James Duddridge: Perceptions of Africa are changing – invest now
James Duddridge is the Member of Parliament for Rochford and Southend East. Follow James on Twitter.
Perceptions of Africa are changing. It is no longer the case that regional conflict can be used to paint the continent as a collection of failed states. Sky scrapers, city dealers, the trading of stocks and shares and a growing affluent middle class are slowly overtaking the traditional images associated with Africa.
I love Africa. Having worked in Botswana, Cote d’Ivoire and Swaziland at various points in the 1990s as a banker, it is a continent that has got under my skin. So it has been fascinating for me to hear the excitement generated around Africa’s future. I’ve recently went to a conference at the London Stock Exchange where investors were buzzing with enthusiasm for African shares. Companies are seeing rapid growth and everyone wants to get involved.
The narrative is quite compelling. The World Bank’s development indicators show that in Sub-Saharan Africa GDP per person has risen every year since 2000, averaging at 5.8% annual growth. That’s 12 years of continuous growth in the face of a series of world economic shocks – we would love growth figures like that in the UK. In the first decade of this century, out of the 10 fastest growing world economies, 5 were in sub-Saharan Africa, with Angola even outgrowing China.
What is encouraging is that these developments will provide the solid platform that’s been needed to sustain long term economic growth, which is good for Africa but also for Britain, as it is in the British national interest for Africa to succeed.
The growth of Africa’s middle class is one of the most significant aspects of African growth because of the potential it creates as both a market for British goods and services, but also in the continued development of a population that is educated and politically informed. A recent report by the African Development Bank estimates that around 30% of the continent’s population are now middle class and this will continue to rise.
Recent trade statistics show that for the first time trade with non-EU countries has accounted for the largest proportion of the UK’s exports. With little sign of an improving economic outlook in the EU anytime soon, now is the time for British business to look to Africa.
Although much further along the track in terms of economic development, the example of China is an interesting one. One of the key drivers of growth in British non-EU exports is the emergence of the new Chinese middle class and their disposable incomes. Alongside this we have seen the growth of dozens of clustered, well-connected new cities in China, which are connected by new air and railway hubs.
I am in no doubt that this will be replicated in Africa in the coming decades. Some of the biggest cities in Africa are growing at an extraordinary rate as is the middle class who increasingly populate them. There is a real opportunity here for British business to be at the forefront of doing business in these developing African markets.
So what is the does this mean for the British Government’s policy commitment to investing 0.7 percent of GDP in developing countries?
I recently attended an event where the International Development Secretary gave a speech on how the Department for International Development, under her leadership, is putting a greater focus on economic development and investing in growth.
Britain has a unique opportunity to help support the creation of robust private sector led economies in Africa. Although there still remains the need for immediate aid to assist in the most desperate situations, the refocus on using the British aid budget more intelligently and strategically will create the right conditions for growth in the countries that both need it and have the potential to be long-term trading partners.
This should be welcomed by all Conservatives. It is right and it is smart. We are in a globalised market place, and we need to ensure that those countries who we do business with are dynamic trading economies that empower businesses rather than hinder them. Africa is a market that is growing, and British investment can help create the right environment that can secure our own long term economic interests.
Indeed ,on the same day that the Secretary of State spoke at the London Stock Exchange 28 top CEOs wrote a joint letter to the Financial Times. Their words are telling: “This isn’t about corporate social responsibility; we know that developing countries will be major markets and important sources of supply in the future...Developing countries become emerging economies and emerging economies become the engines of future global growth and prosperity”.
And sustained economic growth is what will reduce poverty in Africa. The best remedy for those in poverty aren’t handouts, but sustainable jobs that will give parents the opportunity to plan and save for their children to have a proper education, which will in turn lead to more schools and a better education system that will produce well educated young people who can go on to work in growing local and regional businesses.
There are already some excellent examples of work that the Department for International Development (DfID) are doing. For example, DfID match-funded Vodafone's initial investment in the M-PESA mobile banking phone service, which now has 17 million users in Kenya, and a third of Kenyan GDP is expected to pass through the M-PESA system. In South Sudan, DfID have partnered with SAB Miller so that 1200 farmers can get involved in supplying SAB Miller’s brewery in Juba.
In Tanzania, DfID and other donors support the stock exchange regulator to develop a new market segment at the Dar es Salaam Stock Exchange called the Enterprise Growth Market, which is similar to the Alternative Investment Market at the London Stock Exchange.
In Ethiopia, the DfID-supported Investment Climate Facility for Africa is helping to modernise the Ethiopian Commodity Exchange by introducing risk management instruments, facilitating trade and increasing members' access to online trading.
And in Southern Africa, DfID has provided support to the Committee of Southern African Development Community Stock Exchanges to develop business plans to improve the integration of capital markets in the region.
These are just some of the practical ways Britain can use its aid budget wisely and effectively and I would like to see the Government go further in helping create the conditions that will sustain growth and attract investors. DfID increasingly use the phrase that Britain’s investment in development isn’t just the right thing to do but the smart thing to do. I couldn’t agree more.