This morning I had coffee with an Ethiopian gentleman who works as Chief of Party for USAID's AGOA project--which is to say that he works to connect Ethiopian businesses with American markets. He told me some amazing stories. For instance, back in the late 80's, when the country faced the civil war and terrible famines that have shaped U.S. perceptions since, it was illegal to own a business in Ethiopia.
Now, if you want to start an export-driven business, particularly an agribusiness, the Ethiopian government will sell you cheap land and stake you up to 2/3 of the start-up capital with a low-interest loan. Currently, instead of two Ethiopian flower farms employing 500 that existed in 2002, there are forty, employing 30,000. Those jobs are almost all entry-level, rural jobs that provide sustainable livelihoods in turn for about 125,000 family members.
The U.S. gives $600 million in aid to Ethiopia, my friend informed me ("George W. Bush has been Africa's best friend," he said). But, he continued, almost all of it is unsustainable--food aid or PEPFAR funding. Both do good things in the short term, but neither touches the leveraged, sustained impact of those flower farms.
It's very interesting to me to sense a small but perceptible shift in the conventional wisdom about "what to do" with Africa. (That's a terrible turn of phrase, as if African countries needed constant minding. But let's recognize that it has both defined past framing and contains elements of truth.) The Gleneagles G8 summit in 2005 was a big deal, as you may recall, because of the pledges that rich-world leaders made at Tony Blair's prodding to increase their aid funding to African countries. I am not one of those that dismisses such pledges as a waste of time--so long as the aid is directed toward really useful purposes. Interaction is tracking this year's G8 summit because we are all still waiting, and calling, to see those pledges fulfilled and put to good use.
But "good use" for foreign aid is getting harder--though not impossible--to define; education and health infrastructure continue to be key components that nearly everyone agrees on. If you've read this blog for a while, you're probably familiar with these key messages from NGOs like the One Campaign. But take a look at IBM's Global Innovation Outlook report on Africa (that's the cover pictured above). It's a different picture. How often have you hear this one from development organizations? "Over the past decade Africa has averaged 5.4% growth"--beating out the S&P 500 and most European markets in recent years. I'd never heard that number. But that's pretty important context for this analysis from IBM's report on Africa's business prospects:
"I think the climate for business in Africa has never been better than it is right now," says Dr. Tukur, Chair, NEPAD Business Group. "We are witnessing many opportunities for productive long-term investment and public-private partnerships that will facilitate and sustain economic growth and development. Africa is now being taken seriously within the global economic community and it won't be disappointed."
Essays contributed from GIO partners, such as Nepad and Uganda's Makerere University, IBM, and other GIO alumni, explore topics as varied and wide open as the continent itself. For example, there is a compelling look at the African wireless industry, which boasts unprecedented new mobile applications and services. And there is an analysis of how African industries are beginning to move up the value chain, capturing more of the total value of the continent's vast natural resources.
Or take filmmaker Carol Pineau's article, written as an investment column cum development wake-up call in Sunday's Washington Post: "Hey, Here's a Tip: Try Africa."
What surprised me most about Africa's stock exchanges weren't the high returns, but the reason for these amazing rates: prejudice.
No, not the black-white variety; it turns out that even Africa's diaspora shares the aversion to investing in the continent. Experts estimate that only 10 percent of Africans living abroad invest back home. It's that we just can't see Africa as anything more than a basket case. It's easy to envision Africans as child soldiers or victims of famine or poverty. But if you envision a stockbroker, an investor, a financial adviser or a mutual-fund manager, chances are you don't conjure up images of Africans. Yet Africa has all of these.
Kim Jaycox, chief executive of the Africa Fund I at Emerging Capital Partners, one of the first and largest equity funds to invest in Africa, explains that the returns are high because the perception of risk is much higher than the reality. When the perceived and real risk levels even out, returns will go down. In other words, as long as we stick to our belief that Africa is a coast-to-coast disaster zone, even well-managed African companies operating in peaceful nations will have to pay a premium to attract capital.
Pineau touches a raw nerve for development practitioners and advocates. We're big on talking about solutions here at the GII, but even so it's easy to reinforce the perception of an endlessly needy Africa in our calls to make good on G8 promises. Let's be sure, as we advocate for needed aid, that we don't make it harder to build the businesses that will help Africa grow up and out of our to-do list.