Recent years have seen the international business community look to the promise of growth through doing business in Africa, the world’s last frontier for the development of new business opportunities. The previous focus on China as the place to be is now waning, and the new concentration on Africa is evident.
However, there are major risks for businesses in an emerging market environment such as the countries in sub-Saharan Africa. Two of the most significant are the fluctuations in the value of local currencies against international currencies like the US Dollar, and the dependency many states in Africa have traditionally had on commodities.
When commodity prices fall, currency volatility often also hits the country; this explains the instability of recent years in the currencies of countries like South Africa, Zambia, Ghana, Angola and Nigeria. But, when a country pegs its currency to an international currency, as is the case in some Francophone states in West Africa, which are pegged against the Euro, currency instability is less likely to arise.
Countries like Angola – worldwide, the state with the second least-diversified economy - and Nigeria have in recent years experienced the risk associated with a single focus in the economy, and their economies have not shown the growth experienced in earlier times. The International Monetary Fund (IMF), for instance, reported in early 2016 that oil-producing economies in Africa were likely to experience just 2¼% growth, a significant drop from the 6% growth experienced in 2014.
This comes as a result of the dramatic drop in the international oil price and slowing demand for oil – in fact, last year saw the lowest oil price in 20 years.
Many states in Africa are beginning to realise the value of moving away from a single focus in their economies. So, although it’s the region’s biggest oil exporter, Nigeria has significantly diversified its economy, with construction, film, services, transport and retail playing a big role in the country’s GDP.
As the IMF indicated in 2016, ‘medium-term growth prospects remain favourable’ in many parts of the continent, largely because the factors that facilitate growth, like the improved business environment, remain in place. Those more open to private sector involvement – such as in Rwanda, Kenya and Nigeria – have seen the growth of a wealthier middle class, and these are people with the means and the need to travel.
The value of local businesses partnering with global corporations must also be highlighted: the local partner’s understanding of the business environment and legal issues in the country will certainly assist the corporation to establish itself in the country. A significant issue for the hospitality sector is the huge size of the population on the continent, as well as in the growth of a middle class in some states.
So, while both currency fluctuations and a sustained low oil price are factors of concern, there are other signs that suggest economic growth potential, and consequently make countries attractive to international hospitality groups. The Harvard Business Review has highlighted the resilience of an economy as a gauge for international business investors. A range of factors point to a resilient economy: strong human capital; stable democratic systems; low dependence on commodities, as is the case in East Africa; and the strength of regional currencies that are pegged to an international currency. In addition, the huge size of the population on the continent suggests great potential for future business.
Marriott International takes a range of factors into account when planning its expansion on the continent – not low commodity prices or currency fluctuations only. It aims to have a presence in 18 sub-Saharan states by 2025, and these locations are mostly those identified as having resilient economies with GDP growth of over 3% per annum, and offering good potential for business going forward. Over the next five years, 65 new hotels will be built across countries like Nigeria, Ghana, South Africa, Uganda, Kenya, Madagascar, Mauritius, Senegal, Gabon and Rwanda.
So, despite some challenges for the business environment in Africa, the future remains positive, and the hotel industry is certainly poised for growth on the continent.
- By Danny Bryer, Area Director of Sales, Marketing and Revenue Management at Protea Hotels by Marriott®.
The questions that I get asked most often by students, policy makers and political leaders are: “can democracy work in Africa?” and “is Africa becoming more democratic?”.
As we celebrate Africa Day and reflect on how far the continent has come since the Organisation of African Unity was founded in 1963, it seems like a good time to share my response.
Some people who ask these questions assume that the answer will be “no”, because they are thinking of the rise of authoritarian abuses in places like Burundi and Zambia. Others assume that the answer is “yes” because they remember recent transfers of power in Gambia, Ghana and Nigeria.
Overall trends on the continent can be read in a way that supports both conclusions. On the one hand, the average quality of civil liberties has declined every year for the last decade. On the other, the number of African states in which the government has been defeated at the ballot box has increased from a handful in the mid 1990s to 19.
