Earlier this month, I got to attend the 2013 Africa Investor CEO Investor Summit organized by Africa investor (Ai), a leading international investment and communications group. The event was held in Washington, D.C. along World Bank and IMF annual meetings.
During the panel sessions, I was blown away with the current investment climate in Ivory Coast. Their prime minister, Daniel Kablan Duncan, highlighted initiatives his government is undertaking to build local infrastructures that facilitate investment flow. The significance of having the right legal, financial and institutional infrastructures in emerging markets to build the impact economy ecosystem cannot be overstated.
Some governments in Africa, particularly in West Africa, are taking steps to help build investment friendly infrastructures. Nigeria launched its first sovereign wealth fund, which will function as a risk-mitigation mechanism for international investors wishing to fund projects in Nigeria. I’m aware Nigeria is mostly known by many as one of the most corrupt countries in Africa. While I acknowledge that the country continues to face governance challenges, I think good stories should not be overshadowed. The image of Africa is mostly described by many through negative lens of poverty, poor governance and tribal conflicts. This one sided view of Africa is problematic, as my favorite Nigerian female author Chimamanda Ngozi Adichie bests put it “The single story creates stereotypes, and the problem with stereotypes is not that they are untrue, but that they are incomplete. They make one story become the only story.”
Almost every panel at the Investor Summit made a case for capacity building, both at the government and entrepreneur level. In my opinion, too much focus has been placed on improving institutional capacity for governments to create better investment climates in Africa. The conversation needs to shift more towards investing and building capacity for entrepreneurs. The continent is endowed with so much talent- what we need now are more development programs that provide entrepreneurs with the social resources and capital they need to grow. Over the past few years, business accelerator programs (Agora Partnerships, New Ventures Mexico, and Endeavor Global) have been used in Latin America to channel resources to entrepreneurs. Accelerator Programs provide entrepreneurs with with access to mentors, strategic partners, investors and financial consulting they need to grow. I would argue, the African investor climate needs more similar structured business accelerators that should be tailored around investment readiness and deal closing services. If little investments are put in developing capacity for entrepreneurs, finding the right pipeline will remain a big challenge for investors on the African continent.
The big players: development finance institutions, World Bank, IFC simply need to strengthen innovation by creating more programs that develop local talent in the region. There has been slightly too much focus on the macro issues such as economic growth, scalability, and improving political will of governments to support investors. Personally, I have realized that one of the deterring factors to development in Africa has not been about a lack of capacity; rather it has been a struggle with underlying systematic and structural inefficiencies present in standard economic development models. Development institutions and practitioners need to think more in-depth about potential alternative development models that can be used to effect change in the region.
In my opinion, governments and development institutions should provide more incentives to foster a culture of entrepreneurship, especially among young people. Entrepreneurship won’t solve every problem, but I believe it is an effective tool for empowering local talent to become agents of their own change. Business Accelerator Programs can function as an important vehicle for mobilizing local entrepreneurial talent, and create platforms for providing entrepreneurs with the social and financial capital they need to thrive. The vice president for World Bank Africa seems to get it. We simply can’t deal with new problems using old methods. History has shown us that prescriptive strategies have not worked, and led to many unintended consequences. According to World Bank data, poverty rates in Sub-Saharan Africa is about 48.5%. In aggregate terms over the course of the last 50 years, foreign aid transfers to governments in Sub-Saharan Africa totaled a staggering $1 trillion. These numbers show a huge discrepancy between incoming foreign aid numbers and the impact it has had on poverty reduction. Traditional approaches to development have advocated for too long solutions that come with the supposition that poverty is a technical engineering problem that can be fixed by economic growth- give aid to countries- then benefits of economic growth will automatically trickle down to lower income groups of the population. It sounds like a simple equation to solve, but reality remains that aid alone or free trade cannot work. Many external political/economic factors beyond government controls are actually at play.
In essence, development in itself is a multi-dimensional process. My take is that development dynamics ought to change, more investments need to be put into building credibility of local talent through leadership development and entrepreneurship. I believe business accelerator programs can help reshape the investor climate in Africa by making local entrepreneurial talent more accessible to investors. It’s time for the rhetoric to center on building a culture which encourages Africans to take initiative to tackle local problems using local resources. Of course, I say this with an understanding that Africans alone can not solve all development problems by themselves. The magnitude of challenges faced on the continent undeniably demand collaboration.
#Africa #impact investing #world bank #ifc #ADB #Agora #AtlasCorps