The success of many African nations lie in alternative strategies.
By: Corinne Ton That, staff writter
Africa is of the most economically and politically underdeveloped regions of the world. The continent’s slow developmental pace can be directly attributed to its legacy of colonial-related conflicts.
While many African nations gained independence from their colonizers, the ultimate results were dysfunctional economies compounded by bad governance, poor political leadership, and governmental corruption.
Approximately 40% of the African population is considered extremely poor, which means they live on less than US$1 a day. The number of people living in extreme poverty as of 2001 is 313 million, almost doubled the number from 1981.
Daring and creative social businesses like the Grameem Bank prove that businesses can solve problems rather than operate as profit-maximizing entities.
Countries that experience low economic growth and high levels of inequality are more likely to witness violent conflicts. Somalia’s current situation is an extreme example of these conflicts. Development is the key to overcoming violence, and ensuring peace and security throughout Africa.
In what ways can Africa successfully develop, given the myriad of strategies available?
Official development assistance (ODA) is one of the most popular strategies, which involves financial loans from international donors. ODA assumed importance within the UN MDG Programme and during the G8 Gleneagles Summit in 2005.
However, academics like John Kirton, head of University of Toronto’s G8 research group, believe that aid and debt relief do not necessarily create development. ODA may instead render nations dependent on international financial loans. Currently, in Mozambique and Uganda, ODA comprises of 40 to 50% of the national budget. When bad governance and corruption are taken into consideration, the benefits of ODA seem slim.
So why is there an emphasis on ODA, given its mixed track record? According to Zaria Shaw, researcher for the G8 research group, it’s a question of geography. “We are less placed in Africa…We don’t actually have people on the ground to do these types of projects, like the microfinance project in Bangladesh”.
The Grameem Bank, or ‘village bank’ in Bengalese, that Shaw references, is a microfinance organization and social business that lends small amounts of money to the poor, so they can easily repay their loans. The Grameem Bank currently provides 81,371 villages with financial services all over Bangladesh.
For more than 33 years now, the Grameem Bank has shown that a poor population can also be a credit-worthy borrowers. Daring and creative social businesses like the Grameem Bank prove that businesses can solve problems rather than operate as profit-maximizing entities.
Innovative financing would undeniably benefit Africa’s development. Shaw believes that the shape of the development model has changed, with ODA taking a backseat to innovative financing strategies. Development strategies have changed “because we’ve tried everything and certain things don’t work”, states Shaw.
According to Shaw, the private sector will become increasingly involved in aspects of Africa’s development. Similarly to the Grameem Bank, pioneering companies around the world are beginning to include poorer populations as full economic partners.
One of the largest soft-drink bottlers, Coca-Cola SABCO, is working to bring its products to markets all over the African continent. In many East-Africa countries, the company adopted a model that works with independently owned, small-scale distribution companies. They employ bicycles and pushcarts to transport the products to areas not accessible by truck. This system has created more than 12,000 jobs in East Africa, and brought in $500 million in annual revenue.
The international community should make it a priority to build upon these pioneering efforts.
“Trade has always been our vehicle of choice for peace and prosperity”, says Shaw. While opening up markets may be advantageous to African countries, free trade must be backed by appropriate governance polices, and issues of corruption must be addressed.
Change must come from within African countries. Some of the major areas of concern for Africa include inadequate infrastructure, poor and corrupt governance systems, weak health services, and unemployment, to name a few.
By addressing the fundamentals of state development, with simultaneous help from the private sector, and not solely relying on ODA and short-term loans African nations can effectively tackle their root problems.
Business News with BITE.
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