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The East African : March 17th 2014
The EastAfrican 46 BUSINESS MARCH 15-21,2014 Looking South: Af≥ica must now seek pa≥tne≥ships with developing states been unprecedented in speed and scale. While growth levels of West- T ern economies plummeted following the 2008-2009 financial crisis, developing economies continued to grow at high rates, largely driven by a variety of factors, including sound industrial policies and investments in human, physical and technological capacities. Countries of the South have been transforming their economic bases slowly but surely from large agrarian sectors to more diversified economies with large manufacturing and modern service sectors. For the first time in 150 years, the combined output of the developing world’s three leading economies — Brazil, China and India — is about equal to the combined GDP of the longstanding industrial powers of the North — Canada, France, Germany, Italy, United Kingdom and the United States. This represents a dramatic rebalancing of global economic power: In 1950, Brazil, China and India together represented only 10 per cent of the world economy, but it is estimated that by 2050, they will account for 40 per cent of global output. The middle class The impact of this shift is also evident in demography and social development. The absolute number of people in the South means that the middle class will continue to grow in size, income and expectations. Rapid economic growth and poverty reduction, especially in China, have led to a decline in the number of poor by $158 million between 2000 and 2011. Investments in technology and innovation have led to Southern economies sometimes outpacing their Northern counterparts in technological entrepreneurialism and manufacturing capabilities, producing complex products for developing markets. As part of the rising South- South trade, the share of developing countries’ capital goods imports from other developing countries has increased steadily, from 35 per cent in 1995 to 54 per cent in 2010, rendering developing countries as the major source of capital goods for other developing countries. Africa economic fortunes seem to be no different. Since 2000, Africa’s growth has been robust, with the continent showing resilience and recovering very quickly from the global financial crisis. With an impressive growth rate of 5 per cent in 2012, the continent is projected COMMENTARY CARLOS LOPES Africa is slowly but surely shedding its image as the poster child of poverty and destitution to being the new place for investors to be. to be the fastest growing in 2014, and 11 out of the 20 fastest growing economies globally will come from Africa. These changes are not only Policies must address the question of cheap manufactured goods from emerging economies flooding markets.” limited to the economic arena. With the labour force set to reach 1.1 billion by 2040 and adult and youth literacy rates set to approach 100 per cent by 2063, the continent’s human resource endowment will play a major role in realising its economic potential, provided it can properly address the needs for a demographic dividend. In spite of these achievements, challenges persist on the continent: Extreme hunger, youth unemployment, and underlying structural causes of poverty. But the continent seems to attract increasing foreign direct investment from Southern partners such as Korea and Turkey. Indeed, the highest investor stock in Africa is from Malaysia, with $19 billion, followed closely by South Africa with $18 billion. In 2011, the rate of return on inward FDI in Africa (9.3 per cent) was the highest compared with other regions of the world. Africa is therefore slowly but surely shedding its image as the Workers make clothes for export at the export processing zone near Nairobi. Studies have shown cheap imports are killing local industries. poster child of poverty and destitution to being the new place for investors to be. Africa’s increasing ties with the South are particularly important, in view of the debt crises in Europe, the slow recovery of the world economy and the increasing signals for investors to reduce their exposure to hedging markets in light of reduced quantitative easing. The fact that Africa’s total merchandise trade with the South (excluding intra-African trade) increased from $34 billion in 1995 to $283 billion in 2008, representing a third of Africa’s total trade, is evidence to this. Cheap goods Africa must however be aware of the challenges that may accrue as a result of opening its borders to its partners. Many studies have shown the negative impact of cheap goods flooding African markets and killing African fragile industries. Policies guiding trade must address the question of cheap manufactured goods from emerging economies flooding African markets and competing with those from domestic firms. But cheaper goods from emerging markets can benefit Africa’s own industrialisation if they are industrial inputs. To ensure a win-win situation, Africa needs to devise new partnerships with developing countries. African countries need to ensure that partnerships with developing countries work for the continent’s transformation agenda. This has to be within, and complementary to, existing national and regional policies that promote integration. Regional bodies such as the African Union must work as forums to reach binding agreements among member states for a standard set of requirements for foreign involvement on the continent, whether with new or traditional partners. This collective action can also be used to open up greater policy space for industrial investments that were used by the Asian newly industrialised countries during their economic transformation. In this regard, Africa’s engage- ments must be articulated and managed in the context of a comprehensive development strategy for economic transformation. A clear transformation agenda that enables Africa to shift from a largely agrarian society with acute dependence on primary resources towards an economic model based on industry and modern services, with significant employment generation and a more equitable distribution of income. To achieve this, Africa must prioritise its interaction with traditional and emerging partners, articulate its needs in infrastructural development, education and training, health, finance and other critical areas. Carlos Lopes is the Executive Secretary, Economic Commission for Africa. he economic weight of Southern actors at the global level over the past two decades has Business awa≥d finalists named By A SPECIAL CORRESPONDENT The EastAfrican THE SEARCH for the region’s best entrepreneurs has reached the definitive stage, with the naming of seven finalists, among whom four are women. The short-listed business peo- ple are to compete in the Eastern Africa chapter of the EY Entrepreneur of the Year Awards (EOYA), which fetes entrepreneurs based on their entrepreneurial spirit, financial performance, strategic direction, community impact, innovation and personal integrity. The winners of the regional edition organised by corporate services firm EY will be named on March 27 at a gala dinner. The finalists are competing in two categories: Master, which is for business people whose achievements have made them world-class entrepreneurs, and the Emerging category for individuals who are building young businesses with high potential. Ashok Shah of Kenyan in- surer, Apollo Investment, Abid Alam of Ugandan firm Alam Group, Jennifer Riria of Kenya Women Holding and Manoj Shanker of Techno Brain made the cut in the Master category, in the awards, which are based on nominations from the public. In the Emerging category, Jullian Nyamuhange-Omalla of Delight (Uganda), Esther Muchemi of SAMCHI Group and Jyoti Mukherjee of Software Technologies will be fighting for the crown. “These finalists are a great illustration of the entrepreneurial wealth in East Africa. Their strength, vision and determination to re-shape the business environment in achieving economic growth should be celebrated. The stories of their journeys to success should be shared in order to inspire other entrepreneurs and the youth,” said Gitahi Gachahi, CEO EY Eastern Africa. “In Africa, women are an untapped economic force for growth, driving social and economic progress. Each finalist should be celebrated for the contributions they are making in leading our continent into a new future.” The winner of the Master cat- egory will represent East Africa at the global awards ceremony in Monte Carlo in June. The winner will also be inducted into the World Entrepreneur Hall of Fame and compete with more than 50 other finalists for the EY World Entrepreneur of the Year Award, one of the most coveted global business awards. James Mwangi, CEO of Equity Bank is a previous winner.
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