To explain this discrepancy, I suggest that we need to approach the issue a little differently. Instead of focusing on the last two or three elections, or Africa-wide averages, we need to look at whether democratic institutions such as term-limits and elections are starting to work as intended. This tells us much more about whether democratic procedures are starting to become entrenched, and hence how contemporary struggles for power are likely to play out.
When we approach the issue in this way it becomes clear that democracy can work in Africa – but that this does not mean that it always will.
The rules of the game
Democracies are governed by many different sets of regulations, but two of the most important are presidential term-limits and the need to hold free and fair elections. Because these rules have the capacity to remove presidents and governments from power, they represent a litmus test of the strength of democratic institutions and the commitment of political leaders to democratic principles.
So how are these institutions faring? Let us start with elections. Back in the late 1980s only Botswana, Gambia and Mauritius held relatively open multiparty elections. Today, almost every state bar Eritrea holds elections of some form. However, while this represents a remarkable turn of events, the average quality of these elections is low. According to the National Elections Across Democracy and Autocracy dataset, on a 1-10 scale in which 10 is the best score possible, African elections average just over 5.
As a result, opposition parties have to compete for power with one hand tied behind their backs. This helps to explain why African presidents win 88% of the elections that they contest. On this basis, it doesn’t look like democracy is working very well at all.
Colonialism brought large-scale farming to Africa, promising modernisation and jobs – but often dispossessing people and exploiting workers. Now, after several decades of independence, and with investor interest growing, African governments are once again promoting large plantations and estates. But the new corporate interest in African agriculture has been criticised as a “land grab”.
Small-scale farmers, on family land, are still the mainstay of African farming, producing 90% of its food. Their future is increasingly uncertain as the large-scale colonial model returns.
To make way for big farms, local people have lost their land. Promises of jobs and other benefits have been slow to materialise, if at all. The search is on for alternatives to big plantations and estates that can bring in private investment without dispossessing local people – and preferably also support people’s livelihoods by creating jobs and strengthening local economies.
Two possible models stand out.
Contract farming is often touted as an “inclusive business model” that links smallholders into commercial value chains. In these arrangements, smallholder farmers produce cash crops on their own land, as ‘outgrowers’, on contract to agroprocessing companies.
Then there is growth in a new class of “middle farmers”. These are often educated business people and civil servants who are investing money earned elsewhere into medium-scale commercial farms which they own and operate themselves.
So what are the real choices and trade-offs between large plantations or estates; contract farming by outgrowers; or individual medium-scale commercial farmers?
These different models formed the focus of our three-year study in Ghana, Kenya and Zambia. Evidence suggests that each model has different strengths. For policy makers, deciding which kind of farming to promote depends on what they want to achieve.
Plantations are ‘enclaves’
Our cases confirm the characterisation of large plantations as being “enclaves” with few linkages into local economies. They buy farming inputs from far afield, usually from overseas, and in turn send their produce into global markets, bypassing local intermediaries.
Plantations are large, self-contained agribusinesses that rely on hired labour and are vertically-integrated into processing chains (often with on-farm processing). They’re usually associated with one major crop. In Africa, these started with colonial concessions, especially in major cash crops such as coffee, tea, rubber, cotton and sugarcane. Some of these later became state farms after independence while others were dismantled and land returned to local farmers.
Many plantations do create jobs, especially if they have on-site processing. Plantations may also support local farmers if they process crops that local smallholders are already growing. For example, we found an oil palm plantation in Ghana that buys from local smallholders, giving them access to processing facilities and international value chains they would otherwise not reach.
But, typically, plantations have limited connections into the local economy beyond the wages they pay. Where production is mechanised, they create few jobs, as we found in Zambia: the Zambeef grain estate employs few people, and most of these are migrants whose wages don’t go into the local economy. And the jobs that are created are invariably of poor quality.
The main story is that plantations take up land and yet often don’t give back to the local economy. In the cases we researched, all the plantations led to local people losing their land. For instance, the establishment and later expansion of the 10,000-hectare Zambeef estate led to forced removals of people from their cropping fields and grazing lands.
There are some benefits from plantations and estates. But, given more than a century of bad experience, it may be time to concede they seldom – if ever – live up to their promises.
