The Commonwealth Development Corporation (CDC), the United Kingdom’s Finance Institution recently teamed up with US banking giant Citigroup to invest at least $200 million in Africa.
The fund, which will be managed by Citigroup Venture Capital International (CVCI), an African private equity fund, will target infrastructure, natural resources, energy, telecom and general manufacturing sectors.
Dipak Rastogi, CVCI Head, attributed this to the global realization that Africa is ‘a high potential market’ that can generate attractive returns. Sub-Saharan Africa is a most profitable investment destination. It offers, according to the World Bank’s 2003 Global Finance Development report “the highest returns on foreign investments of any region in the world.”
The CDC/CVCI initiative should be lauded for recognizing that it is business that will develop Africa, as opposed to foreign aid that has eroded innovativeness and bred dependency on foreign largesse. Fifty years down the line, Africa has nothing to show of what it has done except alienating governments from their people and increasing corruption.
It is however not celebration time for Africa as far as the $200 fund is concerned, before pertinent issues are addressed. Since the CDC was set up in 1948 to strengthen economies of former British colonies by investing in business, why hasn’t the business climate in these former colonies improved? Who prioritized the fund’s target areas? Were the decisions home-grown? Did they have grassroots approval? Top down approaches will create white elephants in Africa.
In 2003, for example, though most African economies depend on agriculture, CDC assigned only 4 per cent of its $1.7 billion to agriculture; 10 per cent to financial institutions; 6 per cent to manufacturing; 8 per cent to media and communication and a whooping 22 per cent to mining and oil. Why did 22 per cent go to mining/oil while a small portion went to agriculture and financial institutions? Who priotized this allocation? Was the fund more interested in oil? Could the fund be out to build infrastructure to exploit Africa?
According to Naomi Klein in Africa’s Natural Resource Wealth Should Benefit Africans, about 70 per cent of Nigerians still survive on less than $1 a day while Shell is making super profits. Equatorial Guinea, which has a major oil deal with Exxon Mobil, “got a mere 12 per cent of the oil revenues in the first year of its contract,” according to a report on the CBS news programme 60 Minutes.
For a group to qualify for CDC fund, it must stick to CDC’s business principles which include among other factors, CDC overseeing the key management of the recipient team. Will it be the usual story of the fund finding its way back to the firms of origin in form of inflated consultancies and expertise? Will this fund trickle down to small holder businesses which are a majority in Africa or be given to already established multinationals?
Where is an African plan for development done by Africans and for Africans? It is time to embrace new development concepts and strategies with an African flavour. Africa does not require the $200 from Europe. What Europe should do is to open up its countries for trade with Africa. It should allow Africa to export value added products ready to be sold in European supermarket stores. Europe ought to disband policies that make it more favourable for Africa to trade with it than to trade with fellow African states.
It is ironic for Africa to brace itself for $200 million from Europe when it is rejecting funds from its 800 million people by imposing high tariffs to fellow African countries and closing its borders to fellow African States. It is unthinkable for Africa to open its doors to $200 million from Europe while its elites are investing in Swiss banks instead. It is ironic for Africa to open its arms to $200 million from Europe when it is taxing its traders highly, neglecting its farmers, harassing hawkers and allowing the government to do more business than citizens.
Africa must set its house in order and offer incentives to local business people out to fight poverty, disease and illiteracy before opening its arms to outsiders. The old maxim applies here: ‘Set your home in order first!’ Without economic freedom that first stems from within Africa, African countries will hardly achieve poverty reduction.
By Josephat Juma
Mr. Juma is an African Executive Writer
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