African Business - A New Opportunity and Blueprint For America

20 February 2010

The following is a morning key note speech at the Harvard Business School 12th annual Africa Business Conference

Good Morning Ladies and Gentlemen and students at this great university. First let me thank my good friend Professor Calestous Juma, one of Africa's most brilliant strategic thinkers.

I'd also like to thank Erin and her planning committee colleagues for giving me this opportunity to address the 12th Annual Africa Business Conference at the Harvard Business School.   Your theme this year, "Africa Comes of Age: Defining a New Era in African Business," is especially timely and important for a number of reasons.

For some, Africa this year is truly coming of age. Seventeen African nations will celebrate the 50th anniversary of their independence.   Such a landmark provides us with a vantage point from which we can examine Africa's history to the present while we explore why the present is like no other time.

For me, personally, the 50th anniversary of so many nations' independence is noteworthy because this timeframe closely approximates my own engagement with Africa and, arguably, the United States' engagement with Africa through a myriad of initiatives, including the Peace Corps.

Indeed, parts of what I hope to share with you today are my reflections on the broader context of U.S.-Africa relations over the past 50 years.

In fact, if there is one lesson I have learned, it is this:   as William Shakespeare said, "what's past is prologue."

And that's true for America's ability to forge a new partnership with African countries by learning from the missed opportunities of the past.

You see, I was a college student in Atlanta during the student "sit ins" of the civil rights movement which a number of my peers kick-started back in 1960. After a 1962 student trip to Kenya, my first visit to Africa, I decided that my life's work needed to relate in some way to the circumstances I experienced as a Black American in a country with race problems similar to those of my own country.

Fast-forward nearly 50 years; I serve as senior vice president of Seacom. I am also the vice-chairman of the Board of Directors of The Corporate Council on Africa (CCA), a non-profit that has since 1993 advocated for sustained U.S. commercial engagement of Africa through more investment, trade, and commercial relations.

Under the leadership of my good friend Stephen Hayes, President and CEO of CCA and a longtime advocate of Africa, CCA plays a leading role in this country in advocating for increased trade and investment relations between the United States and the nations of Africa. Fifty years ago, no equivalent institution existed.

I believe, now at this very moment, that Africa is at the dawn of a great new era - as the theme of your conference so well puts it.   This era requires a new model of partnership based on trade, responsible investment and technology transfer, instead of "aid."

Today, I would like to discuss this new model of partnership, using my assessment of the state of Africa's economies and taking an introspective look at historical U.S. – Africa relationships.   In so doing I posit that any consequential steps forward must heed lessons from our past engagements with Africa.

Africa Comes of Age: The State of African Economies

In the face of the recent global financial crisis, Africa's economic rise is indeed another under-reported story amidst a constant barrage of familiar news reports concerning Africa's increased suffering – more poverty, malnutrition, civil strife, and death.

We must not let the harsh reality of global economic constraints obscure the equally real progress and potential that is Africa today.

Let me provide you with one telling marker that shows how little Africa's good news has been told:

Early last year, the International Monetary Fund warned that Ethiopia's economic growth could slow to 6.5 percent as the international economic downturn affects its leading foreign exchange earners such as coffee and sesame.

Imagine your growth falling to 6 percent! How we would love to have that! Just think about it:   One of the poorest countries has been growing so fast that 6.5 percent growth represents a sharp decline!

The continent has indeed come of age and is entering a new era, one characterized with boundless business opportunities that outweigh the continent's problems.

A few months ago Time Magazine cited "Africa as a business destination" as one of 10 ideas that are changing the world.

The ongoing financial turmoil and economic downturn has spared most African countries as their economies have mostly experienced a slowdown as opposed to a recession.

According to the IMF, economic growth in sub-Saharan Africa will be 1 percentage point above the global average this year. The IMF also ranks eight African countries among its top 20 fastest-growing economies in 2010. According to the IMF's most recent projections, Angola and the Congo Republic are expected to grow at rates of at least 9% and 12% respectively; both expanding faster than China.

In addition, McKinsey & Company reports that Africa was one of the largest contributors to world economic growth in 2009 – only after China and India.

Moreover, several African countries have seen their credit ratings improve, providing them more access to global financial centers. In a few cases, these ratings have rivaled and even exceeded those of countries such as Argentina or Turkey.