Contract farming brings benefits for some
Contract farming has a long history in Africa, dating back to colonial times. As with plantations, these arrangements were largely for the major cash crops, including cocoa, cotton, tobacco and sugarcane.
Contract farmers are smallholders who enter into contracts with companies that buy and process their crops. Sometimes members of outgrowers’ households might also get jobs on larger “nucleus” estates run by the companies. Whether or not they benefit, or get mired in debt and dependence, depends entirely on the terms of these contracts. Our study looked at contract farming in Ghana’s tropical fruit export sector, in French bean production in Kenya and in sugarcane farming in Zambia.
Contract farming has been hailed by some as the “win-win” solution, enabling commercial investment for global markets without dispossessing local farmers. Farmers farm on their own land, using their own family labour, while also accessing commercial value chains – rather than being displaced by large farms. But we found that this is not necessarily the case. Crucially, there are different kinds of arrangements that determine who benefits.
In Kenya, contract farmers are poorer than most farmers around them. For them, farming on contract provides a crucial livelihood, especially for poor women, who cultivate French beans for the European market and combine this with seasonal jobs on big farms.
In one Zambian block scheme all outgrowers gave up their land to Illovo, a South African company that grows sugarcane. The company pays them dividends. Here, the landowners, typically the old patriarchs, benefit from cash incomes. Young people lose out: they neither inherit the land nor control the cash incomes.
Contract farming clearly provides one effective avenue for smallholders to commercialise. It means, though, that smallholders take on both the risks and the benefits of connecting to commercial value chains.
Medium-scale farming: a promising option
Between the large plantations and the small contract farmers is another model: medium-scale commercial farms owned by individuals or small companies. We studied areas where medium-scale farms were dominating: mango farmers in Ghana, coffee farmers in Kenya and grains farmers in Zambia. While this kind of medium-scale farming also has colonial origins, the past two decades have seen massive growth in new “middle farmers”. Many of them are male, wealthy, middle-aged or retired, often from professional positions.
The medium -scale commercial farming model has a lot to offer. We found that they create more jobs and stimulate rural economies more than either big plantations or smallholder contract farmers. Yet cumulatively, such farms may threaten to dispossess smallholders, just as the big colonial and more recent plantations and estates have done.
The push behind the explosion of the “middle farmers” in the countries we studied has been investment by the educated and (relatively) wealthy. In Ghana in particular, we found, their expansion has displaced smallholders. Cumulatively, even modest-sized farms have led to substantial dispossession and reduced access to land.
Their informal employment patterns mean poor working conditions and few permanent jobs. But, unlike the plantations, these farms are well connected with the local economy. Building on social networks, these “middle farmers” often buy inputs and services from local businesses. At least some of their produce is sold into local markets.
Winners and losers
While policy choices are of course political, they can and should be informed by research about the implications of these different pathways of agricultural commercialisation. What is clear from our research is that different kinds of commercial farming will have different effects on the economy. It’s not just about efficiency. Ultimately, it’s about who wins and who loses.
Ruth Hall, Associate Professor, Institute for Poverty, Land and Agrarian Studies, University of the Western Cape; Dzodzi Tsikata, Associate Professor, University of Ghana, and Ian Scoones, Professorial Fellow, Institute of Development Studies, University of Sussex
In Kenya, it’s estimated that 30% of newspaper revenue comes from government advertising. In 2013, the government spent Ksh40 million in two weeks just to publish congratulatory messages for the new President Uhuru Kenyatta.
But with a general election coming up this year in August, the Kenyan government has decided to stop advertising in local commercial media. In a memo, reportedly sent to all government accounting officers, the directive was given that state departments and agencies would only advertise in My.Gov - a government newspaper and online portal.
Electronic advertising would only be aired on the state broadcaster – the Kenya Broadcasting Corporation. It’s difficult not to characterise the withdrawal of state advertising from commercial media as punitive. Without this revenue stream newspapers are likely to fold.
