Africa Rising in Business, Trade, Innovation, Deputy Secretary-General Says at Harvard Event, Urging Lifting of Barriers to Create Equal Opportunity

DSG/SM/1384
21 January 2020

Africa Rising in Business, Trade, Innovation, Deputy Secretary-General Says at Harvard Event, Urging Lifting of Barriers to Create Equal Opportunity

Following are UN Deputy Secretary-General Amina Mohammed’s remarks to the Harvard Business School event on “Africa rising:  understanding business, entrepreneurship and the complexities of a continent”, in Cambridge, Massachusetts, today:

Let me start by thanking Caroline and Hakeem for inviting me to this gathering of such an impressive group of young people from all corners of Africa and the world.  Let me also open with an anecdote that I think will get to the heart of what we are talking about today.

Not long ago, a few colleagues and I were walking through the United Nations and we saw a meeting sign outside one of the big 400-seat conference rooms:  “Blockchain and global financing”.  Fantastic, we thought.  The United Nations is embracing innovative financing.  Then we saw the next line: “Hosted by The Gambia”.  That raised some eyebrows — not mine, I should stress.  Blockchain in Africa?  People do not typically associate the two.  But yes, it’s a thing.  I immediately thought of the late Hans Rosling, the renowned statistician who spent his life trying to help people move beyond an “overdramatic” worldview.

Quite often, the data in the real world do not support the narratives in our heads.  Perceptions have currency, they matter — negative perceptions harbour the risk of causing adverse behaviour.  In fact, in Africa today there are:  more girls in school; more children vaccinated; and more Governments, such as Kenya and Nigeria, seeking greater cooperation with the private sector to leverage the benefits of blockchain technology.

We need a reset.  We need to define our own narrative.  Fortunately, we have a road map for doing precisely that.  The 2030 Agenda for Sustainable Development and the African Union’s Agenda 2063 provide a road map for inclusive social and economic development, democratic governance and peace and security.  They also offer a path for anchoring ourselves in reality, not myth.

In many respects, Africa today is a paradox.  The continent is home to some of the world’s fastest growing economies — Ethiopia and Rwanda experienced the second- and third-largest rates of increase in gross domestic product (GDP) in 2018.  But high inequality, both within and among countries, is preventing the benefits of that growth to be reaped by all.

You may have seen the headlines on Oxfam’s Annual Inequality Report this past weekend.  The world’s 22 richest men have more wealth than all of Africa’s 326 million women aged 20 and older.  Women in Africa often find themselves working in the informal sector, supporting the market economy with cheap and free labour and supporting the State by providing care services that should be provided by the public sector.  Economic inequality is built on gender inequality.

The continent also has one of the fastest growing populations in the world, with Nigeria projected to be the third most-populated country by 2030, after China and India.  Cross-border conflict has been exacerbated by climate change, with devastating impacts on economic growth.  Weak institutions and corruption further hinder growth that benefits all.  Africa itself understands this, and both the 2030 Agenda and the African Union’s Agenda 2063 are meant to chart a more hopeful course.  The United Nations, for its part, is launching a Decade of Action for delivery and opportunity for our common Sustainable Development Goals (SDGs).  I would like to highlight three key areas that will drive Africa’s economic and social development in the crucial years ahead.  First, the power of business and entrepreneurship; second, the opportunities created by the newly adopted African Continental Free Trade Area; and third, the leapfrogging potential offered by technological innovation.

Let me take them each in turn.  First, African entrepreneurship.  Two facts characterize Africa’s business environment:  it is dominated by the informal sector — 65 per cent of workforce participants are informal.  And, when it comes to trade, extractive commodities such as oil and metals still dominate, as they have since before independence.  Historically, much of the entrepreneurship in Africa has been either informal or driven by State patronage.  Enormous challenges make entrepreneurship, innovation and business difficult, including limited and unreliable infrastructure, lack of access to capital and credit, complex and slow Government bureaucracy, and limited legal recourse.  Another key challenge is not unemployment but underemployment and the lack of decent jobs, particularly for women and young people.  In the decade ahead, 170 million African youth will enter the job market.

Despite these inhibiting factors and trends, entrepreneurship in Africa has continued to grow.  Tech, in particular, has grown from a handful of innovation hubs — like Cc-Hub in Lagos — to more than 600 in 2019.  In 2019 alone, African venture funding is estimated to have reached over $1.3 billion.  The Doing Business index showed that 5 of the 10 most improved countries are in Africa.  Beyond tech, Africa’s business giants — such as Dangote Group, MTN, Safaricom, Aspen Pharmacare, and Ethiopian Airlines — are continuing to advance Africa’s construction, consumer goods, telecoms, pharmaceutical and aviation industries.  According to the 2017 African Economic Outlook, at least 22 per cent of adults in 18 countries are starting a new business.  On average, 38 per cent of entrepreneurs in Africa are aged 25 to 34, with a median age of 31 compared to 36 years in East Asia.  Compared to other regions, women in Africa are twice as likely to start a business.

