Oxford, 18th May 2013
Professor Peter Tufano, Dean, Said Business School, Oxford University;
Distinguished scholars, leaders of business and the media;
Faculty, staff and students;
Ladies and Gentlemen;
It has been said that Africa is the new frontier for business, that it is a continent holding the promise for the global economic turn-around. These are not mere clichés or exaggerated media headlines. They reflect a real, sustained trend of witnessed economic growth.
The World Bank and other publications report that Africa is the second fastest growing region in the world. Nine out of 15 countries in the world with the highest rate of economic growth are in Africa.
And despite worldwide economic slowdown, African economies have averaged growth rates of 5% over the last ten years. Still, most aim for double-digit growth in the next decade. In Rwanda, for instance, we are targeting 11.5% annual growth in the next five years.
And according to recent surveys, 27 African countries have already reached middle-income status and by 2025 that number will have risen to 40.
There is no shortage of skeptics where Africa is concerned, who think this growth cannot last. Equally, there are many who are convinced by the evidence that it will. Among these are those Africans, who are driving it and who are resolved to maintain the momentum. The question therefore as we look to the future is not whether this growth can be sustained, but rather of how.
To a large degree the current growth is driven by structural changes within African countries, which means it can and will last. There is increasing political stability and better governance across Africa. Many countries have undertaken reforms that ensure macro-economic stability and create a better climate for business. In my own country, Rwanda, it takes only six hours to register a business.
Indeed, according to Foreign Policy Magazine’s 2013 Baseline Profitability Index, Rwanda is the 5th best investment destination in the world.
The evidence has also demonstrated that it is not just the resource-rich countries that are witnessing unprecedented growth. The latest figures from Ernst & Young’s Africa Attractiveness Survey 2013 indicate that while in the last ten years Africa’s GDP has tripled, natural resources contributed less than 20% and services nearly 60%.
This is partly explained by an increasing shift from dependency on commodities alone to include services and manufacturing, as well as growing intra-African and South-South trade and investment.
Our countries have also taken deliberate steps to invest in areas that are most sustainable – its people. Over the past few years there has been significant effort to invest in human capital, specifically education and health. Between 2000 and 2008, secondary school enrolment in Africa increased by nearly 50 percent and over the past decade, life expectancy has increased by about 10 percent.
This investment has resulted in increased human capacity, a growing middle class and rising urbanization, all of which translate into greater and diversified domestic demand that will in turn spur economic growth.
Poverty is evidently declining. According to the World Bank, since 1996 the average poverty rate in Sub Saharan Africa has fallen one percentage points every year, and between 2005 and 2008, the portion of Africans on the continent living on less than $ 1.25 a day fell for the first time from 52 percent to 48 percent. In Rwanda for example, between 2006 and 2011, we reduced poverty by an estimated 12 percent and lifted one million people out of poverty.
Growth begets growth, and we may add, confidence as well. Africans are getting more buoyed by what they see as the bright future of their continent’s economies and are more willing to invest in it. That confidence is best exemplified in the growing number of large local individual and corporate entrepreneurs spreading their businesses across Africa. According to market analysts, intra-African investments rose by about 33% in the last five years alone.
Over the last few years, the global investment community has demonstrated confidence in Africa’s future, leading to an emerging sovereign debt bond market. Some African countries, including Rwanda, have placed debt bond offers on the international market and many of them have been hugely oversubscribed.
In the medium to long term, this relationship with private capital provides a solution to the endemic shortage of investment in large infrastructure projects, which has led to dependence on foreign aid as an alternative, even as aid has been declining significantly. African capital markets are also increasingly becoming important sources of investment capital. There are 23 stock markets in Africa today, 15 of them trading daily.
Distinguished Ladies and Gentlemen;
I have dwelt on Africa’s transformation and potential because I have witnessed it firsthand in Rwanda where we started from a very low base to reach where we are now. Other African countries have experienced similar economic transformation. Much more can be done because Africa still has a lot of untapped potential.
However, challenges that may impede our growth potential still exist and must be addressed. Many African countries are charting their own way forward, but we recognize that we need to work together and establish partnerships with private industry/business, governments, academia and non-profit organizations to create lasting prosperity.
In the global economy, knowledge is a key driver of growth and development. To get its full benefits, we need to increase investment in the youth, technology and innovation, and develop entrepreneurship. That is why partnership with academia is crucial and the reason Rwanda has partnered with academic institutions such as Carnegie Mellon University, which has set up a campus in Rwanda to prepare the next generation of IT entrepreneurs and leaders in East Africa.
To all our potential partners I have always said that the real returns on your investment are evident in the many lives whose welfare is positively affected.
This will in turn be sustained by the improving business environment, growing markets, increasing disposable income and readily available labour.
Beyond setting up shop, the international private sector can partner with Africa’s local communities into win-win relationships that will further sustain these returns and continued growth.
In conclusion, let me emphasize that African economies are growing steadily, but this is only the beginning, and will be accelerated in the medium term to reach the level where the continent is stronger, and our people wealthier.
We need to move faster. Our people are mobilized, motivated and ready to embrace meaningful partnerships to address the remaining deficits and meet their full potential.
Thank you for your kind attention, and I look forward to your comments and questions.