Obama and the Entrepreneurship Summit: Bringing Africa Into Focus
When President Obama hosted the historic summit of African leaders in Washington last August, the event was a major contribution to changing the continent’s economic image.
The tired half-truths and clichés about aid dependence, political instability and AIDs were outshone by discussions of investment, genuine collaboration, and shared prosperity. It could not have happened without a firm basis in fact.
In 1990, only two African economies could say that their foreign direct investment outweighed the foreign aid they received. Today, 17 nations can do so. Aid at that time was roughly double the FDI for Africa as a whole; today the ratio has flipped.
FDI, of course, is just one indicator among scores that point toward the same long-term trajectory of growth and expanding opportunity.
The fact that President Obama is visiting Africa again—this time, for an entrepreneurship summit—is a very helpful coincidence. The event will allow Africa to begin correcting so many of the lingering misperceptions about the resilience and diversity of its economy.
Africa’s economy is growing because ever more investors are pouring into the continent for commodities and natural resources, right? Wrong.
Roughly 90 percent of the major greenfield investments across Africa are in manufacturing and services, as opposed to primary sectors such as oil, gas, minerals and other natural resources.
During 2014, when Ebola sent tragic and worrisome headlines throughout the world, investors lost faith in the growth prospects of African companies, right? Wrong.
Private equity managers raised $4 billion for African equity funds in 2014, which in fact was the highest annual total since the industry began tracking fundraising in 2006, and nearly 1.5 times the previous record of $2.6 billion raised in 2006.
African politicians and incumbent companies still smother attempts to foster the creative destruction that comes with dynamic, highly competitive economies, right? Wrong.
Last year alone, African nations enacted 75 regulatory reforms designed to make it easier to start and operate new businesses. In fact, Africa as a region bested all others in the extent of its business-friendly reforms. It is no exaggeration to say that the single biggest factor underlying all these changes is also the most intangible: the expectations of Africans themselves.
Across the continent, there is a pervasive and irreversible acceptance (unlike in the past) of the reality that the private sector, not governments, must be the primary engine of job creation.
Even in countries such as Ethiopia, which has long run a closed economy, the walls have been coming down and foreign investment is coming in.
Africans now expect that evermore elections and power transitions, such as the one in Nigeria recently, will be peaceful, orderly and free of recriminations. Thus progress is being made.
African governments are increasingly recognizing that domestic revenues and debt should be handled prudently, as investment capital, not spoils. Sub-Saharan Africa’s ratio of debt to national income is now lower than that of Central and Eastern Europe, Central Asia, Latin America, and the Caribbean. Four African nations have established sovereign wealth funds since 2007.
Africans are realists. We do not dismiss the litany of tough challenges that others are so quick to cite: infrastructure deficits, corruption, income inequality, ethnic tensions, and gender disparities, etc. But both Africans and our guests would benefit from a fine-grained, truer understanding of the actual potential, durability, and momentum of the continent.
In September of last year, The New York Times published a government estimate saying that as many 1.4 million Africans could become infected with the Ebola virus. To date, the number of fatalities has been eight-tenths of one percent of that figure. One should never diminish the horrific, multi-generational toll of this tragedy, but nor should we allow ourselves to be diverted and paralyzed by misperceptions.
Africa is more than the sum of its immense, young and hopeful populations. It is more than the sum of its natural resource endowments. It is a vibrant rising region that is coming to terms with its legacy problems, even as it rapidly integrates with the global economy.