Africa’s Transformation: Open for Business

16 Oct

Africa’s Transformation: Open for Business

Africa’s agenda of economic transformation opens new business opportunities for investors. Reaching the transformative objectives at the heart of the African Union’s vision – accelerating value creation, promoting diversification, improving public services – will not happen without better synergies between private investment and public action. Both the living standards of Africans and the bottom lines of businesses stand to benefit. In this new era of big ambitions defined by the UN-led Sustainable Development Goals and Agenda 2063, smart investors recognise Africa’s potential. Extractives are no longer the main driver. The continent is open for new investment fuelled by unprecedented domestic demand. Consider the reality: Africa’s population since 2010 has officially been more than one billion. It is projected to be more than two billion in about 30 years, and possibly more than four billion by the end of the century. All of these people need to be fed, clothed, housed, transported, and connected by mobile phones. Growing domestic demand is also supported by remittances from the diaspora, affording Africans increased purchasing power. In 2015 alone, African migrants sent home some $64.6bn, a sum that rivals FDI flows and dwarfs aid. However domestic demand alone is not enough to propel Africa’s structural economic transformation. Africa needs to be more than just a big market. It must become a producer of higher value-added goods and services. Policies therefore must aim to attract more greenfield investment. This requires accelerating the process of regional integration. It also requires more domestic reforms to improve productivity and remove obstacles to growth, notably in infrastructure, energy and skills.

Meeting the challenge of structural transformation will require taking a multi-sectoral approach that looks at different policy options – industrialization, services, natural resources, green technologies, export led and agriculturally-based growth — while considering both regional dynamics and the global context. In the face of this challenge, the continent’s leaders understand that the private sector must play a forward-looking role. To facilitate that, African governments are making efforts to create an enabling environment for private sector-led activity. That is why in a 2015 assessment of 51 African countries, 23 improved conditions for doing business. That is why they are also deepening the process of regional integration by courting foreign investment to build and maintain quality infrastructure. Japan, for example, increased its funding for Africa’s infrastructure across energy, transport, water, and ICT from $1.5bn in 2013 to $2.1bn in 2014. And that is why African governments are sharing knowledge and engaging in peer-to-peer dialogues, such as with the OECD Development Centre, to design effective national development strategies. These are designed to unlock the potential and creativity of entrepreneurs, producers and investors at home – and attract them from abroad. The bottom line is clear: by making Africa’s structural transformation open for business, the continent can do more with the private sector’s resources, ingenuity and innovation to drive productivity, growth and development. Doing so will improve the lives and prospects of Africa’s men, women and children.

Source;  Mario Pezzini, (2016 Africa Investment Report, Published by The Financial Times Ltd Number One Southwark Bridge London SE1 9HL © The Financial Times Ltd 2016).

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