Brenthurst Foundation (Johannesburg)
Nicky Oppenheimer
26 May 2009
document
A speech given at the Africa Day celebrations in the plenary hall of the headquarters of the African Union in Addis Ababa on May 25, 2009. Nicky Oppenheimer is chairman of De Beers.
It is a great privilege to be here today at the African Union, and I am very grateful to the Commission for this opportunity to share with you my own observations and views on how we, on the African continent, should respond to the global economic crisis. Although this is not a crisis of our making it does no good to bury our heads in the sand and assume Africa will not be affected.
Before saying anything else we all need to celebrate today – Africa Day. This celebration is an important moment for our continent, the day of the founding of the OAU in 1963, when 30 of the then 32 independent African states signed the charter here in Addis Ababa. The OAU has evolved in to the African Union but the day remains as important, a celebration of African unity. We must never forget that Africa is populated by lions that operate as a pride in comparison with the Asian tigers who tend to be individual animals. Only if the lions of Africa work together will we be able to feed ourselves and our families.
Over the next twelve months we will face many difficult challenges, and tough policy choices will have to be made. But to reiterate the point, these can be met if we act in partnership -- and also by accelerating our ongoing reform efforts aimed at greater competitiveness and economic diversity.
For this crisis gives Africa a unique opportunity to create an African way of doing business, one which is grounded in fairness, integrity and sustainable development – rather than the greed and recklessness which has got so many of us into an economic mess.
To drive this process of renewal, the corporate world needs strong and principled leadership – of the kind that my own country was blessed with during the greatest turning point in its history.
In Nelson Mandela the people of apartheid South Africa found a leader of real stature. Denied the most basic human rights for most of his life, he fought for peace and reconciliation in a land scarred by decades of fear and mistrust. President Mandela's vision of a non-racial society changed my country forever. The way he worked across seemingly intractable racial barriers with his fellow South Africans, such as the late Helen Suzman, transformed this hopeful vision into a reality.
And their efforts live on – and not just in South Africa. Across the world their example continues to inspire people of all colours and faiths.
Today, amidst the worst global financial crisis since the Great Depression, we look to the next generation of leaders for such guidance and inspiration.
The election of Barack Obama as the 44th President of the United States presents a genuinely historic opportunity – a chance to break with a troubled past, as Mandela did in my own country. Mr Obama's record levels of domestic and international support are a potent sign that the world is hungry for a change of direction, and a new agenda.
To have a new global agenda the first need is to be informed, above all, by a proper diagnosis of what went wrong with the global economic system in the first place. If we do not first understand the root causes of this crisis, our attempts to address its symptoms – such as the absence of liquidity, falling asset values and collapsing manufacturing industries – are destined to fail. Even worse, there is a real danger that we would learn the wrong lessons from this experience.
If you would kindly permit me, I would like to turn now to five key lessons which I believe our continent -- like other regions -- needs to take out of this crisis.
There is ample evidence to suggest that this crisis has given encouragement to the age-old ideological enemies of the open economy. They may have felt on the wrong side of history with the collapse of communism, but nearly two decades later they may feel emboldened by the current global economic turmoil. But for us Africans, this is not a helpful debate. Turning the clock back would risk unravelling the great progress we have made in governance and policy reforms since 1990, and render impossible the levels of economic growth we so desperately need to catch-up with the rest of the developing world.
Even in these times, we cannot forget how the modern era of globalisation – greater flows of trade, capital and technology – have lifted billions out of poverty since the end of the Cold War. Globalisation remains a powerful force for good, linking private people, corporations, cultures and charities every bit as much as it has done capital markets. For that reason, and there is much else, globalisation is here to stay.
Thus lesson number one is that international trade and the flows of real investment across borders as drivers of growth are not what have failed and led to the current crisis. In contrast, this is what has helped reduce the fall. My long-term optimism on growth and the benefits of globalisation remains as strong as ever.
