Handouts no answer to Africa's poverty

South Africa's president, Thabo Mbeki, looks on as the African Union is created

By David Hampshire

Johannesburg, South Africa, 9 July 2002 -- Aid agencies miss the point when they judge the rich world's rescue plans for Africa in terms of aid and debt relief. Even if the Group of Eight's African Action Plan announced at the Kananaskis summit had offered far more than the "peanuts" roundly condemned by Oxfam, there is no chance that handouts could even begin to pull the continent out of poverty.

Africa's needs are on a far greater scale than the extra $6 billion a year that the G8 governments plan to assign to Africa out of the $12 billion increase pledged at the United Nations Conference on Finance for Development in Monterrey last March.

The dire economic facts about the continent speak for themselves. The total combined annual economic output of the 48 African countries is a puny $300 billion, which is roughly the same as Argentina, with a population of only 30 million compared with Africa's 818 million. Africa receives less than one percent of global foreign direct investment. Aid flows are actually declining in real terms, having descended to less than half their level of two decades ago.

To halve African poverty by 2015 in line with the UN Millennium Summit's goal, the UN Conference on Trade and Development reckons that the economies of Sub-Saharan Africa will have to grow by between seven and eight percent a year in real terms, well above their average performance of little over two percent from 1991 to 1997.

By any standards this is a tall order and doubly so for a continent that contains most of the poorest countries in the world, the world's lowest life expectancy, the highest child mortality rates and is now grappling with the AIDS epidemic.

The way to Africa's economic salvation is to build confidence in its future as a place where it is both safe and profitable to invest, persuading investors to disregard generalizations and seize the opportunities that individual countries and sectors offer.

The New Partnership for Africa's Development (NEPAD) wants to engage the private sector in supporting African economic development. Leading business organizations in North America, Europe and Africa, spearheaded by the International Chamber of Commerce and the African Business Roundtable, responded by setting up a NEPAD business group.

As committees meet, reports are generated and summits succeed one another, it is apparent that the NEPAD governments could well involve the private sector even more closely than they have so far in devising and implementing their programmes.

To bring in the increased investment that will generate economic growth and wealth creation, thousands of first time investors will have to be introduced to Africa. Regulatory and economic policies based on the advice of some of the world's foremost business organizations are likely to boost confidence and greatly improve prospects for success.

Business can bring special expertise to NEPAD. For instance, the NEPAD business group has just submitted a detailed seven-year plan for creating reliable local capital markets in Africa together with a healthy investment management industry.

It would be a pity if public-private partnership became no more than a convenient mantra for insertion in official communiqués. There is a wealth of business advice available for the asking. It is up to NEPAD to decide whether to take it.

David Hampshire is Managing Director of Guiness UDV Africa.
He contributed this article to Business Day in Johannesburg.

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