Productivity in Africa: A Matter to Pursue

Published on 1st May 2018

I would like to talk about a very important issue for the development of Africa — Africa at work. As an African entrepreneur myself, as well as an expert in the development of local content initiatives, I know first-hand the importance of putting Africans to work for the development of our society.

We all know the negatives associated with high unemployment — economic stagnation, an increase in crime, and, in very severe cases, even internal conflict can arise. Putting Africans to work is of the utmost importance for economic and political stability across the continent.

Sustainable development of African economies can only be attained by the development of local industry — by investing in Africans, building up African entrepreneurs and supporting the creation of indigenous companies. Indeed, sustainable development of the global economy is heavily dependent on the success in Africa. Africa has one of the largest labor pools in the world, with a population of 1.2 billion people and an estimated 29 million youths expected to enter the workforce annually between 2015 and 2030. Sub-Saharan Africa has a very young population, the youngest in the world, in fact, with a median age of 19. The potential for economic development is unparalleled, with opportunities abounding in every sector, from industrialization to fintech.

But Africa cannot progress unless and until the development of human resources is prioritized as highly as the development of any other sector, from West Africa’s vast energy sector to East Africa’s booming tech sector.

Unfortunately, as we have seen through decades of international companies coming to work in Africa’s natural resources sector, multinational companies won’t take up the burden of knowledge-transfer and training of domestic employees on their own. Strong local content regulations — requiring international companies to employ, train and educate Africans — are vital. Governments have a critical role in making these regulations benefit both the people and the economy.

The legislation must be aggressive, as the building up of human capacity is the highest priority for societal progress. However, there must be a careful balance so as not to scare away international investors with overregulation and too much bureaucracy. While this regulation is certainly necessary, it is very important that over-regulation be avoided.

Few things have the ability to strangle business initiatives and entrepreneurship as much as too much red tape. Unbalanced, unclear and biased regulations will only serve to choke the development of oil and gas projects, and thwart new investment. Complex regulations will drive away new businesses, and take with them money for new projects, corporate social responsibility budgets, educational resources and job creation. Effective local content regulation needs to be fair to international companies by incentivizing local content while also ensuring these companies can operate in an efficient and cost-effective way, while also developing human capacity and furthering social progress.

These regulations must be drafted carefully, implemented with domestic consensus and they must be strongly monitored and enforced by the government, or they will do no good.

We are starting to see governments take the initiative here, at the demand of a new generation of Africans. This younger generation is demanding more from governments — demanding education; access to electricity, school, training and a place in the rapidly-expanding middle class.

In Equatorial Guinea, for example, my law firm was responsible for drafting the country’s National Content Legislation for its hydrocarbons sector. In contrast to similar national content legislations across the continent, however, Equatorial Guinea was very intentional about valuing the contributions of all Africans. For example, the legislation requires contributions by Equatoguineans in every service sector within the energy industry, from engineering to tax consultancy, but when there are no qualified companies available domestically, the legislation then requires companies to hire from within the Central African Economic and Monetary Community (CEMAC) and then Africa as a whole before hiring from abroad. International companies are also required by the law to provide training programs to local employees and contribute to social responsibility projects, many of which focus on health and education. This Africa-first mentality could and should be replicated in different sectors and in different countries.

The government-led initiative to create local content must also strategically address the obstacles that keep indigenous companies from success. Access to financial and technical expertise are very real issues for African entrepreneurs.

There is perhaps no greater obstacle to young Africans than accessing fair, patient financial capital. Loans in Africa are often hard to obtain, and even when available, they are offered at extremely high interest rates and require excessive collateral. While the lack of funding capacity certainly needs to be addressed by the financial sector, national governments are capable of passing regulation that restricts interest rates so that predatory lending is illegal, and that also prioritizes local companies in project financing efforts. An increase in funding capacity will increase as the economy improves, which consistently improves rapidly as human capacity is developed. Tackling issues like a lack of credit, limited equity and currency fluctuations are vital if African entrepreneurs are to get a chance to compete in the international stage.

Governments must also lead the charge in creating opportunities for education and technical training, by creating state-run institutions, forming partnerships with international universities and sponsoring the study of qualified Africans with financial assistance.

While governments have a large role to play in creating the fair regulation that encourages the creation of new local businesses, Africans cannot sit around waiting for the perfect time to act. There will never be a perfect time to act — there will always be obstacles to succeeding as an entrepreneur. There will always be struggle, whether that is getting the education or getting funding. Government-led initiatives can open the door to opportunities, but, in the end, the will to succeed is dependent upon each individual and their drive to succeed.

It is this inner drive to succeed and a passion for life where Africa truly has an edge.

Already, Africa has become a hub for entrepreneurs. According to the African Development Bank, over 20 percent of Africa’s working-age population are starting new businesses — a rate that surpasses every other region in the world. Similarly, small and medium enterprises are the largest providers of formal sector jobs in sub-Saharan Africa. East Africa is setting the trend for fintech and technology globally, not just in Africa. West Africa has a number of internationally-competitive oil and gas companies, started by and ran by Africans. Africans are showing up every day, showing the world we are a force to be reckoned with.

There is, of course, room for improvement. There will always be room for improvement. But Africa is taking center stage in the global economy — hosting several of the world’s fastest growing economies — because of its people. Empowering Africans with the right national policies, as well as the educational and financial capacity necessary to do the job, will ensure the sustainable development of economies and the rise of Africa.

By N.J. Ayuk

C.E.O. Centurion Law Group.

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