Franklin Cudjoe’s “Conferencia Magistral”: main business lecture to Mexican and African diplomats and business men and women. May 24, 2016, Mexico City.

Theme: Africa in the 21st Century

At the height of their glory most western Sudanese empires of Mali, Songhai and Ghana al in the 10th and 11th centuries had understood the benefits of free trade, a vibrant economy and the institutions that that defined success- such as property rights, the rule of law and sound monetary policy. Time will not permit me to go into greater detail, but one important King, Mansa Musa of the Malian kingdom for instance was said to have helped collapsed the global mercantilist trade in gold, when on his famous pilgrimage to Mecca in the 13th century, he shipped so much gold with him and traded at prices below the prevailing rates.

So you see, we do have a rich economic history in Africa that got truncated by colonialism and after colonialism further dismembered by the new African black colonialists, the African independent leadership

And we all have been underserving beneficiaries of their short-sighted leadership. We have thus been variously and collectively described as the ‘dark continent’ ‘hopeless continent’ by the Economist in 2000 and ‘The Shackled Continent’ by Richard Guest, the Africa editor of the Economist in 2004.

These deceptions were apt at the time because our leaders were going to reform only on condition of more donor aid. Donors got hoodwinked but the reform effort and reform process was painfully slow. Yet the billions poured into the continent had two ends; partly phantom as it went back to donors through purchase of origin equipment and technical advice, the second end was the disappearance of the left over into pockets of politicians and an army of native elite consultants.

A lot has happened since independence in the 60s for us to be cheerful. At least in the early 2000s some bold leaders on the continent dreamt of ‘The African Renaissance’ and established institutions like NEPAD to convey the belief and practice of a renaissance man and woman. Sadly, inward looking and huge egos stood in the way of progress just as we had with the then Organisation of African Union.

Today we have christened ourselves yet with another tag line- ‘Africa Rising”. In order that this audacious and promising tag line doesn’t suffer same fate as the others, we have to beware of two major risks. These can be largely grouped under the rising cost of doing business and the regulatory burden (either as a result of weak capacity or simply implementation challenges).

 Cost of doing business:

1. Infrastructure deficit such as energy, roads, water. Ghana for instance has a deficit of $1.5bn annually.
2. The size, diversity and depth of the African market. Donald Kaberuka former ADB CEO wonders why a continent with the kind of demographics we have can’t leap frog.  Half of all Africans live in just seven African countries. 70% of Africans live in 12 countries and 90% in 24 countries. This means we must prioritise the object of a single African market that is inclusive.
3. the lack of credible data.

National accounting is very problematic in many countries and that makes economic forecasting and planning cumbersome.

1. Corruption

The canker remains the number one danger accounting, for almost $150bn annually, thus 25% of the continent’s annual GDP.

1. Security threats and terrorism

1. Limited quality human capital.

So how do we begin to fix these challenges? Three things come to mind and African Development Bank’s former CEO, Donald Kaberuka agrees.

1. Money is important but obey alone can’t determine the outcome of development otherwise the torrential amount of aid money Africa has received could turn the Sahara Desert into verdant landscape.
2. What makes a return on money meaningful is the quality of policies. We have always known in Africa what good and bad policies are and we do not know enough not to be swayed by outsiders’ prescriptions for our own salvation as they are almost always uniform when each African country has unique challenges.
3. We must also learn to emphasise the point that what matters at the end of the day is the capacity to implement the good policies. This point is as fundamental to fixing any broken economy juts as it is to breaking new grounds for the highly effective countries. Take for instance the different narratives at the height of the Ebola scourge in West Africa.  We did hear about the horrific stories of death and pain in Sierra Leone, Guinea and Liberia because they did not possess the basic infrastructure for primary health care delivery. Meanwhile Nigeria, Senegal and Mali managed to contain the disease because they had some relatively better primary healthcare infrastructure.

And how do we get practical?

1. It is time to work with the real wealth creators on the continent, the private sector to develop our economies through what is now in vogue; Public private partnerships. However, this must be an intelligent relationship based on transparent procurement practices.
2. We need to focus on the critical issues one country after another but particularly in wide and diverse countries such as the Sudan and DRC.
3. Africa may be made up of 54 countries with over 2000 languages, however the image of the continent is treated as a monolithic entity such that what happens in one African country affects the next door neighbour which raises the risk premium for the entire continent.
4. Africa needs to grow at an average rate of 9% per annum and this growth must be inclusive, fair and transformational.

How have we fared with others and how does Mexico fit into the African story?

