'Africapitalism' Can Remake the African Economic and Social Landscape Through
Investment, Innovation and Opportunity
Business Development and Entrepreneurship Have More Potential to
Address Africa's Chronic Economic and Social Challenges Than Charity
and Traditional Philanthropy, According to New Report From The Tony
LAGOS, NIGERIA -- (Marketwire) -- 03/18/13 -- Decades of charity
have not solved Africa's chronic economic and social problems, but
there is a potential solution on the horizon: "Africapitalism," which
aims to harness private sector entrepreneurship and investment to
create social wealth and ameliorate problems at the local level.
Private sector development, rather than charity or aid, is the
fastest, most effective and most sustainable path toward
self-reliance for Africa. That is the message of a new white paper by
Tony O. Elumelu -- "Africapitalism: The Path to Economic Prosperity
and Social Wealth -- Rebuilding and Rebranding Africa as a Land of
Investment, Innovation and Entrepreneurship." Mr. Elumelu is the
founder of The Tony Elumelu Foundation and Heirs Holdings Limited and
the former group chief executive of the United Bank for Africa Plc
Only the Right Kind of Private Development Builds Local Economies and
Generates Healthy Returns
"As private enterprise and entrepreneurship take root in Africa, they
are showing their potential to solve social problems," says Mr.
Elumelu. "This is a drastic departure from the old model of
centralised governments managing basic industries, supplemented with
charity and foreign aid."
The paper points out that United Bank for Africa, a single-country
bank that grew into a pan-African financial services institution
serving over 7 million customers in 20 countries, "democratized"
Africa's banking sector. UBA was able to generate significant returns
for investors and also improve individuals' access to financial
services, fuel business growth and facilitate trade.
However, conventional development approaches, and conventional
business approaches to leveraging Africa's resources, have focused on
wealth extraction and often leave local economies in a state of
chronic dependency, with little wealth and few resources with which
to solve problems. For instance, after 50 years of pump
billions of dollars of crude oil and natural gas, there is still no
indigenous Nigerian oil major. And while Nigeria exports crude, it
imports refined petroleum for domestic consumption. All of the value
creation in the production chain takes place outside the country, and
imported refined products are so expensive they require government
subsidies to be affordable.
Africapitalism proposes a very different approach: generating profits
through local wealth creation, helping to build economic
self-sufficiency. Transnational Corporation of Nigeria (Transcorp) is
an example of "self-sufficiency as a solution." The company recently
commissioned Nigeria's first fruit juice concentrate plant, in Benue
State, where 60 percent of fruit crops have spoiled every year
because of a lack of domestic processing capacity or adequate
storage. The new plant will help meet domestic demand for fruit
juice, which has grown by approximately 10 percent annually since
2002. Transcorp's investment aims to generate a profit by creating
jobs, boosting crop yields and farmer incomes, building domestic
markets and addressing food security issues.
Realizing the Promise of Africapitalism Depends on New Approaches
Across the Board
The concept of Africapitalism amounts to a comprehensive framework
for effectively attacking Africa's persistent challenges. It involves
a call for wide-scale changes in attitudes and action, some of which
are in play now. For instance...
-- Governmental reform: The Rwanda Development Board has made significant
progress in simplifying regulation, tax laws and administrative
processes -- increasing the rate of business formation more than
four-fold. It provides a template for other countries to do the same.
-- Investor foresight: When Diageo's Guinness brand, and cell phone
provider MTN, entered the Nigerian market, they were criticized, and
even penalized by financial markets. But they saw what others didn't,
a growing consumer class in Africa. Recently Walmart followed their
lead in acquiring MassMart of South Africa. Patient long-term capital
investment is essential to building African economies, and it can pay
handsome rewards to investors.
-- Intra-African cooperation: As a trading block, the East African
Community provides a valuable example of how to bolster trade and
economic growth. In addition to unifying laws and regulations, they
are increasing direct cooperation among countries -- e.g., the
government of Tanzania was able to shorten the approval process for a
seed production company, Mtanga Farms, from five years to just one, by
working with regulators in Kenya to share seed trial data.
-- A leadership role for investors from Africa: African governments lead
the way in promoting private sector development -- from the IT
industry in Kenya, to the financial services industry in Nigeria, to
the footwear industry in Ethiopia. Domestic investment, however, is
lacking. The white paper argues that to solidify Africa's place in the
world economy, it needs large, liquid capital markets, and successful
businesses with sufficient scale to compete for equity capital from
around the world. Getting there hinges on investment by Africans in
their own economies and their own markets.
Private Sector Development Holds the Promise of a Bright Future for
"Long-term wealth creation at the local level builds the productive
power of Africa's economies and the purchasing power of Africa's
growing consumer class," says Mr. Elumelu. "This is an exciting time
in Africa, a time to shed preconceptions, raise expectations and
recommit to the power of human industry."
"Africapitalism can address many quality-of-life issues -- e.g., food
security and healthcare quality -- as well as break a cycle of
poverty that limits many Africans' ability to solve their own
problems at a local level," he adds.
To receive a copy of "Africapitalism: The Path to Economic Prosperity
and Social Wealth -- Rebuilding and Rebranding Africa as a Land of
Investment, Innovation and Entrepreneurship" and/or to speak with
Tony O. Elumelu, please contact Katarina We
Sommerfield Communications, Inc. at +1 (212) 255-8386 or
ABOUT THE TONY ELUMELU FOUNDATION
As a premier pan-African focused
not-for-profit institution, The Tony Elumelu Foundation (TEF) is
dedicated to the promotion and celebration of excellence in business
leadership and entrepreneurship across the continent. TEF strives to
deploy its resources to generate solutions to challenges that inhibit
the African private sector. Through its commitment to catalytic
philanthropy, TEF seeks to achieve its mission by building the
capacity of fast-growing African businesses, supporting and driving
policies that promote competitiveness, deploying financial capital
through impact investments, and educating the public and private
sector actors through rigorous research. TEF is guided by global
standards, strong governance, and a commitment to accountability.
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