Africa, the second-largest continent and home to 1 billion people, has long captured the imagination of the world. Today, different thinkers, political and business leaders are preoccupied with a single question – how to help Africa’s economy grow so it can trade with the world on better terms?
By Sola Adegbesan, head of sales: Africa regions and international, global markets at Standard Bank
The answer is simple: Africa needs to craft its own solutions to solve its problems. It starts with the promotion of a mindset of self-reliance. There’s no better way of expressing that self-sufficiency than creating innovative financing solutions to fund projects that could lead to sustainable economic growth in all the continent’s 54 African countries.
However, these funding solutions need to consider the specific needs of different African countries. If this could be achieved, Africa would prosper and the standard of living on the continent would rise.
The need for alternative funding solutions has never been greater given the uncertain economic prospects the continent faces. While Africa’s prosperity rose dramatically in the past few years due to greater integration into the world economy, this picture has since changed.
Economic growth in sub-Saharan Africa slowed to 3,6% in 2022, from 4,1% in 2021; and economic activity in the region is projected to further decline to 3,1% in 2023. Africa faces a grain shortage as a result of the Russian-Ukraine conflict. This calamity comes at a time when the continent’s economy was still recovering from the effects of the coronavirus a couple of years ago.
The current picture
Development finance has its limitations in amounts available, acceptable repayment risk and in some cases; financing cost vs project viability. In addition, such finance often comes with strictures on how African nations should run their economies. As such, solutions that are imported rather than developed at home, may inadvertently come at a hefty price.
This is a legacy of the post-World War II era, when extraordinary efforts to provide provisional financial and technical assistance to European countries in the wake of the war’s devastation helped to set them back on the path to national unity. Since then, this approach’s foundations have become the cornerstone of development thought.
But there’s no denying that the traditional development finance model has not worked for Africa over the past six decades. Even though the world economy has grown in the past few decades, most African nations lag economically and grapple with abject poverty. Their commodities are highly susceptible to market fluctuations and natural disasters, and their societies are prone to instability, making it difficult to attract foreign investment.
That is why most African nations turn to development aid to survive, which is not a viable model to achieve sustainable economic development. Since 1990, African countries have received over $1,3-trillion in development assistance; however, the continent’s financial, societal, and political fabric remains fragile.
Time for a new thinking
In fairness, Africa is hard at work pursuing Agenda 2063, a development blueprint and master plan for transforming the continent into the global powerhouse of the future. But the chances of this plan to succeed could be enhanced if Africa stops importing solutions from the outside and, instead, develops its own solutions for its own local challenges. This is the best way to positively change the trajectory of its economic development.
In recent years, Africa has proved that it has the capability to champion local solutions. Take the phenomenal success of M-PESA, a mobile-based payment service targeting the unbanked that was launched in Kenya in 2007. The service has been so successful that it has expanded to Tanzania, Mozambique, Democratic Republic of the Congo, Lesotho, Ghana, Egypt, Afghanistan, and South Africa.
We live on a continent that is well endowed with mineral resources. If these natural resources could be well managed, the sky is the limit for African countries. We are also on a continent with a predominantly youthful population that needs jobs. If this human resource could be harnessed and groomed, Africa would be unstoppable.
In fact, if this labour force could be skilled and exported around the world it could lead to greater inflows of Diasporic finance that could boost African economies – human resource is a commodity of the future.
A case in point is Ethiopian Airways’ ongoing programme to train aviation personnel who can work anywhere in the world. Underpinning the programme is a realisation that aviation is essential for global business and generates economic growth, creates jobs, and facilitates international trade and tourism.
Helping Africa grow
Standard Bank strongly believes in Africa’s potential and wants to drive her growth forward. Our destiny is tied to our continent. If Africa thrives, we prosper. For this reason, we are committed to play our part in making sure that Africa grows and delivers on its potential. As a bank, we offer banking and other monetary expertise for free to African governments to use to reform their economies.
To be sure, Africa is a continent, not a country. Each country faces different challenges. We are also keenly aware that we may not always get things right all the time, but we’d rather offer solutions rather than complain and criticise on the side-lines. We are prepared to partner with others who are concerned about the fate of our continent.
In fulfilling our commitments to all our stakeholders, it is important to be in an environment where the economy is growing, where entrepreneurship thrives, and businesses are doing well. An environment where there’s regulation and civil society is stable. When all these factors are in place, the turnover of companies grows and so does the country’s GDP. That means more business for financial institutions. For this reason, Standard Bank is heavily invested in making sure that Africa works.
As a respected African bank with international presence, we use our expertise to guide African governments and institutions to understand the value of the resources they have so that they can use these assets to raise finance at a much cheaper cost. We also help them to invest in the value chain of these resources. The idea is to encourage African governments to use and develop what they have rather than simply borrow.
We also encourage many African countries to create an enabling environment for innovation through changing legislation so that it can reflect new realities. Sticking to the status quo does not foster change.
Hard work lies ahead
Hard work is required to turn the idea of African solutions for African problems into reality. It cannot be yet another slogan. Each African country will need to put in the hard work. While cognisant of the injustices of colonialism and the unequal manner in which African economies were incorporated into the world economy after independence, Standard Bank prefers to focus on solutions for the future, on what Africa can achieve if all nations could rally behind the idea of finding our own solutions to financing models.
For Standard Bank, it’s about what we can do in the present moment. Even developed economies that we envy today made economic strides on their own, with little or no outside help. We should do the same. It will require bold thinking. It will also require the triumph of pragmatism over idealism. Back in 1978, Deng Xiaoping, leader of a then-small China, famously said: “It doesn’t matter whether a cat is black or white, as long as it catches mice.”. Today, China is the second-largest economy that continually seeks to be self-sufficient in key areas such as technology, finance, food and energy.
Singapore is another economic marvel. In 1965, the country achieved independence with a GDP of $975-million. Its current GDP is close to $400-billion. Even more remarkable is the fact that this growth was accomplished with only 3-million people. This makes its GDP per capita the second-highest in the world.
Another important aspect of doing things differently is for African countries to work a lot closer to find solutions to common problems.
Even Kwame Nkrumah, the founding father of modern Ghana, realised this ideal many decades ago. “It is clear that we must find an African solution to our problems, and that this can only be found in African unity. Divided we are weak; united, Africa could become one of the greatest forces for good in the world,” Nkrumah said.
Indeed, it’s time for Africans to heed this call. We are committed to help in the search for African solutions to African problems.