Investment replacing aid?
The perception that Africa has reached a turning point – one qualitatively different from previous false dawns – stems from a combination of global and regional circumstance. “If the politics can be managed, there are the talent and resources in Africa for this story to be real,” says Michael Turner, managing director in east Africa of Actis, a UK fund backed by pension funds, sovereign wealth funds and international development institutions. “The more people become confident with that idea, so the more the other big players will start to come in, especially now that big US institutions like Carlyle are coming.
Growth has been spurred by market liberalisation and improved public management of finances as well as a boom in the commodities that Africa has in abundance. Perhaps the biggest factor has been the engagement of emerging powers including India and Brazil but led by China. Asian demand for African resources has engendered a revival in the terms on which the continent trades.
No one sensible believes that the road will be smooth for all of sub-Saharan Africa. But in almost every sector demand outstrips supply. “The reality is Africa is probably 30 years behind China and 20 years behind India on the developmental curve in that regard, so I think the Chinese and Indians will start to look at parts of Africa as potential sites for low-cost manufacturing and outsourcing and things like that,” says Michael Lalor of Ernst & Young.
Dambisa Moyo, a Zambian economist, says many African governments still fail to take some of the most obvious steps to facilitate investment. Although it takes just three days to register and open a business in Rwanda, for example, that compares with 213 for Guinea.
“Governments have a responsibility to provide public goods, create a policy environment that encourages people to invest and make sure there is a regulatory framework that penalises people for bad behaviour but also steps in when the market fails,” Ms Moyo says. “Quite clearly Chinese and other emerging countries have been able to deliver these three things. But if you look at African countries they are still not delivering.”