If anything, a workable solution to the current crisis demands acting selflessly in global terms. Even as their exports plunge, the great manufacturing economies of Asia have to resist the urge to dispense their traditional economic medicine, to cheapen exchange rates to spur trade flows. Rather than reverting to greater protectionism which will hurt most of us, we have to continue to press ahead for greater openness. Without this push, in the short-term, emerging markets could suffer from a lack of access to wealthier trading partners; in the longer-term, the great developed markets of Europe and North America would be denied the possibility of benefiting from the potential inherent in the younger populations of Asia and Africa.
Just as the effect of global regulatory and policy errors have had a devastating effect, there is a need for Africa to have a voice in global efforts to remove weaknesses and imbalances. Long-term reductions to world trade would be particularly damaging to developing countries, including those in Africa. Much of this will be determined elsewhere, but Africa has choices. One of those is to reduce its own protectionism in the face of the crisis. Another is to assume a constructive role in global negotiations at multilateral forums, such as the G20, and it means having more to say apart from requesting more aid.
This points to lesson number two – the continuous need for global engagement and leadership by Africans.
There is no doubt that many states which are already fragile, especially in Africa and the Middle East, could become even more so as a result of the global economic downturn. Any reduction in already scant resources and revenues could spell disaster for some countries.
Across Africa countless families have been affected by the fall in remittances flows, an increasingly important source of investment and welfare for many countries. The drop in commodity prices will hit African countries harder than it will benefit them in the form of lower fuel and food costs, not least since virtually all of our continent's development success stories have been underpinned by the prudent management and use of such primary goods. The anticipated fall in aid may not be bad news over the long-term since few countries have historically developed through aid, but it is likely to pressure those who in the short-term are dependent on this form of income for government expenditure. And the lack of liquidity in global markets will hit cashstrapped African markets hardest, especially where we need private equity to invest in infrastructure and other essential projects.
One big change about how we think differently about the future compared to two years ago is that we should no longer assume a commodity supercycle. We (both economies and companies) have come down to earth. This has been painful but not all bad. Lesson number three is thus a reminder that how well we prepare for the future depends on how well we use commodity inflows – but also, that this future needs to be about more than commodities. Botswana remains a remarkable example of how to invest a commodity windfall wisely.
If we do not resist the urge to ditch the frameworks that have generated such prosperity around the globe, the crisis could hinder the emergence of financial institutions in developing countries. Without reliable banks and efficient credit markets, Africa like other developing regions, for example, will remain poverty stricken, at the mercy of the costly finance provided by weak institutions and narrow networks, and heavily dependent on unrefined commodity exports.
But an effective response to the current crisis cannot only be technocratic.
By itself, a technocratic response is unlikely to convince individuals to once more entrust their hard-earned savings to financial institutions and systems whose conduct has been at the very least dilatory and, in some cases, reprehensible. To build this trust, we have to reinstate a sense of value in the banking sector and build a reputation for fair play and fair returns rather than excess and profligacy. If we can, confidence in investment and credit systems will return over time. This is lesson number four.
For business, this means that corporate good governance and social investment cannot just be a slogan to appease civil society. Instead, it must be an operating dictum founded in self-interest. We must act in synch with the world in which we live, not in the bubble of careless ambition, seeing investments as a generational enterprise and not tomorrow's balance sheet. Ethical capitalism requires reasonable returns not rapacious behaviour.
In the short-term, governments will have to manage the economic and political fall-out of lower revenues from natural resources, trade and tax, as well as smaller aid transfers. Most African leaders will have less scope than Western nations to buttress domestic demand through stimulus spending programmes, given the rudimentary nature of their capital markets.
African nations will also have to resist the temptation to play politics and roll-back reforms in the face of temporary domestic pressures. In the face of large budget demands and dwindling revenues, African nations will nevertheless also have to increase money supply, which could lead to an increase in domestic inflation and a falling currency.
Other sound policies also need to be protected: trade reforms should not be reversed for small countries, and key health, education and infrastructure programmes and expenditures need to be maintained. By doing so, we will assist not only in creating the conditions for long-term and positive economic growth, but also increase the size of formal employment, reduce the vulnerability of certain groups including women and children, give them access to banking and other credit institutions, and help deal with corruption.
As I emphasised earlier, overall, it is vital that we avoid learning the wrong lessons from the current crisis. We cannot discard the market-related reforms which have acted as key drivers of growth for successful developing nations around the world. Good governance, open markets, and strong institutions all remain intrinsically important to Africa's development.
