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University of Ghana
Even though the world has identified Africa as the next best destination to do business, it has always being hindered by poor infrastructure. Economic efficiency is not harmonized due to difficulty in accessing Africa’s markets. Therefore, for Africa to realize its full potential, a fully structured and sustainable infrastructure development is needed. Africa accounts for 12% of the world’s population but only contributes 1% of global GDP and only 2% of world trade.
Although the continent has successfully maintained an average growth rate of between 4 % and 6% for the past few years, Africa accounts for 12% of the world’s population but only contributes 1% of global GDP and only 2% of world trade. Poor infrastructure cost each member country’s growth to reduce by 2percentage point each year and cut productivity by as much as 40%.
According to the World Bank, about $93 billion is needed annually to be able to fund Africa’s infrastructure for the next 10 years. Which is about 15 percent of the region’s GDP. About $60 billion would go to new projects and the rest would go into the maintenance of the existing ones.
According to a development research brief, by the African Development Bank (AfDB), in 2009, less than 10% (in 10 countries) and less than 50% (in 33 countries) of roads in Africa are paved, 40% of the continent’s population lacks access to safe water; 60% of the population lacks basic sanitation an only 30% of the rural population in Sub-Saharan Africa has access to all-season roads. Transport costs in Africa are among the highest in the world; only 30 percent of African population has access to electricity; Africa has the lowest telephone penetration – 14% (the world average is 52%). Africa has the lowest Internet penetration – 3% (the world average is 14%).
These are the challenges staring the continent in the face despite the recent economic prospects projected to be experienced in the next decade and beyond. How then do we as Africans, solve the infrastructure deficit? This is a legitimate question which demand answers from all quarters. The issue of financing Africa’s infrastructure is of course long term in nature. That is why we must critically look at means possible to reach our continental goal of creating a strong socio-economic welfare. Recent activities of governments across the continent have proven again and again that, they cannot single handedly handle the infrastructure deficits, the more reason why it has become very critical for the involvement of the private sector to provide long term capital in this regard.
A recent African economic theory, which has gain attention from the world all over is Africapitalism, coined by Mr. Tony Elumelu, a distinguished business man and African Philanthropist. Mr. Tony O. Elumelu, CON, is an entrepreneur, a philanthropist and the chairman of Heirs Holdings Limited, an investment company that builds sustainable African businesses. He is the creator and the leading proponent of the term Africapitalism. In 2011, he started The Tony Elumelu Foundation, an African-funded philanthropic organization focused on supporting entrepreneurs in Africa by enhancing the competitiveness of the private sector.
Mr. Elumelu has received numerous honours, board, and committee appointments, and in 2012, the government of Nigeria conferred on him the national honour of Commander of the Order of the Niger.
In 2012, Forbes Magazine named Mr. Elumelu one of Africa’s 20 Most Powerful People in African Business, and he was included in New African Magazine’s list of 100 most influential Africans in business. Mr. Elumelu also serves as an advisor to the USAID’s Private Capital Group for Africa (PCGA) Partners Forum.
Why is Africapitalism identified as a philosophy which Africa must consider now in order to secure future economic boom? It is for the simple fact that, it seeks to address the very challenge facing the continent, “Lack of access to long-term financing”. It stresses on the role of the private sector in this regard.
Mr. Elumelu, according to a white dubbed “Africapitalism: the path to economic prosperity and social wealth” described Africapitalism as an economic philosophy that embodies the private sector’s commitment to the economic transformation of Africa through investments that generate both economic prosperity and social wealth. This is to the end of seeing Africans taking charge of the value-adding sectors and ensuring faster economic prosperity. Africapitalism asserts that value creation through entrepreneurship is Africa’s unique path forward — distinct from emerging markets like China with its state-run enterprises, or Korea with its “Chaebol” conglomerates, or India with its large family-run businesses. The philosophy is about long-term investment in Africa, driven by Africa’s own private sector to deliver economic prosperity and improve the lives of Africans. Africapitalism is not capitalism with an African twist; it is a rallying cry for empowering the private sector to drive Africa’s economic and social growth.
Its primary goal is greater economic prosperity and social wealth, driven by Africa’s private sector, its domestic economies, markets, and businesses. This, to an extent is to satisfy three fundamental tenets; wealth creation, funding entrepreneurship and transparent competitive markets. It is in the philosophy that the private sector, both foreign multinationals as well as African business leaders to break free from the historical tendencies of exploitation and extraction of wealth and instead focus on generating profit through wealth creation. Again, it asserts that, governments are not responsible for running industries; they are responsible for providing a supportive environment for businesses to thrive, in markets that are fair, transparent, and open. Their policies should encourage creation of new wealth rather than support the exploitation and extraction of existing wealth
At the heart of Africapitalism is long-term investment that creates economic prosperity, a commercial objective, as well as social wealth. Thus, a private sector approaches to solving some of Africa’s most intractable development problems and the “new” Africa: a reinvigorated private sector solving social problems by building businesses and creating social wealth. It is a drastic departure from the old model of centralized governments managing basic industries, a structure often developed at the recommendation of the well meaning but misguided global development.
Africa’s quest to access long term financing for infrastructure development is what has actually made the theory more useful and practical. Long term financing of infrastructure development by private investors is very difficult because of the lack of a comprehensive market-oriented infrastructure finance system, with clearly defined roles and responsibilities for the public and private sectors, and a clear and transparent system to provide public sector financial support to make infrastructures financially viable.
Again, there is insufficient capacity for project design and implementation. The key bottleneck to infrastructure development has been identified as not capital, but a severe lack of bankable projects which can attract private capital. There is poor accountability, performance-, and contract-management across the continent, all these leading to the inaccessibility of long term finance.
It has therefore become critical, that Africa rethink around the AFRICAPITALISM theory and make it work practically and effectively on the continent.
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