From Johannesburg to Cairo, through Nairobi and Accra, stock exchanges are sprawling across the continent;

Furthermore, new forms of partnerships with rising global economic powerhouses have also contributed to African countries' economic betterment.   In fact, the BRIC countries have provided a platform for increased exports as well as the creation of a new model of partnerships based on trade investment and technology transfer, instead of "aid."   These new forms of partnerships have combined to improve African countries' macroeconomic stability.   Indeed, inflation has decreased by half since the 1990's, while foreign-exchange reserves have increased 30 percent.   Public finances showed a 2.8 percent-of-GDP surplus in 2008, compared to a 1.4 percent-of-GDP deficit in 2000-2005.   And external debt has decreased from 110 percent of GDP in 2005 to 21 percent in 2008.

Improved institutions and leadership on the continent are related to recent solid macro-economic performance.

Indeed, we have seen the rise of a new generation of private-sector minded African leaders determined to move away from an era of aid-dependency and corrupt governments towards self-reliance and economic empowerment for their people.   For example, in central Africa, Rwanda has invested heavily in broadband and is promoting itself as a business services hub. Some Americans visiting there remark that wireless connectivity is easier to obtain in Rwanda than in many places in the United States.   And in Liberia, President Ellen Sirleaf Johnson is exemplifying honest and effective governance in some of the most difficult post-conflict circumstances.

And many African leaders have vocally condemned undemocratic transitions, such as occurred in Madagascar and Guinea.

Moreover, sustained youth engagement has continued to feed Africa with an ingredient essential to its economic growth: human capital.

More Africans and non-Africans are voluntarily migrating to Africa, some to return to the land of their birth, others to try their hand at pursuing their dreams in what many call the last great frontier for business.   My 25 year old step-son, for example, left a lucrative job on Wall Street to take a job in southern Africa.   And my 23 daughter has joined the Peace Corps.

And whether through raising their voices for increased awareness of business opportunities in Africa or fighting for integrating the coverage of African countries and businesses into the Harvard Business School curriculum, the Business School's Africa Business Club, a group of passionate and dedicated students, has worked tirelessly within the Harvard community to drive the point home that Africa also matters economically.

The African continent now finds itself at a critical juncture, where investment and business opportunities outweigh the challenges and are increasingly determining Africa's relations with the rest of the world.

In my view, it is in the strategic interests of the United States, both in terms of military and economic security, that the American business community seriously explore these opportunities and rouses itself from a slumber wherein it has been too risk-averse and too ignorant of the opportunities present today in Africa.   We are literally sleeping while Asian, Middle Eastern and South American investors are busy at work in Africa.

For The United States to succeed in Africa in the 21st Century, we need to focus on mutually beneficial economic partnerships that integrate lessons from the history of our relationship with Africa.

U.S. – Africa relationships

No serious assessment of current conditions and future economic prospects on the continent can ignore the impact of history.

Therefore, to discuss this new era of doing business in Africa I must begin with the impact on the continent of the Berlin Conference in 1885 and its consequences, namely the scramble for Africa, which resulted in European economic, political, and military dominance on the continent.

Though the Berlin Conference may well be receding in history, we cannot minimize its impact on the continent, something that continues to influence the continent's economic and political progress.

Europe carved up Africa with little or no concern for the continent's natural ethnic boundaries or its historical cultural affinities.   The ongoing war in the Democratic Republic of Congo is but one illustration of the results of this conference.

Thus, Africa's weak public and private sector institutions, and its plethora of post independence conflicts, including civil wars, are directly linked to the consequences of the Berlin Conference.

I refer to this event because all that has followed is directly related to the decisions made at that conference, even if it seems like the distant past.

You might ask why the Berlin Conference is pertinent to the examination of modern U.S.–Africa policy issues?   In the modern post-independence era, U.S. policy is directly tied to this legacy.

After all, the United States was never a colonial power in Africa. Indeed, because of that, the U.S. had a great opportunity to shape post independence relations between Africa and the West. As African nations won their independence, Africans looked to the United States to play a neutral and constructive role in bridging relations with the West.

When we examine Africa's various independence struggles, references to our own war of independence with Britain, as well as the civil rights struggles that were being waged here in the United States, were often cited as having had profound moral and political impact on Africa's independence movements.

In my judgment and experience, one of the greatest lost opportunities in our relations with Africa in the post independence period was our refusal to establish a policy framework with Africa that was free of the European colonial past established at the Berlin Conference.

What in fact was this great lost opportunity? In a phrase, it was in our failure to differentiate. Differentiate what?

The answer concisely was the failure to differentiate our policies and values from those of a still resistant and unfriendly Europe toward Africa.   For example, the United States naively viewed the nature and force of Guinea's grief with France as being hostile to the United States.   For a long time, the United States also mistakenly viewed the struggle for equality in South Africa as fundamentally against its vital interests.   The same could be inferred about the United States' attitude towards Patrice Lumumba in Congo-Zaire.