Finally, over the longer-term, the African world must renew its efforts to build a domestic consensus on the necessity of economic reform, the importance of high growth rates to reduce poverty, and the integration of our nations into the global economy. In other words, we need to build 'Coalitions for Growth' – remember the lions! By doing so, will we be able to take advantage of the major long-term trends that have been driving capital to developing markets.
And this leads to my fifth, final and most important lesson – the need to strengthen and improve African competitiveness urgently.
Competitiveness, as the auto-industry in America has learnt to its cost, is the life-blood of economic growth. Such growth is the linchpin of social harmony and political stability. Accepting the philosophy of the need for private sector-driven growth and the critical guiding role of the state is what propelled Asian growth for the past forty years, from Japan's post-war recovery, through the tigers and cubs, to China's amazing economic performance.
African countries need to be economically robust. By improving competitiveness and deepening our integration with global markets, we can simultaneously reduce our economic vulnerability and increase growth.
African competitiveness has received much too little attention, something that my family, through the Brenthurst Foundation and its range of continental and international partners, has sought to address through the creation of the 'Lake Kivu Consensus on Economic Competitiveness'. We should all play our part to make this vision a reality, making sure that Africa finds the means from within for its own development, and not be dependent on – and vulnerable to – the vagaries in donor sentiment. This thinking is very much in line with the aspirations of many of our continent's great leaders.
As President Paul Kagame has put it: 'Aid is bad for Africa – it has never built productive capacity to create prosperity, and never will. There is no mystery that competitive enterprises that create and sell products in domestic, regional and global markets are the real source of wealth. Africa cannot be an exception.'
Or as Mozambique's President Armando Guebuza has argued: 'The current global economic crisis is yet another and louder call for our countries in Africa to improve the competitiveness of their economies, institutions and policies. More importantly, it provides the stimulus for us to strengthen our resolve and quicken our pace in doing so.'
Or to quote Liberia's President Ellen Johnson-Sirleaf: 'Improving competitiveness is essential to dealing with Africa's marginalization and ensuring its renewal.'
Accepting this growth and competitiveness philosophy is key to ensuring that Africa's economic lions will roar – and that they will be able to provide the interdependent network of jobs, security, the free passage of trade, and economic growth that we crave.
As the Spence Commission on Growth and Development points out in its report last year, fast sustained growth is not a miracle. Rather it is attainable for developing countries with the 'right mix of ingredients'. The Commission found that: 'Countries need leaders who are committed to achieving growth and who can take advantage of opportunities from the global economy. They also need to know about the levels of incentives and public investments that are necessary for private investment to take off and ensure the long-term diversification of the economy and its integration in the global economy.'
Critically, therefore, the long-term priorities of African leaders should not change despite the turbulence of the international economy. To the contrary, goals associated with the promotion of competitiveness should be accelerated. True competitiveness requires political and macro-economic stability, and social and environmental stability. It relates to what countries can do together, including improving trade logistics and deepening integration. With growth and competitiveness as a national and continental priority, resources can be mobilised, appropriate policies written, and novel solutions brought to bear.
This is our opportunity. We must seize it with both hands.
As an African I am delighted to be with you on Africa Day, here at the home of the African Union.
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I would like Mr Oppenheimer to open his door to me and my proposals.
The Cheif Economist at the AU is aware I am waiting for him to confirm a time and date to discuss our invitation as well as accept our offer to supply an inward investment service for Pan-African Private Sector Businesses. The project title is Africa Circular Sustainable Markets (ACSM).
Perhaps, Mr Oppenheimer will go beyond attending this days events and consider the real point he should be making is that " the organisations that represent Africa and the institutions that provide financail support should open their doors". Why do these doors remain closed when the public are told approach and be welcome.
I am still waiting!
I am available at anytime and willing to add both viable and sustainable solutions to help Africa move beyond the current as well as the historic problems. I only require your time.
In all due respect,
Sincerely,
Ms Starr Hart-Meekums CEO & Founder WWC Ltd - ACSM Ltd. +44 (0) 1787 313191
Active Discussions: Calls for 'African Way' of Doing Business