The rapid advancement of information communication technology has produced both great promise and great peril for the world. Information communication technology has allowed corporations to expand into emerging markets and ideas to migrate around the world. Information communication technology has reshaped the way in which we conduct business and our daily lives. Yet this advancement has also changed the way in which we view the relative disparities that exist. For those of us in the top global income brackets of the world, it is difficult for us to understand the impact with which these disparities are felt. Whether good or bad, these felt disparities infect many of the emerging economies with which the western world conducts business. When the disparities bring about changes in fair governance, decent living conditions, and a future for children, the relative disparity felt is lessened and is often times not acted on. Unfortunately this is not the case on the most underdeveloped continent in the world: Africa. Yet Africa is the next large emerging market.
Globalization is rapidly bringing changes to all corners of the world. In some countries, such as Singapore, this is a welcome economic change. In most countries in Africa, everything that has occurred after decolonization has left almost every former colony in Africa poorer than it was during the first years of independent rule. While there are many stipulations about why this has happened, it is important to realize that the lack of economic stability in Africa is not entirely due to the after shocks of colonialism or slavery. For instance Korea was a colony of Japan until the end of the Second World War. During this time the Japanese endeavored to destroy the Korean culture, displaced thousands of Koreans, and barred Koreans from universities. Furthermore after becoming an independent country, Korea was plunged into a civil war that split the country into two and killed millions of Koreans. Yet, even with this traumatic history, Korea, which was “…as poor as Ghana in 1953, is now twenty times richer.” (Guest, 2010) Most importantly solely concentrating on colonialism does not provide answers to many of the current problems in Africa.
While Africa’s problems are numerous, they are not an insurmountable barrier to economic development and prosperity. In fact, some of Africa’s problems are themselves business gems, which if solved would provide a great economic and social return on investment. In order to solve these business gems and thereby much of the economic and social woes of Africa, a new thought leadership has to occur within the industrialized nations. Currently there are several thoughts on how governments and global businesses interact with Africa. These thoughts can be divided into two main categories:
1. Use money as leverage to produce social changes
2. Invest in infrastructure solely for financial return without thought to social change
While a relatively newer thought, using money as leverage to produce social change is currently the largest source of investment in Africa. During the past fifty years “… over US$1 trillion in development-related aid has been transferred from rich countries to Africa.” (Moyo, 2009) Yet almost every African country has become increasingly autocratic and have seen their respective GDPs shrink. While a more in depth review of economic aid is required to understand why aid has been unsuccessful in Africa, simply stated Africa’s current condition speaks for itself.
The second thought category is an old mode of business that was popular during colonialism and has now reemerged as a significant manner in which business is conducted in Africa. This reemerged thought has been popularized by the rapid increase in Chinese investment within Africa. China is now “…Africa’s second largest business partner…” and “…has increased bilateral trade between the two regions fiftyfold, and is expected to reach $100 billion by 2010.” (Beuret, 2009) As China increases its investment and interactions with Africa, this thought will continue to regain prominence within the business community.
As governments and business organizations continue to invest in Africa, it is important for them to consider the future growth of the market in which they are investing. The African market will not grow if aid is continually heaped upon the continent- it will continue to contract. At the same time, the African market will neither be able to sustain external investments nor organically grow if external entities only invest in infrastructure in order to obtain higher margins. Therefore a new thought leadership that is grounded in an understanding that a result of external investments needs to be the broadening of an African middle class is required for globalization to positively effect Africans.
In order to broaden (and in many areas create) an African middle class, there are several global strategies which will create the environment necessary to produce desired results.
· Use the low cost of living in many of the African countries to create country specific advantages.
· Build supporting industries which will complement country specific advantages.
· Create the legal infrastructure necessary to conduct business.
Achieving the objectives
Before the other two objectives can begin to be worked on, it is necessary for countries in Africa to build a legal system that respects property rights and is independent. According to The Fate of Africa: A history of fifty years of independence, Africans as a whole are literally sitting atop of money, their homes and land, which they are unable to tap into because of a lack of definable property rights. This lack of property rights and respect of the judiciary for ownership prevents not only multi-national institutions from investing in much of Africa, but also prevents Africans from obtaining financing to grow or start a business.
Without an independent judiciary, a key factor identified by Global Strategy: Creating and sustaining advantage across borders, as being necessary for successful global growth is unavailable: is unobtainable. Ethics is required for business to be conducted and governments to run. Western governments reacting to the increasing autocratic nature of most under-developed countries have created anti-bribery laws. Yet it is common knowledge that these multi-national entities find ways to get around the imposed anti-bribery laws, because most western countries are unable to police the actions of their respective multi-national entities.