Leila Janah, founder and CEO of social enterprises Samasource and LXMI, once said that “talent is equally distributed, opportunity is not”.  It is crucial for the future of the global economy and stability that young people have access to inclusive, decent employment.  Bright spots of entrepreneurship and cutting-edge African innovation give reason to be hopeful.  Some well-known entrepreneurial successes include:  Andela, a “talent accelerator” linking remotely working African tech engineers into Silicon Valley firms; Jumia, the “African Amazon” and first African tech company to reach “unicorn” funding status; and M-Pesa, — the revolutionary Kenyan mobile money application.

Each of these firms generated thousands, and in some cases, tens of thousands, of income and livelihood opportunities, that potentially reduce poverty and inequality.  But successful entrepreneurship development will require the support of the international community, a conducive domestic regulatory framework for business and investment, and a vigilant and assertive civil society that holds Governments accountable for their actions.

Both the 2030 Agenda and Agenda 2063 highlight that countries thrive when the private sector thrives.  Twenty years ago, former United Nations Secretary-General Kofi Annan called on the global business community and the United Nations to initiate a global compact of shared values and principles to give a human face to the global market.  Since its inception, the United Nations Global Compact has operated with the understanding that when businesses unite, they can be a powerful force for good by upholding universal principles in the areas of human rights, labour, the environment and anti-corruption.  By helping broker partnerships between African Governments and business, 10 Global Compact Local Networks across Africa are helping address poverty and inequality, constraints to economic exchange, illicit financial flows and the migration of skilled labour.

African businesses — including entrepreneurs — have an essential role to play in supporting African sustainable development.  Today, Secretary-General António Guterres has prioritized the Decade of Action to achieve the SDGs with a special focus on climate action and gender.

On climate, all 54 African countries have adopted Nationally Determined Contributions (NDCs) — national climate plans highlighting climate actions Governments aim to implement for mitigation and adaptation to climate change.  By driving fundamental changes in Africa’s energy mix and transport modalities, these NDCs harbour great opportunities for business, and we are increasingly seeing collaboration between government and enterprises on implementing NDCs on the continent.

Third, let me turn now to the African Continental Free Trade Area (AfCFTA).  This landmark step creates an entirely new entrepreneurial landscape.  The Africa Continental Free Trade Area is the world’s largest such zone in terms of the number of participating countries.  With its five pillars focusing on:  i) Trade in goods, ii) Trade in services, iii) Intellectual property rights, iv) Competition policy, and v) Investment, it aims to liberalize trade within a market of $2.5 trillion and 1.3 billion people.

It will help address the challenge of scalability in Africa, where many markets are small, and build regional value chains.  The AfCFTA helps address the challenge of scalability in Africa, where many markets are small — 21 have GDPs less than $10 billion — and build regional value chains.  This helps to create opportunities for businesses and entrepreneurship development by creating regional markets and business networks for local businesses.  By July of this year, the Trade Area will help consolidate the African market by beginning to reduce tariffs on 90 per cent of goods traded between African countries, while creating mechanisms to simplify and harmonize procedures, logistics and standards.

Over the course of five years, for Africa’s middle-income economies — and 10 years for its least developed economies — tariffs on most of intra-African trade will be eliminated.  Importantly, the continental trade agreement also immediately tackles non-tariff barriers — those rules and cumbersome formalities that increase the time and costs of trading across borders.  By making formal trade easier and less expensive, the Trade Agreement also helps to transform Africa’s heavily informal-sector dominated economy.

Informal traders dominate cross-border trade across corridors, such as Lagos or Abidjan, and will largely benefit from the anticipated better trading conditions.  Moreover, women are estimated to account for 70 per cent of informal cross-border traders in Africa.  When engaged in such activity, they are particularly vulnerable to harassment, violence, confiscation of goods and even imprisonment.  By reducing tariffs, the AfCFTA makes it more affordable for informal traders to operate through formal channels, which offer more protection.

