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  World Economic Forum on Africa
    Cape Town, 31 May 2 June 2006
World Economic Forum on Africa Home   

Tackling Risks to Prosperity Printer friendly versionSend to a friend
"In Africa, you need alternative modes of financing [such as microfinance] which have been very successful in India. It is the bottom of the pyramid that pays back all the money." Syamal Gupta Chairman, Tata International, India; Co-Chair, World Economic Forum on Africa
"Governments throughout Africa are beginning to realize that the private sector is where jobs are created. Let companies run so that in turn they create more revenues for the government that can be used for things like healthcare." Jim Goodnight Chief Executive Officer, SAS, USA; Co-Chair, World Economic Forum on Africa
Because global risks are interconnected, confronting them requires a concerted, multifaceted approach.
•  It is important to appreciate how risks are linked to understand how solutions are connected.
•  Adequate infrastructure, for example, will ensure timely delivery of health services and access to schools, which are essential to boosting performance in healthcare and education.
•  Business must play a greater role in pushing forward initiatives to mitigate the risks affecting Africa. The Investment Climate Facility (ICF) for Africa is an example of an innovative public-private partnership designed for that purpose.

"The current foreign aid system works very well for everyone except poor people." William Easterly Professor, Economics Department, New York University, USA
Risks are interconnected, requiring a multifaceted approach to confronting them. Infrastructure and education, for example, are keys to solving persistent problems such as hunger and impediments to the delivery of health services. As Africa goes for growth, it must move on a wide number of fronts, focusing on the basics of sustainability, including education, the empowerment of women, infrastructure, the rule of law and healthcare. Above all, business, in partnership with government, must play a more active role in pursuing solutions. The new Investment Climate Facility for Africa is an example of an innovative public-private partnership aimed at promoting sustainable growth.

At a workshop on managing risks, participants examined the linkages between threats such as terrorism, pandemics, oil price shocks and climate change. Worries of a terrorist strike may drive petroleum prices up, while the rise of energy costs could spur development of alternative fuels, a longterm response to climate change. "It is almost impossible to separate one risk and think of it in isolation," Sean M. Cleary, Managing Director, Strategic Concepts, South Africa, counselled. "In a highly interconnected world, these risks manifest themselves in highly systemic ways." But, he warned, "If we get paralyzed by the prospect of risk, we will cease to achieve anything in terms of economic development and growth."

Globalization means that the world is fraught with risks, both on and off the radar screen. Even at a time of unprecedented growth, Africa has its full share, some threats in greater proportion than in other regions. It was a poignant coincidence that while participants gathered in Cape Town, the United Nations in New York was assessing the progress (or lack of it) in the fight against HIV/AIDS. UN projections forecast that the death toll from the pandemic in Africa, which accounts for almost half of HIV/AIDS fatalities, could reach 100 million by 2025. The disease is the leading cause of death among Africans.

As Africa goes for growth, Africans must go for solutions. On a range of challenges from health to hunger, reputation to regional trade, the continent has to counter the daunting array of problems with a varied arsenal of traditional and innovative remedies. The goal: to sustain the region's 5% growth and push it even higher.

Tackling risks to African prosperity: Steve Booysen, Group Chief Executive, Absa Group, South Africa; Thomas Fuentes,
Special Agent in Charge of International Operations, Federal Bureau of Investigation, USA; Obiageli Katryn Ezekwesili, Minister of
Solid Minerals of Nigeria; Jim Goodnight, Chief Executive Officer, SAS, USA; Trevor Manuel, Minister of Finance of South Africa;
Gobind Nankani, Vice-President for Africa, World Bank, Washington DC

At the meeting, participants identified key solutions, including infrastructure, delivery of healthcare services, education, empowerment of women, improvement of the investment climate, the promotion of regional and global trade, and the reshaping of Africa's image, among others.

"We sometimes get lost in a one-dimensional growth debate," said meeting Co-Chair Maria Ramos, Group Chief Executive, Transnet, South Africa. "But for sustainable growth, you need to have other things in place. We have to spend money on health, on education. Without infrastructure, how do you get products to market, people to clinics, students to schools?"

Take hunger as an example. In one workshop, participants discussed solutions for eliminating this scourge in Africa, including the education of women and girls; microfinancing for small-scale farmers; assistance in the provision of water, seed and fertilizer; the promotion of small enterprise; the application of effective business models; and the development and support of top-class agricultural colleges. In the session on HIV/AIDS, there was widespread recognition that education is a crucial tool in combating the pandemic. In the plenary session on overcoming the challenges to growth, Thomas Fuentes, Special Agent in Charge of International Operations, Federal Bureau of Investigation, USA, underscored how crime and corruption can ruin a country's competitiveness.

Initiatives such as The New Partnership for Africa's Development (NEPAD) and the Millennium Development Goals (MDG) are predicated on the principle that Africa must take a multifaceted approach to the risks it faces. But many countries lack the capacity to pursue a full-court press. "There are trade-offs in the MDGs; if you do more of one thing, you will do less of another," reckoned William Easterly, Professor, Economics Department, New York University, USA. The likelihood that Africa will meet its MDG commitments is diminishing. Less than 30 nations on the continent have subscribed to NEPAD and the African Peer Review Mechanism (APRM), which has uncovered deficiencies in some economies.

The lack of capacity is perhaps the strongest argument for greater participation of the private sector. In practically every session, that was the clear refrain. "HIV/AIDS workplace programmes are a business imperative," said Brian Smith, Director, Human Resources, Volkswagen of South Africa, South Africa. "While many large organizations are involved, smaller firms often don't have the time or resources to do the same. It makes sense for big firms to extend programmes through to suppliers and SMEs.

In securing Africa's energy future too, business must play its part. "Africa will not develop without clean, affordable sources of energy being readily available," said Salomon Banamuhere Baliene, Minister of Energy of the Democratic Republic of Congo. "The private sector must play a major role.We must liberalize. We must allow public-private partnerships to develop all kinds of energy sources."

This spirit of cooperation and comprehensive action is what lies behind the Investment Climate Facility (ICF) for Africa, an Africa-owned public-private partnership to make the continent a better place in which to do business. Endorsed by the World Economic Forum's Africa Economic Summit 2005 and the G-8, the ICF was launched in Cape Town with US$ 100 million in funding. Its objective: to remove obstacles both real and perceived to doing business in Africa by focusing on property rights and contract enforcement, reducing red tape, reforming taxation and customs, making financial markets more inclusive, facilitating infrastructure, increasing the flexibility of labour markets, promoting competition and controlling corruption and crime.

While previous initiatives may have gone awry, this time Africa may be in a perfect "sweet spot" of peace, stability and growth that will make a difference. "The political will is there," Jakaya M. Kikwete, President of Tanzania, assured participants. Africa may not get a better chance than now to blunt for good some of the sharp threats it faces. "Action is what counts," declared Niall FitzGerald, Chairman, Reuters, United Kingdom; Member of the Foundation Board of the World Economic Forum. "This is Africa's moment, not of greatest need, but of greatest opportunity."

"If we get paralyzed by the prospect of risk, we will cease to achieve anything in terms of economic development and growth." Sean M. Cleary Managing Director, Strategic Concepts, South Africa