It was my pleasure to attend the World Economic Forum’s annual meeting in Davos, which examined the seismic political, economic and social developments that took place in 2016, and their implications for the world order. As Klaus Schwab, founder of the World Economic Forum, argues, decision makers must acknowledge that frustration and discontent are only increasing among people who haven’t experienced economic development and social progress. In response, leaders must ‘listen and honestly explain the breadth of issues, proactively generate solutions and make decisions based on shared values‘.
I believe that this emphasis on responsible and responsive leadership is especially pertinent for Africa. Late last year, the World Bank reported that economic growth in sub-Saharan Africa is projected to fall to 1.6%, the lowest level in two decades. Furthermore, there remain underlying structural issues that are hindering our pursuit of inclusive economic development. First, there is a severe energy deficit that is depriving 600 million people of access to electricity. These persistent power supply issues are not only affecting our citizens’ quality of life, but they are also pushing up the high cost of doing business in Africa. Second, there are unrelentingly high rates of unemployment among our younger generations. According to the Brookings Institution, youth unemployment across sub-Saharan Africa is four times higher than the region’s aggregate unemployment level. This can be attributed to higher education that fails to equip graduates for the job market, and inadequate support for young entrepreneurs.
If we want to ensure that Africa remains a competitive place to do business and that sustainable development is a reality, we must take decisive action on these issues. Certainly, African governments have the main responsibility in addressing the continent’s underlying structural issues. However, I would emphasise that the scale of our development challenges demands collaboration among a variety of stakeholders. As the biggest source of job creation and a recognised engine of growth, I believe that the private sector is well positioned to help African countries become sustainable and inclusive knowledge economies.
First, for-profit businesses can help enhance our citizens’ access to clean and affordable electricity. For example, they can enhance energy access over the long term by accelerating the deployment of affordable and localised tech innovations. I’ve been particularly impressed by the Kenyan start-up, M-Kopa, which is using solar technology to provide affordable electricity to East African homes. After paying a small deposit, M-Kopa users are given a solar system to install at their homes. Using a mobile payment system on their mobile phone, they can then top it up every day for a paltry sum in order to get energy. Initiatives such as these are particularly valuable for two reasons. By providing affordable, reliable and clean power, M-KOPA is giving its customers the productive demand they need to start and grow their own businesses. M-KOPA has also demonstrated that harnessing popular mobile money technologies and the latest solar systems can yield impressive economic benefits. In an article for Harvard Business Review, Clayton Christensen, Efosa Ojomo, Derek van Bever write that M-KOPA has been pulled into more than 400,000 homes and is signing up an average of 550 homes a day. The company has also established 100 services across Kenya and created approximately 2,500 jobs. Given their expertise and resources, I would encourage other private sector companies to explore similarly impactful activities that can generate a competitive financial return.
Private sector companies can also demonstrate responsible and responsive leadership by facilitating African entrepreneurs’ access to financing. As the Brookings Institution notes, African SMEs find collateral requirements one of the main obstacles to accessing traditional forms of financing needed to purchase equipment and grow their businesses. Businesses can help homegrown SMEs in this regard by using lending practices that circumvent the need for collateral and a well-established credit history. Since March 2015, Kenya Commercial Bank, the country’s largest bank, and M-Pesa, Safaricom’s mobile money service, have partnered to issue loans to the country’s micro SMEs by using credit scores derived from mobile phone data. Although most of the borrowers had been considered un-creditworthy due to their non-existent credit history and access to financial services, KCB-Mpesa accepts 80% of applicants, with a default rate of just under 2%. Since funding represents a key constraint to the success of start-ups, these initiatives could be both game changing for entrepreneurs and profitable for private sector companies. Considering micro, small and medium enterprises (MSMEs) account for around half of Africa’s employment and one third of its GDP, empowering entrepreneurs in this way could help boost economic growth on the continent.
Finally, businesses should also help Africa’s young and dynamic population to develop appropriate skills for the workplace. For example, they can help fill the endlessly documented skills gap by working with higher education institutions to deliver high-quality and industrially relevant STEM curricula. Businesses could also assist cash-strapped local universities deliver courses that allow students to develop a detailed knowledge of the sciences, as well as the softer skills needed to prosper in an unforgiving job market. A good example is US enterprise tech leader, SAP’s University Alliances Programme, which gives universities and other vocational education providers across Africa access to the company’s software and curriculum, enabling faculty to help students connect business and IT concepts to practice. The company also runs the Skills for Africa Programme, an initiative that offers talented students a fully paid scholarship and assistance to launch a career as an associate SAP consultant. Initiatives such as these help ensure that young graduates are able to hit the ground running, and expose companies to top local talent.
Africa will only achieve sustainable development if our leaders ensure that all citizens have the means to improve their livelihoods and contribute to their countries. I call on private sector companies operating on the continent to embrace their leadership position and work with African countries to achieve this goal.