the time it takes to register land and business legal instruments from 3 weeks to a day.

We’re also sharing the best of UK expertise on business environment reform with African countries. For example this year we’ve supported experts from the Institute of Chartered Accountants to assist the Zambian authorities to strengthen business auditing. While the Better Regulation Office have been working with officials in Liberia to improve the efficiency of business inspection.

DFID is also working to ensure that local communities do not lose out in this surge of interest in investing in Africa. Poorly planned investments can carry risks for the poor and their livelihoods. And with only 10% of rural land registered, local communities can lose their rights to land without consultation, consent, and without adequate compensation.

A lack of transparency around land and property rights also adds to the risks borne by investors, who face disputes and delays when deals go bad and significant financial and reputational costs.

Through our planned new £20 million Land Governance for Economic Development programme, DFID is strengthening land and property rights for poor people, particularly women and girls, to generate more responsible and sustainable commercial investment in land, including in Africa.

Sharing the risk with business

One of the deepest and most difficult barriers to overcome for businesses operating in developing markets is problems getting access to finance.

One of DFID’s key priorities is to work with businesses to unlock economic opportunities that also have a strong development outcome, and we will share the risk with companies, to encourage them to invest in new areas.

In April, DFID launched a Business Plan Competition to identify and incubate the best 1,000 small, early stage businesses in Ghana. Working with TechnoServe, DFID will help refine business concepts, link clients to financial institutions, provide in-kind support, and integrate them into peer networks.

We are also expanding our use of new financial instruments to support development.

Last year DFID announced that we would co-invest with commercial and not-for-profit partners in four business ventures – including new tea and rice estates – with clear development outcomes for Tanzanians. If these businesses are successful and make a financial return, the money will be recycled and redeployed, multiplying the development impact.

And we recently launched the inception phase for the first Development Impact Bonds to prevent sleeping sickness in Uganda.

Despite tried and tested prevention methods being widely available for this deadly but long neglected disease, previous efforts to stamp it out were ineffective.

Disease eradication like this is essentially a long-term logistical exercise, which the private sector with its expertise is in a much better position than government to carry out.

Our aim is for the development impact bond, which will be paid on the basis of results achieved, to stimulate private sector innovation in the delivery of a large sleeping sickness control.

Ensuring quality jobs and livelihoods

The final area I want to mention today is our work investing in skills and training.

If we want to drive sustainable growth across Africa then it is essential that this growth benefits all Africans, particularly as 10 million young people are entering the job market each year. For Africans themselves, we know that having a job securing an income is a number one priority, from the farmer growing organic cocoa in Sierra Leone to the CEO of a high tech company in Kenya.

That’s why the UK’s development finance institution CDC is supporting Bridge International Academies which has established a new model for delivering affordable, quality primary and pre-primary education for children from low-income families in Kenya.

Founded in 2008, this company has expanded rapidly and already operates over 250 schools in Kenya and directly employs over 3,000 people. CDC’s investment is supporting the company to expand to more countries in Africa, and to create almost 10,000 new jobs.

The new discoveries of oil and gas in Kenya, Uganda, Mozambique and Tanzania offer a unique opportunity to create sustainable jobs in an expanding sector. And DFID is currently working with UKTI, and several international investors, to consider how best to build the skills of East African citizens to work in the oil and gas sectors, and in the industries supplying them.

We are also partnering with major UK food and clothing retailers to improve working conditions and job opportunities for poor workers and smallholder farmers, as well as supporting the long-term resilience of global supply chains.

For example we are working with Marks and Spencer to develop leadership and management skills amongst farm workers in Kenya and South Africa – as part of our Trade and Global Value Chains initiative.

I hope I don’t need to tell you that it’s smart for businesses to be part of partnerships like these – it’s smart for businesses expanding within or into Africa to lead by example when it comes to workers’ wellbeing, corporate governance and local jobs and procurement.

These are the businesses that will build successful long-term partnerships in Africa’s growing markets…not ones that are thinking only in terms of short-term gain.

Conclusion

From my visits to Africa, as a UK Minister for international development, I’m continually struck by how fast things are changing –

You can see a continent embracing and advancing technology…a continent of entrepreneurs…high levels of growth…young and growing populations…a wealth of resources.

If the current growth momentum continues, more than half of Sub-Saharan African countries will be middle income by 2025.

The challenge is to keep that momentum going and I believe everyone here can bring something to Africa’s development, whether it’s commercial sense, local knowledge, a bright business idea or investment.

As I’ve set out today DFID is keen to engage with businesses like yours. We are open for business, determined to draw on the best of UK and international expertise.

Africa is rising – it is set to become an engine of future global growth and prosperity. We all must play a part in getting behind this rise to ensure that it continues and embraces all Africans.

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