Though the AfCFTA bears much fruit, it must be sufficiently nurtured.  A recurring challenge with Africa’s other regional trade agreements has been lack of implementation.  Leaders must see through the commitments to which they penned their signatures, and they must be encouraged by the private sector that seeks to benefit from these changes.  This is an area the United Nations Economic Commission for Africa is supporting.  Already, 18 countries are being supported with national AfCFTA implementation strategies, 15 of which should be finalized by the end of 2019.  These strategies help identify countries’ comparative advantages within the African market and ensure a coherent and strategic approach towards both AfCFTA implementation and complementary measures.  The Free Trade Agreement also advances the integration of Africa into a digital single market and creates opportunities to grow Africa’s digital economies.

Increasing infrastructure and deploying the right policies for e-commerce would enable the large informal sector in Africa to market, receive payment and make purchases with international buyers, thus increasing the scale of the market — as witnessed in the dramatic rise of trading via social media platforms.  New technologies can provide access to markets that were previously closed and give customers direct access to products previously controlled.  The International Trade Centre has estimated that the market size of e-commerce in Africa would reach $50 billion in 2018, a significant jump from $8 billion just five years earlier.  McKinsey has projected that it will reach $300 billion by 2025 — a further leap.  Digital trade also creates the opportunity to export a greater number and diversity of goods to a larger pool of countries.  Trade within services is also increasingly digitalized across a range of sectors, such as accounting and health care.

The Digital Financial Services market in Africa also looks very promising.  The link between financial inclusion and development is well recognized, and financial inclusion plays a significant role in attaining many of the Sustainable Development Goals.  Africa uses more mobile banking than all other developing regions put together.  The use of financial technology, in particular, mobile money, has become increasingly widespread.  For example, Kenya is ranked twenty-sixth worldwide in the Digital Financial Inclusion Rankings, while in Zimbabwe more than 85 per cent of financial transactions are now performed digitally.

Yet 500 million Africans do not have a basic legal means of identification, with women disproportionately lacking identification.  Digital ID together with civil registration can be a foundation for trusted identity services both nationally and regionally.  The benefits of a legal identity include gender equality, social protection delivery, financial inclusion, improved governance, safer migration, superior health delivery, enhanced refugee child protection, reduced statelessness, and better access to land and property rights.  With robust privacy, data protection, cybersecurity laws, and enforcement, digitalizing ID along with e-government, e-commerce, e-payments, education, and entrepreneurship provides a pathway to the achievement of inclusive growth and the SDGs.

In these ways and more, Africa is rising.  The opportunities and potential created through supporting businesses and entrepreneurs on the ground; greater trade and cooperation between economies; and harnessing the potential of technological innovation, offer a bright path for the continent, especially its youth and women.

I have seen so many examples of the fantastic businesses started by young people on the continent; two years ago I met Dysmus Kisilu, a young Kenyan who saw that smallholder farmers in his country had trouble accessing stable electricity.  He took this challenge head-on and founded “Solar Freeze”, a company that provides renewable energy solutions, such as solar-powered irrigation kits and solar-powered cold storage units, to help farmers increase agricultural productivity.  His company has thus far worked with over 3,000 small-scale women farmers in Kenya to increase agricultural yields by more than 150 per cent since 2016.

Across the continent, business and regulatory improvements are afoot.  According to the World Bank Ease of Doing Business Rankings, Kenya, Rwanda and Zambia are now among the world’s top 10 economies in terms of getting credit.  Since 2003, the average time taken to start a new business across Africa has plummeted from 62 days to 20.  In addition to adopting policies that have strengthened doing business, African Governments have invested in much-needed infrastructure aimed at easing supply side constraints.  Access to electricity on the continent has improved, while, for example, the Senegambia bridge supported by the Africa Development Bank that opened a year ago, has lowered costs for doing business within the Gambia and between the Gambia and Senegal.

Nonetheless, infrastructure and other development needs have come at a cost for African Governments.  Debt levels rose from 40.1 per cent of GDP in 2012 to peak at 59.1 per cent of GDP in 2017, while the number of countries with debt-to-GDP ratios above 55 per cent doubled between 2011 and 2019.  It is, therefore, imperative that countries adopt policy options — such as domestic resource mobilization, increased concessional borrowing and place emphasis on policies for efficient financial management — to avoid debt distress that could undo the gains achieved so far.

This brings me back to Leila Janah’s quote that I mentioned before — “Talent is equally distributed, opportunity is not”.  Time and time again, we see that when we remove obstacles for entrepreneurs and give our young people and women the opportunity and tools to go into business, they will thrive — to everyone’s benefit.  Africa is rising, and that rise is being powered by an African narrative and rebooted African leadership.  The United Nations is Africa’s strong partner across this work.

I look forward to hearing your thoughts this evening.  Thank you again for inviting me to be here.

Thank you.

For information media. Not an official record.