| |
Contributions from
the Column
InWEnt Forum
Public service: Working for commun welfare
Private-sector growth in Africa
8-9/2006 |
|
[ Private-sector growth ]
“We need more business”
Many multinational companies stay away from Africa, in spite of economic success stories becoming more frequent there. At present, enterprises active in the sectors of telecommunications and service offshoring are reaping in profits. The Millennium Development Goals (MDGs) will be reached on the basis of private-sector success in Africa – or not at all.
[ By Azani Tschabo and Jochen Weikert ]
The international business press normally does not include regional sections for Africa. We are still quite unaccustomed to headlines such as “Average economic growth of over 5 % and a 60 % increase in flows of foreign direct investment – This is Africa today” (Business Day, South Africa, 21.06.06) or “Some of the best returns on investment in the banking sector anywhere are to be found in Africa” (African Business, Mai 2004). That needn’t be the case.
Development research shows that broad economic growth does not result from well-meant action by individual companies. “Corporate social responsibility is certainly a good thing, but it will not ensure that the MDGs are reached,” Bruce Jenks, vice president of the United Nations’ Development Programme, said at the 10th International Business Forum held by InWEnt last year in New York. He would like to see companies focus business interest on the markets of the poor. Private enterprise is most likely to contribute to development by “doing business with the poor”, by improving the general supply of goods and services and lowering prices in the process.
Many multinational companies stay away from Africa, however, because good news is rarely reported from countries south of the Sahara. The media do not seem to be interested in the reality of peoples’ lives improving in that region. Therefore, most investors and businessmen from rich countries have a negatively biased image of the continent, which puts Africa in an unfavourable light for investment decisions.
To be sure, the general conditions in many African countries do not exactly attract investors. In the past few years, however, success stories have become more common. In 2002, for instance, most of the 2200 corporations listed on African stock exchanges reported high profits for their shareholders. Nonetheless, the international business press was hardly paying any attention.
Celtel International, an African telecommunications firm, is an example of strong performance. Founded in 1998, it now has offices in 15 African countries, 13 of which are among the poorest on the continent. In the fiscal year 2004, the company posted a turnover of more than $ 1 billion. The company was taken over in May of 2005 by MTC of Kuwait for $ 3.4 billion. Africa is currently the world’s fastest-growing market for mobile telecommunications.
Similarly, companies that outsource business processes (“offshoring”) are also doing good business. Premium Contact Centre International (PCCI), a Senegalese service provider, opened its doors in 2002 with 40 employees. Today, it has 1300 staff members who earn salaries five times above the national average. The company benefits from global competition, which is forcing French telecommunications companies to reduce costs by offshoring services. Senegal is an almost perfect destination. The country’s French education system and its low wages give it considerable competitive advantages.
It will not be possible for African economies to expand massively unless the local people are perceived as creative entrepreneurs and discriminating consumers. Celtel’s profits clearly show that there is great demand for some products in poor countries, especially those that serve everyday needs or entrepreneurship. However, successes are rarely based on conventional Western management models. New sales channels are needed to serve both sparsely populated rural areas and extremely densely populated urban markets. Products and production processes have to work even under poor infrastructure conditions, and this challenge can actually drive innovation. Because Senegal’s telephone network is too weak, for instance, PCCI uses Voice-over IP (VoIP), an Internet-supported telephone system, which provides considerable cost advantages over European competitors.
Of course, internationally active firms have to take local cultural aspects into account. A number of offshoring entrepreneurs therefore not only hire qualified local employees, but also some with experience abroad. These people are familiar with markets in advanced and developing countries. They also have the necessary contacts to act as intermediaries between both worlds.
Development needs investors
The Millennium Development Goals (MDGs) will be reached on the basis of private-sector success in Africa – or not at all. The United Nations has set itself a noble agenda on poverty reduction, but success will be difficult to achieve. Relying on donor action will certainly not do. Multiplier effects are needed, and only markets can provide them. For instance, investments can lead to greater income, greater consumption and thus trigger yet more investments. When consumer-goods provision becomes better and cheaper, the share of disposable income spent on education and health can increase. In cooperation with the World Bank Institute, InWEnt will therefore host the 11th International Business Forum in Bonn in October. That will be an attempt to speed up expert discourse on the matter. Top politicians, business leaders and representatives of civil society will meet. InWEnt is especially competent in promoting dialogue with the private sector as 8% of its shares are owned by German business associations.
Free-market involvement can lead to the kind of far-reaching effects that development policy-makers usually only dream of. Last year, Celtel founder Mohammed Ibrahim reported that the company relied on a network of 120,000 sales points for pre-paid cell phone cards. These sales points were visited by 5.2 million customers a month. The clients either wanted to make calls themselves or rent their phones. “Aid is wonderful, and welfare is great, but they both only have the effect of aspirin,” Ibrahim stated at the InWEnt conference in New York. “But aspirin will not help Africa develop; it will only ease the pain. What we need is more business in Africa.”
Debate on the pros and cons of globalised capitalism is lively. This debate is important because it sheds light on the dark sides of globalisation and forces private companies to rise to their social responsibilities. But if one takes a look at how private-sector growth and social development relate, the figures speak for themselves. In China, the number of people living in poverty has fallen from 56 % to 17 % in the 20 years since markets were liberalised. Africa urgently needs that kind of economic dynamism. The Asian Tigers did not start leaping about in one go. Their expansion took preparation and depended on private as well as foreign investors. Typically, migrants from Asia took advantage of the opportunity to earn good money by investing in their homeland despite the risks. South-East Asian Tigers, China and India, all got the required jumpstart from venture capital and intercultural networking. Once the foundations were in place, these countries also became attractive to foreign investors. Africa should follow their example.
Azani Tschabo
is member of the managing team for the 11th International Business Forum 2006.
azani-tschabo@web.de
Jochen Weikert
works in InWEnt's Department of Sustainable Technology, Industrial and Urban Development.
jochen.weikert@inwent.org
Link
In cooperation with the World Bank Institute, the UNDP and the UN Global Compact, InWEnt will organise the 11th International Business Forum entitled “Business and the Millennium Development Goals: The Business Challenge Africa” from October 8-11 in Bonn. http://www.businessandmdgs.net
|