Thus, sadly and tellingly, in 50 years of post- independence engagement with Africa, our government never undertook a basic independent study and review of our true national interests in Africa.   We assumed that our own interests intersected and converged with those of Europe. Moreover, on the flip side we never considered how our interests might diverge from those of Europe.

It was understandable in the pre-independence period that our relationship with Nigeria should rightfully have been conducted through bilateral relations and diplomatic channels with Great Britain and those with Senegal throughout our relations with France…

However, in the post-independence period, when we began to conduct our relationships with African countries, like Nigeria, through their own Embassies, we continued to coordinate our approach with the British.   In the strategic arena, our political relationship with Africa was even more disappointing to Africans.   Until the dissolution of the Soviet Union, our policies in Africa were dictated by something called Soviet containment – an effort to reduce Soviet influence in Africa.

It is fair to say that we failed to act on any policy interest in Africa that was separate from those of our European allies.

To be sure, African post-colonial leaders quickly learned to play this card for their own narrow political interests.   They knew they could get more if they threatened to create an alliance with the Soviet Union and vice versa.   Ethiopia, Guinea, and Egypt are good examples of this dynamic of changing alliances.

It is in the area of development policy, however, that we and others in the West have experienced our greatest failures in Africa.   Our efforts, while well-intentioned, sought to export our values and ways of doing things to Africa. In most cases for both public and private sector development, for the past 50 years it has been a case of "our way or the highway"; our money or no money. Our aid to Africa has been tied to our own formulations, priorities, and institutions.

The approaches made by the Bretton Woods financial institutions have not been different.   Various multilateral financial institutions have dictated the terms of development under the banner of "partnership and sustainability" while excluding Africans from the councils of governance and staff leadership.

From their sides, Africans have experienced failed leadership for much of the post-independence period as well as lack of concerted approaches to problem-solving and often rampant corruption in public sector administration. Given all of this, where do we go from here as Africa is entering a new economic era?

A New Model of Partnership

Not since the dawn of the Kennedy Presidency have Africans expressed as much hope in the United States as they do now, thanks in large part to the election of Barack Obama President of the United States. Assistant Secretary of State Johnnie Carson is the most experienced African expert ever appointed to that position.   Within this new context, however, our policies are not unimportant. To move from where we have come to where we must go under the conditions of the current global economic meltdown are critical for both the U.S. and for Africa.

Africa is no longer just a humanitarian and developmental challenge, but rather a growing and vibrant source of energy, export opportunities and international partnerships.   Not investing in Africa today would be tantamount to missing out on California's Gold Rush in the 1850s, Japan and Germany in the 1950s, Southeast Asia in the 1980s, and emerging markets in the 1990s.

In this new era in African Business, the United States must take bolder moves to increase its economic engagement of Africa.

The Corporate Council on Africa's Policy Recommendations

Thanks in large part to the work of The Corporate Council on Africa and the website, which today has millions of users a year; the western world now knows that Africa is open for business.   The Corporate Council on Africa's substantive recommendations to the Obama administration, entitled The United States and Africa: Policy Recommendations from the American Private Sector for the Obama Administration, provides a good framework for increased U.S. economic engagement of Africa.

This report, which represents a collective assessment of the state of U.S.-Africa business relations and prospects, was the result of inputs from more than half of CCA's members working in sector groups over a three-month period.    The authors addressed trade, finance, security, agriculture, electrical power, extractive industries, healthcare, infrastructure, and tourism.

CCA's report underpins our belief that national security, foreign policy and commercial interests of the United States mandate a much stronger relationship with the nations of Africa.   The CCA policy report addresses three key, cross-cutting areas:   security, finance and trade.

In the security sector CCA's recommendations reflect our belief that greater U.S. engagement and cooperation with African governments in strengthening security is key to encouraging greater direct investment and to increasing the benefits for Africans from foreign investment.

In the finance sector, CCA's recommendations support critical U.S. economic and national security interests in the region.   It reflects the reality that the growth of African economies creates opportunities for American job creation through the export of capital goods to build infrastructure and consumer goods to meet the needs of the emerging middle class.

In the trade sector, CCA believes that the African Growth and Opportunity Act (AGOA) still provides a valuable framework for integrating U.S. economic engagement with Africa, but   should be expanded to foster greater trade and investment and thus spur additional economic benefits for both Africa and America.

In addition to these cross-cutting themes, the working groups made specific recommendations for their respective sectors.   Key recommendations include:

Strengthen public-private partnerships and increase United States Government technical assistance and capacity-building in aid projects.   In most sectors public-private partnerships provide an important means to share expertise, mitigate risks and achieve ambitious outcomes in common endeavors.

