Leading Ivestment Company in Africa

Africapitalism Promotes African Solutions To African Challenges

By Tony O. Elumelu, CON, Chairman, Heirs Holdings

Just a few days ago, I was honored to be a guest at the United Nations in New York, to witness the ratification of the new Global Goals – successors to the Millennium Development Goals launched in 2000. This next set of global priorities, known as the Sustainable Development Goals, strives to address many of the challenges facing Africa today, none of which is more critical than the need to create employment for our young people.  So many of the challenges Africa – and the world – revolve around this core issue.

One of the key drivers of positive of social and political change is economic empowerment, which is not the same as economic growth. Africa is now home to six out of the ten fastest growing economies in the world.  However, despite Africa’s rising tide, it is not lifting all boats, millions of people are being left behind. According to research conducted by the IMF—which looked at 173 countries over the last 50 years— socially unequal countries tend to have lower and less durable economic growth.  If we as Africans are going to meet the challenges that still confront us and, moreover, lay the foundation for the continent to take its rightful place as a global power, our success must be shared by all and not just a few.

The most visible symptom of Africa’s unequal growth today are the African economic refugees who are attempting a perilous journey across the Mediterranean to illegally enter Europe.  According to a study in July of this year by Refuge Network International, a humanitarian NGO, there are 40,000 illegal immigrants in Morocco alone from Nigeria, Cameroon, Ghana and Francophone countries.  Although the global media has highlighted the tragedy of Syrians and Africans as they reach Europe or, sadly, perish along the way, lack of economic opportunity is also one faced by many Africans at home.  The ultimate solution is for Europe, the international community, and African institutions to redouble efforts to reduce and eventually eliminate the incentive to leave the homeland in search of a better life elsewhere.  I believe the economic philosophy of “Africapitalism” should be an important part of that effort.

Africapitalism is predicated on the belief that Africa’s private sector must play a central role in the continent’s transformation.  It is only through long-term investment in strategic sectors, that we will empower Africans to reap the majority of the benefits of our natural and human resources – and the African private sector is increasingly well placed to achieve this.  Too much of recent African economic success has been dependent upon global companies and interests playing a significant role in the development of resources.  By building the capacity of African firms to assume more complex and lucrative elements of the value chain, more of the financial and spillover benefits of the African growth story will accrue to Africans, as opposed to foreign interests. I am not arguing for nationalisation, but  for Africa and its private sector to be bold in its aspirations and not shrink from protecting and promoting its interests – doing nothing less than what other nations do.

Gabon is an example of a country that has been endowed with tremendous natural resource wealth, which has helped drive their economy to achieve a 5.1 per cent growth rate, out pacing the continent’s overall growth of 4.5 per cent.  However, like many African economies, Gabon is primarily dependent upon oil, which accounts for close to 50 per cent of GDP, 60 per cent of tax revenue and 80 per cent of exports. This imbalance is a significant contributing factor to the country’s unemployment, estimated at over 20 per cent overall and 60 percent among Gabon’s youth. The solution to this challenge goes beyond the mere adoption of local content policies, and requires a structural change that will build the capacity of Gabonese firms and talent to assume more and more control over value-adding elements of the oil supply chain, and allow more of the proceeds of Gabon’s oil to accrue to the national economy.  In recognition of this, I understand, the government is leading an innovative and important effort to update the country’s strategic development plan that will establish ten centres around the country to maximize comparative advantages that will deepen local supply chains in the sector as well as to accelerate the diversification into others including agriculture, timber, and tourism.

European leaders are grappling to respond to the influx of African migrants and refugees and considering whether or not to allow tens of thousands to resettle in the region— but in truth, these are but a fraction of the number trying to get in.  This does not address the heart of the issue, since the long-term answer is to improve living conditions and help create opportunities for a better quality of life in Africa and this requires much more than just additional development assistance to solve.  One of the most impactful steps Europeans could take to change the economic prospects of millions of Africans is to support the Doha round of World Trade Organization talks, which would liberalize trade in agricultural products and allow them to flow from Africa to Europe, without the high tariffs imposed as a way to make them less competitive with European producers. According to the World Bank, adoption of this trade regime would result in more than $100 billion in annual trade revenues for Africa, opening up hundreds of thousands of opportunities for Africans living in poor, rural areas to obtain formal employment, increase their household incomes, perhaps start their own businesses and build a sustainable livelihood, without leaving their own communities.

One of my core, unshakable beliefs is in the inherent ingenuity and capacity of my fellow Africans to find solutions to our continent’s most difficult challenges.  And while we need a wide variety of interventions from across all sectors to address them, earlier this year, I put my personal wealth where my mouth is and launched the Tony Elumelu Entrepreneurship Programme – a 10-year, $100 million initiative to provide 10,000 African entrepreneurs with the training, mentoring, networking, and capital they need to get their business idea off the ground.  In the first year of the programme in which 1,000 entrepreneurs were selected from 52 different African countries, 30 percent of the entrepreneurs chosen are starting businesses in the agricultural sector, perhaps the most critical to Africa’s progress.

The adoption of Africapitalism by companies that will build more inclusive business models and by governments that will create more business-friendly environments, as well as incentives for entrepreneurs, can help unlock opportunities for millions of Africans.  Moreover, Africapitalism will place the power to define Africa’s future back into the hands of Africans, and eventually eliminate the need to risk life and limb to reach another continent that is not the answer to their problems or Africa’s.

The Europe which emerged from its own wars and nightmares can be an important model for Africa, illustrating the benefits of breaking down regional trade barriers, whilst also protecting social rights. It is the responsibility and interest of all of us – Europeans and Africans – to work to achieve these aims.

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