Oxstones Investment Club™The purpose of this note is to add to the list of reasons for the expected strong economic development in Africa, articulated by Jonathan Berman at the Harvard Business Review (http://hbr.org/2013/10/seven-reasons-why-africas-time-is-now/ar/1), and introduced here at Oxstones by my colleague Brian Andreosky (https://oxstones.com/seven-reasons-why-africas-time-is-now/).
First and foremost, I would like to express my complete agreement with reasons, conclusions, estimates, and forecasts, indicated by Berman (2013). Indeed, Berman provides an excellent detail-oriented analysis. In our globalized world, Africa will have a very prominent place very soon.
There are a couple of more reasons for the strong economic potential of Africa.
Reason 8. Development of the intra-African trade will results in increased opportunities. As Berman shows in the original article, Reason 3 states that the “intra-African trade is in its infancy” (2013). Increase of the intra-African trade can be anticipated. It will be a natural next step that the strengthening African producers will consider expansion to foreign markets. The neighboring countries will be especially attractive to the emerging manufacturers due to lower transportation costs. I observed such a situation in Vietnam in 2006. Furthermore, this particular tendency in Vietnam continues in the following years. The increased intra-African trade will increase cash flows. As an outcome, the increased cash flows will contribute to increases in the amounts of disposable incomes, purchasing capability, demand, and growth in the service industry. An additional demand will require more supply. Growth in supply will create new cash flows and jobs. Moreover, while Africa already has its good quantity of well-trained professionals, an increased intra-African trade will result in the higher number of qualified personnel, familiar with international business operations.
Reason 9. Impact of remittances. Remittances historically demonstrated the tendency for growth. Also, incoming remittances constitute the increase of buying capacity in Africa. Bruckner, based on the World Bank estimates, promotes an estimate of $40 billion annual remittances regularly coming to Africa and possible $50 billion in savings of the Africa natives abroad that can be potentially invested in Africa (2011: 4). The latter category would more fit into the category of the foreign direct investment (FDI) instead of the traditional remittances. In the case of increased business opportunities in Africa, these amounts may start to come in. The Africa Diaspora, living elsewhere, also may start entrepreneurial activities targeting the African markets. As one of the variants, these individuals may partner up with their networks in their respective places of residence outside of Africa. Therefore, in addition to the large-scale projects and investments, development of economy in the African countries may bring a high potential to the mid-size businesses.
When wealth in Africa will grow, the amount of incoming remittances may go down. But that process would happen only when the remittances will not be so much needed any more. It would not be a negative process, but only a reflection of other positive changes. Some senders of remittances may come back to Africa to explore emerging professional and/or entrepreneurial opportunities. To some extent, remittances will be substituted by the FDI from the African Diaspora. More importantly, much more new qualified jobs will be created throughout the continent.
In addition to listing reasons for the future success of Africa, it seems appropriate to bring up one more aspect. The economic progress in Africa will lead to a number of improvements. One of them may take place in the long term, but it should be especially emphasized. Opportunities for provision of drinking water will drastically increase. For many centuries, this topic remained one of the greatest challenges in Africa. Many millions of lives were shortened or lost due to this horrific challenge. Even now, the United Nations (UN) concludes that from 800 million of residents of Sub-Saharan Africa, over 300 million reside in the conditions of water scarcity (United Nations, 2013). Certainly, this problem cannot be solved in a short term.
On the other hand, when the economic progress in Africa may be solidified, needs for provision of drinking water will gain even more attention. The decision-making corporate and governmental stakeholders will reach the financial ability to overcome this problem. Research and development in water purification led to a number of interesting innovations in the last several decades. In other words, the technological ability became more feasible. Therefore, finally many millions of people in Africa will gain a reliable and convenient access to the safe potable water of high quality. This solution will grant numerous benefits to all stakeholders involved. Eventually, the water distribution/purification industry in Africa will turn into a booming field.
One more comment can be added in relation to Reason 5 in Berman’s original article. Reason 5 pertains to educational achievements in Africa and to allocation of 20% of the government spending for education. Being in the agreement with Berman’s argument, it seems applicable to add recent development in the business education in Africa. Likewise, Europe experienced vast increase in quality in the number of the lead MBA programs in the last fifteen years or so. A similar process now takes place in Africa and in its rapidly growing universities.
Furthermore, someone became a creative and efficient driving force behind the development of African business education. This gentleman’s name is Richard America. He serves as a Professor at the McDonough School of Business at Georgetown University in Washington, DC, USA. I have an honor to know him personally in the capacity of his former student. Richard America’s initiative, efforts, and strategic vision provided significant impact on the business education in Africa. Various leaders of the African universities also demonstrated significant interest in strengthening of their undergraduate and graduate business programs.
Africa is developing. Certainly, each country in Africa remains responsible for its own specific conditions in relation with the business environment. Many good signs indicate the strong positive continental trend. Stability, education, developed workforce, and other factors give enough reasons for optimism. Eventually, multiple stakeholders will benefit from the advanced business activities in Africa.
Bibliography
Berman, Jonathan (2013). Vision Statement: Seven Reasons Why Africa’s Time Is Now. Harvard Business Review, October 2013. Accessed on September 25, 2013. http://hbr.org/2013/10/seven-reasons-why-africas-time-is-now/ar/1.
Bruckner, Marcus (2011). Rainfall, Financial Development, and Remittances: Evidence from Sub-Saharan Africa. International Money Fund, working paper.
United Nations (2013). Fact and Figures. United Nations International Year of Water Cooperation. Accessed on September 30, 2013. http://www.un.org/en/events/worldwateryear/factsfigures.shtml.
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