Businesses are important for wealth creation and development of any society because they undertake huge risks to innovate, create and market value bringing prosperity to themselves and society. The impact of businesses is not just limited to creativity and wealth creation. They foster interactions in communities and ensure the survival of people tied to the business activities. Many believe that business entrepreneurship is Africa’s best bet to attain economic and social development. Leading entrepreneur, Mr. Tony Elumelu, who professes the Africapitalism philosophy believes that “entrepreneurs will play a central role in bringing together private wealth and public need and that the transformative impact of economic growth unleashed by a fully empowered, socially conscious entrepreneurial class will dwarf the results achieved by the previous aid-driven approach to Africa’s development.”
Businesses are contributing immensely to Africa’s development. The African Development Bank estimates that Africa’s private sector accounts for over four-fifths of total production, two-thirds of total investment, and three-fourths of total credit to the economy, and employs 90% of the employed working age population. Given this position, the optimal performance of African businesses is important as it becomes clearer that the aspiration for a transformed Africa can only be achieved through effective partnership between the public and private sectors.
Africa is attractive for business. Six African countries – Ethiopia, Congo DRC, Ivory Coast, Mozambique, Tanzania and Rwanda are among the thirteen fastest growing economies in the World according to the World Bank. Africa’s demographics also promise a huge dividend for business. The continent’s one billion, mainly youthful consumers are an increasingly compelling market as consumer spending per capita already matches that of India and China and is expected to reach $1.4 trillion in 2020. Mckinsey, in a June 2010 article had noted that the rate of return on foreign investment in Africa dwarfs that of any other developing region. Thus, Africa has continued to draw attention not only from businesses abroad, but also from existing players in the continent.
Despite Africa’s attractiveness for business, there are still many challenges facing businesses in the continent. Doing business in Africa remains largely difficult. Sub-Saharan Africa had a regional average score of 56.28 points out of 100 and a regional rank of 114 out of 189 ranked economies in the 2016 World Bank’s Doing Business Index. There are still challenges with respect to the environment for business, policy, corruption, access to resources, political and economic stability and uncertainties which hurt business competitiveness.
While many businesses have fallen on the way, the thriving ones have grown to be resilient to these challenges. But this still comes at a huge cost – a loss in business and social prosperity that could have been attained if businesses do not have to invest in adaptation strategies.
Doing business in Africa is difficult largely because Africa’s leadership has not succeeded on the whole in using the tools of governance and policy to complement the ‘natural’ factors that make Africa attractive for business. Although, modest gains have been achieved through some outstanding reforms, the challenges facing businesses remain enormous. Africa’s businesses hold the promise of significant further growth opportunities if these challenges are addressed. With a bolder, stronger and smarter leadership, these challenges can be tackled and the full potentials of businesses unleashed.
As a leader, I would use smart governance and policy tools to address the challenges facing African businesses in the following areas:
Creating an enabling environment for business: The enabling environment for business in Africa is poor. Insecurity occasioned by conflicts is a major threat to businesses. In Nigeria for example, the Boko Haram and the Niger-Delta crises are hurting businesses and the general economy. A commitment to peace and consensus building would be a major priority. Huge investments in infrastructure especially in power, transport and broadband would be undertaken to enable businesses succeed.
Access to resources: Financing is key to business success yet banks prefer lending to governments than businesses in Africa making the public sector crowd out the private sector in terms of financing. To solve this problem, I would pursue a borrowing policy that has a balanced mix of foreign and domestic borrowing so as to create enough room for businesses to attract financing from the domestic financial markets.
Policy: Government policies can make and unmake businesses. In Nigeria, government’s reluctance to allow a market-determined naira exchange rate and the rationing of foreign exchange has denied many businesses access to foreign exchange to purchase critical goods that serve as inputs in their operations. Some businesses have closed shop as a result. I would pursue public policies that are market-friendly and be consistent with my policies. I would also undertake a reform of the land tenure system to make land more useful for business in Africa.
Corruption and multiple taxation: Corruption increases the cost of doing business and yet remains pervasive in Africa. I would fight corruption especially through building strong institutions that can check corruption before it happens. Multiple taxation would be eliminated by unifying the tax system and adopting technology tools like e-collection to make compliance easier. Tax incentives would also be an important tool I would use to drive business growth.
Other measures: To support businesses, I would commit to democratic tenets that ensure political stability. Macroeconomic stability would be aggressively pursued to create an investment-friendly climate. My leadership would be clear with its policy direction from the outset so as not to create uncertainties that hamper investment decisions. I would invest in ideas, technological innovation and entrepreneurship and move the economy away from commodity dependence so that businesses and the economy can be shielded from the impact of commodity bubbles. Building and strengthening institutions that support businesses is important as well as building an effective public sector that knows its place (does not do businesses most suited for the private sector) but supports businesses to perform optimally. I would pursue regional co-operation to address common business challenges and promote intra-African trade. I would forge global partnerships with the rest of the World that favour African businesses. I would also be willing to learn and replicate success examples of transformational leadership especially the Lee Kuan Yew Singapore’s story and the East Asian miracle and change the story of doing business in Africa for good.
Businesses can help build the Africa of the future. What is needed is a smarter leadership that can work together with all stakeholders to address the challenges facing businesses and putAfrica on the path to transformation.
Chimezie Uzoigwe