Worse still, efforts to withdraw government advertising from commercial media can be interpreted as a worrying way to undermine the freedom of expression. Starving news media of revenue is a means of indirect state control. This has been the case in countries such as Serbia, Hungary, Namibia, Lesotho and Swaziland. But to fully understand the link between government spend on advertising and media freedom it’s important to take a historical perspective.
How did we get here?
The 1990s saw the adoption of multi-party politics in many African countries. This led to relatively liberal constitutions in South Africa, Kenya, Nigeria and Ghana among others.
Since then, most African governments have grown anxious about their inability to control the local news agenda, much less articulate government policy. For governments in countries such as Ethiopia, Uganda, Zimbabwe and more recently Tanzania, controlling the news agenda is seen as a means to stay in power. Views that compete with the state position are often cast as legitimising the opposition agenda.
This is part of a much broader strategy for political control which Africanist historians and political scientists have called the “ideology of order”. This is based on the premise that dissent is a threat to nationbuilding and must therefore be diminished.
The narrative was popularised by most post-independence African governments and emphasized through incessant calls for what they liked to call “unity”.
In Kenya, former president Daniel Moi even coined his own political philosophy of “peace, love and unity”. Citizens were expected to accept this narrative unequivocally. Dissenting views were undermined through state-controlled media such as Kenya Broadcasting Corporation and newspapers such as the Kenya Times.
From the 1960s - 1980s, African governments conveniently used the nation-building argument to suppress legitimate dissent. Opposition was punished by imprisonment, forced exile and even death. This was common practice in Kenya, the Democratic Republic of Congo, Uganda, and in West Africa more generally. The current political climate on the continent is premised on constitutional safeguards including the protection of free speech which make these kinds of punishments unlikely in the present day.
Many countries now have institutional safeguards including fairly robust judicial systems capable of withstanding the tyranny of naked state repression. As a result, the media is controlled in subtler ways and its violence is softer. It’s against this background that I interpret the withdrawal of government adverts from the commercial media in Kenya.
Controlling media budgets
In Kenya, the decision followed a special cabinet meeting which agreed that a new newspaper would be launched to articulate the government agenda more accurately. The government also argued that the move was part of an initiative to curb runaway spending by lowering advert spend in Kenya’s mainstream media and directing all the money to the new title.
A similar move was made in South Africa last year when the government’s communications arm announced that it would scale down government advertising in local commercial media. Instead, advertisements would be carried in the government newspaper Vuk’uzenzele. The decision withdrew an estimated $30 million from the country’s commercial newspaper industry.
The South African government also claimed that the move was made to reduce government spending. But critics have argued that the decision was made to punish a media outlet that’s been particularly critical of President Jacob Zuma’s presidency.
In both countries the decisions have hit at a particularly hard time for the media industry, providing governments with the perfect tool with which to control the press.
Will a free press survive
Commercial news media is going through a period of unprecedented crisis. The old business models are unable to sustain media operations as audiences adopt new ways of consuming news. More than that, mass audiences are growing ever smaller. Newspapers particularly haven’t been able to adapt to the changing profile of the old versus the new newspaper reader.
The effect has been that newspapers are no longer as attractive to advertisers. As such, they have to rely a lot more on state money and patronage for survival. To sidestep state control commercial media in Africa must rethink their business models and diversify their revenue streams.
It won’t be an easy road but non-state media must also work hard to disrupt this re-emerging narrative of “order”. Nation states cannot revert to the dark days when government policy was singular and alternative viewpoints were silenced or delegitimised.
When G20 leaders meet later this year in Hamburg, investment in Africa’s future will be high on their agenda. German Chancellor Angela Merkel has already committed to using her presidency of the forum to promote “sustainable growth and jobs” on the continent, with a focus on “investments in infrastructure and renewable energies.”
Energy is not a new need for many Africans. While parts of Africa are energy-rich, supply remains frustratingly poor for most of the continent. Indeed, the African Development Bank calculates that some 620 million Africans live without access to reliable electricity.
But with advanced economies now expressing support for efforts to broaden the availability of this basic human need, perhaps the time has come to flip the switch on one of Africa’s biggest developmental – and societal – challenges.