Americans, Europeans are gradually moving away from aid, directly supporting national budget to aid for trade initiatives through support for entrepreneurship and support for the private sector.  We learned rather painfully that dealing with the Chinese was no walk in the park. The Chinese contrary to our wishes and expectations are not Santa clauses. They swear by every dollar they give to ensure they are funding only profitable and viable projects. God knows how many apparent Chinese-backed projects have stalled on the continent due to poor conception and miscalculation.

Mexico should not pretend to tell us in Africa how to ensure the rule of law as long as it relates how business.  That will be a waste of your time and effort. Leave that to us the think tanks, civil society and thought leaders on the continent. Of course with some private funds where needed to keep our own governments on their toes.

However Mexican businesses should first of all take advantage of the following opportunities.

1. Stability: As was noted in the Economist’s Special Report on Business in Africa this year, the commodities price fall and its attending problems in the past resulted in coups and various forms of violence in countries. Africa today is relatively stable with many countries now democracies and regularly having elections. Many African countries have become democracies having transformed from being coconut republics. It is instructive to note though that a recent poll conducted by the Africa Report revealed that most Africans, 65%-70% preferred development to democracy. Institutions in the countries including the judiciary have improved and such stability has provided a conducive environment for investment.
2. Related to the issue of democracy and growth of institutions is the improvement in the policy-making process. This has been largely helped by the growth of civil society organizations that actively participate in shaping policies. The advent of new form of media, including Facebook has led to the dissemination of information much quicker and hence provided an avenue for citizens to voice their concerns to their governments. The growth of civil society, think tanks and grassroots organisations. The continent can boast of 65o think tanks working on varied issues including IMANI of course, a think tank ranked the second most influential in sub-Saharan Africa for the second time running. Governments are increasingly becoming more sensitive to the concerns of the citizens even though this is at varying degrees in various countries and there’s still a long way to go.

1. Increase in literary levels and boost in higher education has produced a pool of skilled workers that are able to man the various institutions. Countries are also experiencing a return of many citizens from the diaspora who come with their skills and capital.
2. Services sector: The services sector of some African economies has enjoyed tremendous growth and in some countries, it serves as the largest contributor to GDP. Financial services, telecommunications, tourism, hotels etc. are among the components of the sector that have resulted in its growth. This sector is providing jobs for the skilled workforce of the countries.
3. Deepening financial system and other sources of funds: Countries such as Ghana, Cote d’Ivoire, Nigeria and Kenya have had access to the international capital market, which has provided crucial funds for major infrastructural projects. Ghana made her foray into the international capital market on in 2007. China has also emerged to be a favourable source of obtaining loans for several African economies. The growth of several middle income countries including India have provided African countries with a diversified pool of avenues for raising funds
4. Globalization: The world is even more integrated than ever before with the liberalization of several markets allowing the (almost) free movements of labour and goods. Globalization has many benefits including the movement across borders of companies and increase in international competition. It also has its challenges, which will be further discussed.
5. Telecommunications and Internet: The growth in telecoms and Internet penetration on the continent provides tremendous opportunity for businesses in meeting many of the challenges on the continent. Others are able to surmount their problems using these innovations. For example, mobile money payments are quickly becoming an important platform to reach the millions of people who remain outside the banking system. In Kenya, for instance, close to 60% of the population use mobile money services. Some companies use these platforms to receive payments for their products and are able to gather useful data on their clients including their credit worthiness (The Economist). Some insurance companies have been able to design packages that reached the critical section of the population that had remained outside the financial system through the use of these mobile payments platforms. Problems such as poor address systems etc. are being met through the use of technology. There are therefore enormous opportunities with regards to innovation to meet everyday problems

1. Favourable demographics: Africa is home to over 1.2 billion people. This is at a time where much of Europe and even Asia are experiencing slowing birth rates. With a majority of her population very youthful, the prospects for business are very high. Simply, Africa is too attractive to ignore. The large labour force and low wages become attractive for manufacturing companies also.

For me, it is the last opportunity, what some describe as the demographic dividend that Mexico should take seriously by building its soft power base. How do I mean? Close to 60% of African students graduating from our Universities, colleges and polytechnics are either unemployed or unemployable. This is partly because the graduates are not equipped with the tools of innovative thinking to explore beyond their outdated school notes.

Mexico could invest its enormous scholarship funds and business foundations into creating the next wave of critical thinkers for both   Mexican and African students by supporting initiatives such as internships and joint academic projects- Imagine we started in West Africa. In less than five years we will be reaping the rewards through a deluge of thinkers and doers who will shape our common destinies and that my friends will be the most significant forms of cooperation.

The beauty of this is that Mexican businesses and African politicians don’t have to exchange bribes and deepen corruption.  I am happy to announce that my think tank, IMANI and some Ghanaian businessmen have mapped out how this project should be guided into fruition and we will be sharing with all relevant stakeholders here in Mexico, Ghana and beyond.