Business Impatient With Leaders On Nepad

Image: Flickr, waf1on1
Image: Flickr, waf1on1

African politicians urge investment, but corporate captains want stability, accountability first. It was only a matter of time.

For two years business has rallied behind Nepad, forming corporate councils and pledging to support Africa’s blue-ribbon initiative for development. But progress on implementing the key components of Nepad has been slow, and patience among the private sector is wearing thin.

When the continent’s best thinkers gathered in the capital of Mozambique in early June for the World Economic Forum’s (WEF’s) annual Africa conference, the disconnect between business and political leaders was more apparent than it had ever been. African reformists like South African President Thabo Mbeki bemoaned the lack of foreign investment in Africa. Corporate captains, in response, said if governments couldn’t deliver on Nepad provisions such as the African Peer Review Mechanism (APRM), they would, in effect, apply their own shadow criteria for engagement.

‘Business has expressed an opinion on the peer review mechanism … and would like to see built-in sanctions for peers’ who fail to meet set standards of performance, said Reuel Khoza, chairman of South Africa’s electricity utility Eskom, addressing a pre-summit media conference.

A new study released at the WEF gathering, entitled The Africa Competitiveness Report 2004, underscored the need for urgent and sustained development: Sub-Saharan Africa was the only region in the world to experience consistent flat or negative growth over the past 50 years, resulting in a significantly larger proportion of Africans living below the poverty line than at the outset of the post-independence period.

The statistics paint a stark picture. In 1970, the report notes, Ghana and Korea had ‘broadly similar per capita income levels,’ but ‘by 2003, Korea’s GDP per capita was some 30 times higher than that of Ghana.’ Similarly, ‘Hungary’s GDP per capita is projected to be about 28 times higher than that of oil-rich Nigeria, whereas it was only 5 times higher in 1970.’ The impact of these figures is nothing short of a humanitarian disaster: Six in 10 people living south of the Sahara now exist below the poverty line, unable to access healthcare, education and even basic nutrition.

Africa’s share of global foreign direct investment is 1.7%.

‘Poverty used to be an essentially Asian phenomenon,’ the report states. ‘The excellent economic performance of Asia, paired with the disastrous growth performance of Africa, has turned poverty into an essentially African problem.’

Nepad is supposed to provide an answer to this. As Mozambican President Joaquim

Chissano declared at a pre-summit press conference in Maputo: ‘We need pan-African solutions to African problems and Nepad has all those possible solutions.’

Two years ago big business might have been more inclined to believe him. When the WEF gathered in Durban, South Africa, in 2002, Khoza rallied the leaders of more than 100 corporate giants and parastatals to form the Nepad Business Group.

Earlier this year, they rededicated themselves to supporting the goals of Nepad at the Davos meeting of the WEF. But the private sector is finding it increasingly difficult to mask its frustration at the slow pace of Nepad-oriented reforms aimed at creating more stable environments for growth and development.

‘Business is the net creator of jobs,’ said Vassi Naidoo, chief executive at Deloitte & Touche Tohmatsu in South Africa. ‘Government has a significant role to play to make business competitive. Sadly, there is not much action from Nepad.’

One of the priority areas for Nepad is infrastructure, which is a major building block for sustainable growth. The initiative has identified 20 priority programmes for development under infrastructure and they include energy, transport, airways, water and sanitation as well as railroads, but so far business has been slow to invest in these projects.

One problem with Nepad is that it is hard to pinpoint programmes that have come about as a result of the new partnership between countries. Most projects that are underway and broadly defined as being ‘in the spirit of Nepad’ have been in operation long before Nepad was launched. Some of those singled out as Nepad-related are broadly defined and the challenge is putting them into operation.

‘For example, in the Democratic Republic of Congo the Nepad documents will talk about sharing water resources from the Congo River with other states. That’s a Nepad project, but then you have to unpack it and work uut how you make it real and that’s the challenge,’ said one official.

Infrastructure points a lens on the costs of mismanagement and poor macroeconomic planning common among African countries. As the WEF competitiveness study indicates, greater investment alone is not the solution: ‘Improved physical infrastructure will not have the desired effect on competitiveness if African countries do not recognise and address explicitly the constraints which have stunted previous initiatives.’

Inefficiency, over-regulation, corruption, and lack of adequate cost-recovery mechanisms to ensure debt repayment and maintenance are some of the key factors preventing Africa from realising the economic potential of infrastructure.

These problems point to the core grievance that business has with regard to Nepad: the slow pace of implementation on the African Peer Review Mechanism. For the private sector to prosper, business leaders argue, it needs a conducive political environment. The APRM was designed to help create more enabling conditions by giving political leaders a tool to help each other improve their performance in critical areas such as economic governance, rule of law and corruption.

‘The APRM is the most tangible manifestation out of Nepad,’ said Stanley Subramoney, a member of the Nepad Business Group. Echoing his concern, Naidoo said: ‘If we’re going to be successful, we need an enlightened leadership.’

But peer review is voluntary and, so far, just more than 20 countries have signed up. The process has begun in countries such as Ghana and Malawi, but critical questions about transparency and participation from civil society and business remain cloudy.

The APRM gets directly to issues that are crucial to establishing the conditions that will attract investment. Political instability, price volatility, the tendency of  government to engage in sweeping policy reversals and an uncertain macroeconomic environment contribute to the risk of doing business on the continent. So, too, does confusion around such fundamental concerns as property rights.

‘We would like to believe that political leadership has provided a start [to the APRM process], but delivery will come from more partners,’ said Khoza. The Nepad Business Group has suggested running a parallel review system that would be similar to what international credit rating agencies do.

If the consensus from the WEF summit was that African leadership has failed to provide governance and economic management that will enable the peoples of Africa to break the seemingly intractable cycle of conflict, disease and poverty, the gathering also provided a platform for sharing solutions.

Huddled in true African style beneath a stand of trees outside the Maputo conference centre, Mbeki and Mozambican presidential candidate Armando Guebuza gathered with business leaders to discuss how to nurture a new generation of African leaders equipped with the skills to promote steady development on the continent.

Ndidi Nwuneli, founder and managing partner of LEAP Africa, a Nigerian non-profit organisation devoted to developing the next generation of African business and political leaders, identified four essential qualities of leadership: integrity, investment in successors, incentives to inspire people through vision and a willingness to make sacrifices for the good of the group.

That last point echoed earlier comments by President Chissano. ‘The challenge,’ he said, ‘is to make everyone understand that each has a responsibility to make government do well – not by shouting, but by acting and not waiting.’

Government looks to business, business looks to government. Nepad’s vision for Africa’s development hangs in the balance.