According to the International Energy Agency, Africa accounts for 13% of the world’s population but only 4% of its energy demand. While residents of London or New York might complain of slow broadband or shoddy mobile phone reception, many people in African cities, towns, and villages still struggle with access to basic electricity to light their homes and power their businesses. As I have noted elsewhere, in 36 African countries, just two in five people have electricity throughout the day. In some countries, fewer than one in ten do.
Given this, it is not surprising that so many of Africa’s young people believe their best hope lies in traveling to Europe and beyond. Reliable electricity is about more than powering schools, hospitals, and homes. A reliable supply of power can allow young people to develop skills, find employment, and start a business – and can enable existing businesses to compete on a level playing field in regional and international markets. Because electricity is fundamental for economic development, providing communities and businesses with access to reliable, clean, and affordable energy will be my top priority during my stewardship of the African Union.
As the G20’s Hamburg agenda suggests, African and Western countries now have a shared incentive to work together to solve Africa’s developmental shortcomings. Africa cannot afford to lose generations of its young talent to places like Germany, France, and Italy, and European countries cannot afford to continue struggling with an influx of migrants. Among the best ways to reverse these trends is cooperation between developing and developed economics – particularly in the energy sector.
Opportunities for partnership abound. According to a February 2015 report by McKinsey & Company, Africa has an extraordinary reserve of untapped energy potential, including an estimated 10 terawatts of potential solar energy, 350 gigawatts of hydroelectric power, 110 gigawatts of wind power, and an additional 15 gigawatts of geothermal energy. Whereas it was once too expensive to exploit Africa’s vast renewable assets, technology is providing solutions that promote new enterprises and new opportunities. With sufficient international investment, Africa will have a chance to harness and use these resources.
We have already seen the impact new sources of power can have on African cities. Two years ago, residents of Conakry, Guinea’s capital, could not light their homes for more than six hours a day, and businesses went without the power they needed to operate. Now, thanks to the construction of the Kaleta hydroelectric dam by the China International Water & Electric Corporation, businesses have reliable power for up to 24 hours a day.
And it’s not just Guinea. From the huge pan-African Lekela wind and solar projects, to wind farms in Kenya and solar projects in Rwanda and Tanzania, large and small African countries alike are harnessing their natural resources to create jobs and produce clean, affordable energy.
What’s even more exciting is that these projects are not happening in isolation. They are being planned alongside a wider push to create a network of industrial-scale generating capacity across the continent.
International collaboration and investment are essential to these efforts. Working with international partners in West Africa, a groundbreaking electricity interconnector will allow power exports from Côte d’Ivoire to Liberia, Sierra Leone, and Guinea. And this will be the first of several new public-private initiatives aimed at transforming how African countries deliver power.
If we get this right, we will not only strengthen African economies’ capacity to provide jobs and a future for our young people. We will open up new trading opportunities for both Africa and the West.
Having spent the last year coordinating energy policy within the African Union, I have sensed a growing mood of impatience from Africa’s political leaders on the topic, a sentiment that is shared by many of our people. But African leaders are demonstrating a new determination to improve younger generations’ prospects, not least by electrifying our economies.
Never in my lifetime have I seen Africa’s political leaders so focused on overcoming some of the challenges that have held back our continent for so long. Working with international partners in the public and private sector, we can chart a new and prosperous path for Africa and a hopeful future for our youth. And if African leaders pair their determination with the G20’s pledge to invest in infrastructure partnerships, the future for Africa’s people will be bright in more ways than one.
- By Alpha Condé is President of Guinea and Chairperson of the African Union.
Copyright: Project Syndicate, 2017.
Former US president Barack Obama often reminded audiences that his presidency was made possible by the brave men, women, and children of the civil rights movement. They had bolstered America’s democracy through stubborn protest. He applauded mass action as essential to building democracy and ensuring its durability once established.
He did not limit his praise of protest to the American context. In an address in May 2011, he spoke with admiration of the brave protesters of the so-called Arab Spring in the Middle East and North Africa. In his estimation they were akin to America’s 19th-century abolitionists and mid-20th-century civic rights activists.
