IBM - All eyes on Africa

All eyes on Africa. Strategic partnerships, soaring investments and the talents of the Cheetah Generation are powering Africa's growth. Get a PDF of this story (467 KB).

Africa rising: the future is now

Africa. Once considered a sleepy, economic backwater, the continent is now suddenly on top of business minds across the globe. China conducts $55 billion a year in trade within Africa. Entrepreneurial success stories grace the pages of Western glossy magazines. And the economies of dozens of African nations are growing at healthy rates . Just as Southeast Asia and Eastern Europe did before, Africa is sowing the seeds for economic growth in the coming years. "The economic outlook for Africa is the best in 30 years, growth is averaging 5.5 to 5.8% across the continent, and there is ample reason for optimism. The African continent has emphatically and irreversibly turned the corner," said Thabo Mbeki, president of South Africa, earlier this year.

To help foster economic development, IBM held Global Innovation Outlook (GIO) conferences throughout 2007, bringing together leaders in business, government and academia. These global "Deep Dive" sessions took place in Nairobi, Kenya; Dakar, Senegal; Paris, France; Lisbon, Portugal; Atlanta, United States; Beijing, China; and Cape Town, South Africa. All in all, an effort to innovate, collaboratively, to accelerate the positive change that has already begun.

While the continent still needs to improve infrastructure, attract investment, and build a stronger skills base, the basic building blocks for continued growth are there. Following are some insights from the GIO discussions.

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One continent, many markets

There is a tendency to treat Africa as one, big homogeneous market, but it is actually 54 countries, with 930 million people who speak an estimated 2,000¹ different languages. There are countless demographics within the continent. But a severe lack of data to help understand those varied markets makes it difficult for businesses to grow beyond the borders of a village, town, or country. It also makes it difficult to get funds that are invested in well-known, more developed areas, to reach the undeveloped areas that need it the most.

At a glance
At US $39 billion, a new record, Foreign Direct Investment (FDI) in Africa in 2006 recorded a 25% increase over 2005². This is due, in large part, to increased activity in extractive industries such as petroleum, mining and cocoa.

Two-thirds of FDI flows in 2006 were to developed countries (up from three-fifths in 2005). FDI flows into developing countries in 2006 rose by a more modest, but significant, 10%.³

However, this investment is slow to trickle down: 300 million African people live on less than $1 a day.⁴

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Microfinance: small loans, big impact

The biggest industries in Africa are focused on extracting its abundant natural resources: oil, gas, and minerals. Yet the majority of the jobs are created in small businesses that rely on microfinance: loans of less than $1,000 that help individuals start and grow businesses in their community.

At a glance
By offering access to credit and savings to those living in the informal economy [off-the-books income without access to traditional banking], microfinance can help businesses grow, and eventually enter into the mainstream economy.

The International Labor Organization estimates that three-fourths of all Africans work in the informal sector, comprising over 40% of the continent's overall gross domestic product (GDP).⁵

Recipients of microfinance have been remarkably reliable borrowers—default rates of less than 10% are common. Typical interest rates of 10% to 15% promise a reasonable return for lenders.⁶

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The mobile imperative

The infrastructure to support landline phones is non-existent in most of rural Africa, but that hasn't stopped the continent from becoming a hotbed for innovation in wireless applications. Per capita access to wireless handsets is among the highest in the world in many parts of Africa, even in remote villages that lack electricity. In fact, unprecedented mobile applications—like Safaricom's mobile money transfer service in Kenya—are already up and running, leapfrogging so-called developed and other emerging markets.

At a glance
27 million landline telephones in Africa⁷
33 million Internet users in Africa
100+ million mobile phone subscribers in Africa (2006)⁸

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The Cheetah Generation

Any discussion of Africa's future must include the "Cheetah Generation," the fast-moving, forward-thinking young men and women eager to accelerate Africa's development. Africa has the world's highest growth rate in high school attendance, many of whom expect to go to university. But higher education institutions are woefully unprepared to handle the demands of today's global economy, and few offer the real-world training that graduates need to find meaningful work. There is a critical role the private sector can play.

At a glance
"One thing that's quite striking is the degree to which virtually every university is innovating to cope with their problems...to try make the most of the conditions they confront," says Professor Akilagpa Sawyerr, secretary general of the Association of African Universities in Accra, Ghana⁹. Innovations include private sector partnerships to build facilities; bridge programs to prepare students; recruitment of African professionals living abroad to volunteer and teach for a few weeks when they come home on vacation.

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Hidden strength: Africa's women

The role of women in the economic development of Africa is increasingly well documented. And while there is still a long way to go in terms of fully supporting and enabling women in African business environments, awareness is being raised and progress is being made. "African women are born entrepreneurs," says Bola Olabisi, CEO of the Global Women Inventors and Innovators Network (GWIIN). "They don't just talk about business; they get out there and do it."

The evidence: in Africa, women account for more than 60 percent of the rural labor force, and contribute up to 80 percent of food production. And more than 80 percent of those women are working, unregistered and unrecognized by the government, in the informal sector.

But changes to better recognize women's role in Africa are underway. For example, Rwanda now has the highest number of women parliament members in the world — a full 50 percent in the Chamber of Deputies; 35 percent in the Senate; and 34 percent in the Cabinet. Numbers like those put most developed countries to shame.

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Footnotes

¹ Languages of the World by National Virtual Translation Center, http://www.nvtc.gov/lotw/months/november/worldlanguages.htm , 2007
^2,3 "FDI Flows in 2006: The Global and Regional Pictures," http://www.unctad.org/TEMPLATES/Page.asp?intItemID=4160&lang=1
⁴ http://earthtrends.wri.org/updates/node/6, December 22, 2005
^5,6 "Africa: Microfinance Supports Sustainable Growth-a Private Sector Model of Development," Africa Journal, Washington DC, 28 July 2007, Robert Pettit
⁷ "Mobile phones the talk of Africa as landlines lose out," Guardian Unlimited, May 5, 2004
⁸ http://www.wi-fitechnology.com/displayarticle2563.html, February 2, 2006
⁹ "African Universities Strive to Make the Grade," voa.com (Voice of America), Washington, D.C. 18 June 2007, William Eagle

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	The above report is part of a global conversation IBM is hosting about innovation that can change the world. Learn more.

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