  • Provide financial incentives to encourage investment in Africa that will generate export jobs in the United States.
  • Support agribusiness investments to enable Africa to meet its food needs and supply bio-fuels for a green economy.
  • Support investment in Africa's electrical power sector to strengthen the base for economic growth. Expand U.S. government support for private sector health care in Africa.
  • Increase support for American investment in Africa's tourist sector to foster American travel and African job growth.
  • Increase senior level advocacy for American trade and investment with Africa.
  • Provide risk mitigation measures across all sectors of business investment.   

Finally, U.S. companies must also heed past lessons in the ways they conduct business in Africa.

Vietnam taught us that the U.S. can never know enough to be able to shoulder the responsibilities of running a country other than our own.   Our involvement in Iraq and Afghanistan in this generation teaches us the same thing- that we should never ever presume to know more about Africa than Africans.   If we do, we will not be able to partner effectively with Africans to fulfill the continent's needs and promises.

SEACOM - Moving Beyond the Traditional Narrowly-Defined Bottom Line

In this new era, it is also necessary for U.S. companies to operate beyond the traditional narrowly-defined bottom line. The bottom line has to include considerations of how investments made by the company have improved the lives of a broad base of the population.

In this regards, the existence of Seacom is noteworthy. Brian Herlihy, SEACOM'S CEO, encompasses the values and vision in his investment and development approaches which have attracted the respect and partnership of a new generation of African business leaders. Brian is without peer as one of the world's most creative and accomplished large-scale infrastructure developers in Africa.

In much of Africa, internet access is largely through costly satellite links. In South Africa or Kenya, for example, internet access is slow and expensive. You can't send large volumes of information or data efficiently.   Many opportunities have so far been exploited by those who seek strong financial returns, without regard to providing large-scale access that could benefit a large population. There has too often been a short-term outlook that lacks an understanding of how a broader base of users could also provide a foundation for a long-term return on investment.

Seacom has laid a fiber optic cable from Mumbai in India to Cape town, all the way up the eastern coast of Africa to Cairo in Egypt and out to Europe - the first such sub-marine cable system not relying on satellite communication in that huge area of the world.

Seacom's cable is transforming the eastern coast of Africa as it connects to the rest of the world.   It will allow real-time data sharing within Africa and to and from the rest of the world. It can transform the operations of medical services, research libraries and financial transactions, as well as media. When this happens, we will also see creative uses for music and entertainment and for things we cannot even predict.

Seacom's distinctive consultative operating model has enabled it to bring African investors to the table and integrate their concerns, including those about benefits to the larger public. Too often, international investors call the shots and the interests of Africans, particularly the broad base of the population, are secondary. On this project, from the outset, more than cursory attention has been given to designing ways people can benefit – not just to what rate of return can be achieved.

We in the West tend to want to do things our way; we think it slows us down to listen to people. I think that is a basic mistake. We go in and tell people how to do things instead of asking them, consulting with them, bringing them in. I think projects can succeed with involvement, collaboration and participation by people on the ground – at the conceptual as well as the execution stages.

I think this is clearly good citizenship. But it is also good business. In a period of a decade, Bruce Wrobel, founder of Global Alumina, Sithe Global and co-founder of SEACOM, has become one on this country's most innovative investors in Africa. When one examines closely his formula for success, one will discover thatfundamental to his approach is a philosophy and strategy which is designed to improve the living conditions of Africans. To Wrobel, this is not corporate social responsibility, rather, it is the essence and raison d'être for doing business and forming business partnerships on the continent.

There is always a question to answer: will this investment benefit a broad base of African people, where reducing poverty and improving equitable access to services remain predominant issues? You cannot get around that.

Seacom's business operating model provides a blueprint for responsible business engagement to corporations wishing to succeed in Africa.

What we are beginning to slowly recognize in this country – from the work of The Corporate Council on Africa and dedicated advocates of Africa like you - is that Africa is not so different from everywhere else except perhaps in embodying the extremes – some of the world's most vexing problems combined with a vast still largely untapped potential.

To be clear, in this era in African Business, our approach must be one that integrates both extremes, allowing the continent and its people to move beyond its legacy of problems and realize the promises of its economic potential.

As Africa enters a new defining era in global business, we must embrace these dual realities and respond creatively in the spirit of collaboration and mutual respect to build on the missed opportunities on the past for a new prosperous future in U.S.-Africa relations.

Thank You.

Haskell Sears Ward is senior vice president of SEACOM and vice chairman of the Corporate Council on Africa.


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