Obama called these protests powerful democratic expressions from everyday citizens:
There are times in the course of history when the actions of ordinary citizens spark movements for change because they speak to a longing for freedom that has been building up for years.
refused to go home – day after day, week after week – until a dictator of more than two decades finally left power.
Obama embraced protests as an advanced political tool of the marginalised. It is therefore ironic and unfortunate that during his eight years in office he chose not to direct similar praise toward pro-democracy demonstrations in countries south of the Maghreb.
There were many high notes from the Obama administration on African affairs. But his silence on pro-democracy protests in Africa was a missed opportunity to engage directly with mass citizen-led movements.
During his two official visits to the continent, and when African heads of state visited the White House, Obama raised the issues of transparency and good governance. But he reserved his remarks almost entirely for heads of state. He foisted on them the onus for change.
This is an anaemic rendering of the forces behind good governance in Africa. It stands in marked contrast to the richer, more textured and substantive analyses he offered when it came to the world’s other regions. Africa has been fertile ground for good governance movements. Transformative activism is redefining political participation in a host of countries. The most notable cases include Zimbabwe, South Africa, Ethiopia and the Democratic Republic of the Congo (DRC).
Protests in Burkina Faso in October 2014 had the greatest success among these disparate movements. They forced Blaise Compaoré to resign when he tried to change the constitution after 27 years in power.
Currently, the DRC is in the midst of a protest-driven political transformation. In Kinshasa, Goma, Lubumbashi and other Congolese cities, more than 170 people have died in more than a year of sporadic protests. Still, people continue to return to the streets. The breaking point was when President Joseph Kabila refused to step down at the end of his second term, as mandated by the constitution. Protesters have also called for an independent commission to investigate the police violence and killings that have characterised the state’s response to protesters.
Catholic Bishops intervened to mediate talks that included representatives from the government, the political opposition and civil society organisations. These negotiations produced a government commitment to hold elections before the end of 2017.
The agreement also states that Kabila – who has been in power since 2001 – will neither change the constitution nor seek a third term. The talks and subsequent agreement were a direct product of the mass demonstrations. Mass action is working in the DRC. It would gain strength with greater foreign attention and pressure.
Obama, America’s first African-American president, took an approach to Africa that stands in contrast to the 100-plus-year history of African-American political leaders supporting and demonstrating solidarity with good governance movements in Africa.
The most notable, documented and celebrated example was the broad support for the struggle against apartheid in South Africa during the 1970s and 1980s.
But there were other issues and events that inspired Africa- Americans to take action in solidarity with Africans. These included King Leopold of Belgian’s forced labour colony in the Congo, Italy’s invasion of Ethiopia in 1935, white-minority rule in Rhodesia, Portugal’s ongoing colonial occupation in Africa during the early 1970s, and Western complicity in the ousting and ultimate assassination of Congo’s first prime minister, Patrice Lumumba, in 1960.
African-American activists, joined later by lawmakers, remained at the forefront of progressive American support for protest and dissent in the name of democracy and good governance.
No American president had greater goodwill from Africans than Obama. Yet he disappointed by avoiding African issues that the American press and political establishment might consider radical or controversial. To play it safe, Obama stuck to the banal talking points on African authoritarianism and economic liberalism.
Protesters in Africa will not have a better friend in Donald Trump. His presidency is likely to be a reprieve for African autocrats. Trump will be content to reduce US engagement with Africa to trade and anti-terrorism. He has indicated that humanitarian and development aid are in danger of suffering massive cuts under his administration.
In this nascent, post-Obama period, the ongoing protests in many African cities deserve the support of US lawmakers. Merely acknowledging the issues at the heart of their movements and struggles would legitimise and buoy their causes in the international community. It would also give them leverage in their engagements with their respective governments.
Africa’s pro-democracy movements will continue with or without formal recognition from Trump or members of the US Congress. Yet such recognition is critical to lending them international legitimacy, and would help place extra pressure on repressive regimes targeted by protests.
In the Trump era, civil and human rights organisations, student organisations, trade unions, and African-American and other concerned lawmakers have a particularly important role to play in African affairs.