Lynne Featherstone: Africa can be the future engine of global growth
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
Speech by the Development Minister at the Africa Rising event - part of the International Festival of Business 2014 in Liverpool.
Thank you for that introduction. I’m delighted to be here today to kick off this important conference.
There can be little doubt that Africa is on the rise.
Six of the world’s 10 fastest-growing economies of the past decade were in sub-Saharan Africa.
And there is growing optimism that the benefits of this growth will filter down to Africans at all levels. Already we can see that more children are in education, maternal mortality rates are down and fewer people are dying of malaria and AIDS.
What’s particularly striking for me is the wealth of creativity and innovation from entrepreneurs across the continent.
Only 2 weeks ago I met someone from a Tanzanian company called Off Grid Electric which is using mobile phones to increase rural access to electricity. Their model means that poor households prepay weekly through their mobile phones just for the energy they use for their lights, TV and mobile phones.
In Malawi, the entrepreneurs behind Malawi Mangoes are setting up the country’s first ever large-scale, fruit processing plant, powered by solar and biogas, exploiting the growing international demand for mango and banana concentrate.
Both these innovative ventures received funding from the Department for International Development.
This might seem like a surprise to some of you, who associate DFID more with health, education and sanitation. These areas remain critical to our work and we aren’t going to stop doing it.
But we know that aid alone is not the solution. Sustainable and inclusive economic growth empowers communities and ends poverty.
And I recognise that it is the private sector that is the main driver behind this growth. It is taking opportunities and creating jobs and prosperity.
That’s why increasingly DFID is focused on driving sustainable, inclusive economic growth, alongside our work on basic services.
I don’t need to tell this audience that driving growth and jobs in Africa has the potential to also benefit the UK.
Smart, forward-thinking businesses are already looking at Africa and seeing the major markets and sources of supply of the future.
Today I want to set out how the UK is getting behind Africa’s growth:
firstly, how we are helping to improve the business environment
secondly, how we giving businesses of all sizes an economic launchpad and sharing the risks and rewards of investment in Africa
and finally, how we are investing in skills and training to improve the strength of local workforces.
Improving the business environment
Africa’s high investment potential is no secret to the business community. Foreign Direct Investment (FDI) flows to sub-Saharan Africa rose from roughly $30 billion in 2010 to $41 billion in 2011, and diaspora investment in business opportunities has also increased.
Despite these positive indicators, Africa is still a very challenging place to do business. Cumbersome regulations, poor infrastructure and unreliable energy supplies all hinder Africa’s growth.
DFID is playing a critical role in helping to remove these obstacles.
Through our programmes such as Trade Mark East Africa we are supporting the East Africa Community to develop a common market. This programme will help increase trade and reduce transport costs and time.
We are also working with governments to make the operating environment for businesses simpler, fairer and more transparent. I know this is a huge priority for businesses.
In Sierra Leone, for example, DFID’s Investment Climate Facility has helped reduce the time it takes to register land and business legal instruments from 3 weeks to a single day.
We’re also sharing the best of UK expertise on business environment reform with African countries. For example this year we’ve supported experts from the Institute of Chartered Accountants to assist the Zambian authorities in improving business auditing.
DFID is also working to ensure that local communities share in the benefits of greater economic growth. Poorly planned investments can carry risks for the poor and their livelihoods. And with only 10% of rural land registered, local communities can lose their rights to land without consultation, consent, and without adequate compensation.
A lack of transparency around land and property rights also adds to the risks borne by investors, who face disputes and delays when deals go bad and significant financial and reputational costs.
Through our planned new £20 million Land Governance for Economic Development programme, DFID is strengthening land and property rights for poor people, particularly women and girls, to generate more responsible and sustainable commercial investment in land, including in Africa.
Sharing the risk with business
One of the deepest and most difficult barriers to overcome for businesses operating in developing markets is the lack of access to finance.
One of DFID’s key priorities is to work with businesses to unlock economic opportunities that also have a strong development outcome. We share the risk with companies to encourage them to invest in new areas.
In April, DFID launched a competition to identify and incubate the best 1,000 small, early stage businesses in Ghana. Working with TechnoServe, DFID will help refine business concepts, link clients to financial institutions, provide in-kind support, and integrate them into peer networks.
We are also expanding our use of new financial instruments to support development.
Last year DFID announced that we would co-invest with commercial and not-for-profit partners in four business ventures in Tanzania, with clear development outcomes. If these businesses are successful and make a financial return, the money will be reinvested, multiplying the development impact.
DFID also recently launched the inception phase for the first Development Impact Bonds to prevent sleeping sickness in Uganda.
Previous efforts to tackle this deadly but long neglected disease have been unsuccessful.
Disease eradication like this is essentially a long-term logistical exercise, which the private sector with its expertise is much better placed than government to carry out.
Our aim is for the development impact bond, which will be paid on the basis of results achieved, to stimulate private sector innovation to generate new ideas to tackle this disease.
Ensuring quality jobs and livelihoods
The final area I want to mention today is our work investing in skills and training.
If we want to drive sustainable growth across Africa then it is essential that this growth benefits all Africans, particularly as 10 million young people are entering the job market each year. For Africans themselves, we know that having a paid job is the top priority.
That’s why the UK’s development finance institution CDC is supporting Bridge International Academies which is delivering affordable, quality primary and pre-primary education for children from low-income families in Kenya.
Founded in 2008, this company has expanded rapidly and already operates over 250 schools in Kenya and directly employs over 3,000 people. CDC’s investment is supporting the company to expand to more countries in Africa, and to create almost 10,000 new jobs.
The new discoveries of oil and gas in Kenya, Uganda, Mozambique and Tanzania offer a unique opportunity to create sustainable jobs in an expanding sector. And DFID is currently working with UKTI, and several international investors, to consider how best to build the skills of East African citizens to work in the oil and gas sectors, and in the industries supplying them.
We are also partnering with major UK food and clothing retailers to improve working conditions and job opportunities for poor workers and smallholder farmers, as well as supporting the long-term resilience of global supply chains.
It’s smart for businesses expanding within or into Africa to lead by example when it comes to workers’ wellbeing, corporate governance and local jobs.
It is these businesses that will build successful long-term partnerships in Africa’s growing markets and not those that are thinking only of short-term gains.
From my visits to Africa I’m continually struck by how fast things are changing and how much potential there is.
You can see a continent embracing and advancing technology, a wealth of entrepreneurship, high levels of growth, young and growing populations and a wealth of resources.
If the current momentum continues, more than half of sub-Saharan African countries will be middle income by 2025.
The challenge is to keep that momentum going and I believe everyone here has something to contribute, whether it’s commercial sense, local knowledge, a bright business idea or investment.
As I’ve set out today DFID is keen to engage with businesses like yours. We are determined to draw on the best of UK and international expertise.
Africa is rising: it is set to become an engine of future global growth and prosperity. We all must play a part in getting behind this rise to ensure that it is sustained and embraces all Africans.