Yet the paradigm of this conundrum is that the environment in most of the African nations requires multi-national entities to bribe governmental and tribal officials. Even if it is not the multi-national entity directly bribing officials, it is common for these entities to partner with local firms (usually owned by an important and powerful individual) and have these firms bribe on the entities’ behalf. The only way to rectify this concern is by creating and empowering an independent judiciary.
Once an independent judiciary is established, African nations will be posed to obtain financing and investment which they will be able to use to create economic areas that will allow country specific advantages. These advantages will spur economic growth and provide for the baseline creation of a middle class, by enticing multi-national entities to establish large scale operations in Africa which are not centered solely around mineral resources. Furthermore the growth of multi-national entities will increase tax revenue received and raise the GDP of African nations that take part. Most importantly, these economic areas will stem the tide of educated Africans leaving the continent to work and live in other countries outside of Africa.
But in order for Africa to retain her educated Africans, African countries will need to build industries that complement the country specific advantages. Too much of legitimate African industry is centered around mineral resources. Africa needs to expand its economic options. Currently countries receiving almost their entire revenue output from mineral resources - like Nigeria and Angola – suffer heavily from Dutch Disease. These nations have seen their other economic outputs contract, while at the same time, these same nations are spending less per capita on infrastructure than they were post-independence. (Ghazvinian, 2007) The culminating result of this is that Africa is producing fewer educated Africans and that Africa as a whole is falling further behind the industrialized world.
While simplistic, basic infrastructure is required throughout much of Africa. In fact, the parts of Africa over which land travel is conducted by vehicle, is often times measured as hours per kilometer rather than kilometers per hour. (Meredith, 2005) According to Keynesian economics, not only would large investment in infrastructure improve the ability of business to be conducted throughout Africa, but it would also spur organic growth within Africa.
Information communication technology will continue to expand and link our world in new ways. Cultures will more heavily interact, businesses will continue to grow internationally, and ideas will continue to migrate around the world. As globalization continues to expand further into the emerging markets of Africa, multi-national entities and governments throughout the world are going to have create a new thought leadership in dealing with the emerging markets. The two former categories of dealing with African governments - giving aid for social change and investing in countries solely for financial gain - have shown to be unproductive in the long run.
Yet in order for globalization to have a beneficial effect on the emerging markets in Africa, the objective of governments and multi-national entities needs to be the creation of a large African middle class. Only through the creation of a large African middle class will investments be able to be sustained internally. Furthermore it is through the African middle class that investments opportunities will arise and good governance will emerge.
But, a large African middle class cannot arise out of the current political and economic reality of much of Africa. Several objectives must be met before Africa will be able to create a large middle class. In order for there to be an increase in internal organic growth and outside investment, and independent judiciary that respects property rights must be established. Once this judiciary is established economic zones can be created to spur country specific advantages. In order for these country specific advantages to be grow, Africa must be able to keep the majority of its highly trained African workforce. In order to retain these people, supporting industries need to be created which will support continued organic growth.
Economic prosperity has been an illusive dream for much of Africa since independence in the mid 20th century. While history is a factor in some of the strife that Africa currently experiences, many of the problems have been created by corrupt practices combined with single source revenue engines. While either causal factor is harmful in its own right, the combination of these two causal factors have had devastative effects throughout Africa.
Yet even though Africa has a huge gap to overcome, Africa provides multiple business gems. These gems provide significant incentive for both foreign and internal investment. There are opportunities in Africa. As this century progresses, leaders in governments and business will realize that it is neither beneficial in the long run to rape the land or only feed the people. Rather it is in everyone’s long term interest to use globalization and the migration of ideas to provide tools with which Africa can build itself.
Beuret, S. M. (2009). China Safari: On the trail of Beijing's expansion in Africa. New York: Nation Books.
Ghazvinian, J. (2007). Untapped: The scramble for Africa's Oil. New York: Harcourt, Inc.
Guest, R. (2010). The Shackled Continent. New York: Smithsonian Books.
Marshall Goldsmith, C. G.-C. (2003). Global Leadership: The next generation. New York: Prentice Hall.
Meredith, M. (2005). The Fate of Africa: A history of fifty years of independence. New York: Public Affairs.
Moyo, D. (2009). Dead Aid: Why aid is not working and how there is a better way for Africa. New York: Farrar, Straus, and Giroux.
Ramaswamy, A. I. (2006). Global Strategy: Creating and sustaining advantage across borders. New York: Oxford University Press.