For decades, the World Bank has believed that the key to unlocking Africa’s prosperity lies in empowering entrepreneurs. This philosophy holds good in a world where all is equal, and all conditions hold true across all economies. But Africa is not a land that can forget its past and plunge headlong into a capitalism-fuelled future that has no roots in its rich cultural heritage and its struggle to survive amid multiple foreign invasions and gut-wrenching genocides.
Five years ago, at the start of the decade, numerous books and articles crowned Africa as an upcoming player in the global economy, highlighting that young entrepreneurs were transforming the economy, much like the US economy had received a boost from its twenty-something ‘tech-preneurs’, who indeed are still ensuring that the US stays ahead of manufacturing giants like China. However, today, while Africa has seen its GDP per capita increase significantly at a continent-wide level, the gains have been cornered by the elite community and foreign investors.
Over the half-decade, infrastructural investments, while touted as the backbone of the growing economy, have largely served to reinforce the continent’s excessive and historical reliance on mining natural resources and exporting them overseas. More unfortunately indeed, as human report indices like those in the United Nation’s 2015 Human Development Report indicate, a majority of the population has been denied the benefits of growth and continues to live amid poverty.
Indeed, the report notes that globalisation and technological changes (widely regarded as the springboard for US economic development) are actually creating, rather than pulling down divides, as highly skilled workers and those with access to technology find their opportunities opened up even more, while those without face more uncertainties. The implications for the workforce are summed up succinctly by the report author, Selim Jahan, who says:
“There has never been a better time to be a highly skilled worker. Conversely, it is not a good time to be unskilled. This is deepening inequalities.”
This does not bode well for Africa, which is dominated by unskilled workers among its young workforce, and where a relatively low level of education in the youthful workforce does not spell good news for youth who are interested in pursuing opportunities in the ICT (Information and Communications Technology) sector.
It stands to reason then that Africa’s entrepreneurs must fashion their own destiny with the indigenous tools at their disposal, mindful of their ethnic traditions of community living and the need to give back to their own people.
It is in this context that terms like Africapitalism, with their associated community and social development connotations, are finding increasing favour with global development institutions that are seeking to lift the continent out of poverty.
Simply defined, in the words of Tony Elumelu, the founder of this school of thought, Africapitalism is an economic philosophy that the African private sector has the power to transform the continent through long-term investments, creating both economic prosperity and social wealth.
The Nigerian philanthropist,private investor and former banker first coined the term in 2011, and since then, global financial institutions have been pursuing this concept with enthusiasm, with the Africapitalism Institute having been formally launched during the 2014 World Economic Forum held in Abuja, Nigeria in May of the same year.
The pan-African think tank is dedicated to the promotion of the philosophy through “rigorous academic-level applied research” on the transformative role of the private sector in Africa’s development. Indeed, a private sector that realises that competitiveness of a company and the health of the communities around it are mutually dependent is key to Africa’s success and its allied benefits trickling down to the poorest of the poor.
It is here that committed entrepreneurs with socially relevant businesses are integral to Africa’s sustained development. Funding is a key constraint for such entrepreneurs, as they typically do not have family wealth or longstanding experience to buttress their business plans. It is in this gap that private financiers must step up their efforts to reach out to such for-profit businesses with high socio-developmental impact. In this space, GroFin is one such financier that provides socially relevant businesses with not only funding to meet long-term needs, but also the right business support to ensure sustainability of business operations.
Supplementing efforts of global financial institutions like the World Bank, which, through its member institute, the International Finance Corporation (IFC), is meeting the needs of entrepreneurs with soft loans to governments, private financiers like GroFin meet entrepreneurial needs with more intensive on-the-ground efforts to identify African business owners that fall in the ‘missing middle’.
The missing middle refers to two concepts. First up, it refers to Small and Medium Enterprises (SMEs) that are too large for micro-finance but too small for private equity. Secondly, it refers to the lack of contribution to employment and GDP that SMEs in developing and emerging economies are making when compared to SMEs in developed economies.
It is here that GroFin seeks to make a difference with its efforts and supports entrepreneurs committed to their businesses and passionate about community development, indeed those with an ‘Africapitalism’ mindset.
This post was originally published on 14.01.16 on LinkedIn Pulse by Nishika Bajaj.