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The enduring relevance of ‘African solutions to African problems’.
When the phrase “African solutions to African problems” was coined in 2007, it was hailed as a timely pledge for African autonomy and empowerment. At the time, there was a growing consensus that the cure to Africa’s ills could be found through continental integration and self-determination. In more recent years, though, the slogan has been dismissed as an empty utopian catchall, prone to the advancement of zero-sum interests. Ambassador Abukar Arman, the former Somalia special envoy to the United States, wrote last year in an Al Jazeera column that the motive to solve problems on African terms often tends to create new ones and “perpetuate dependency, exploitation and indeed subjugation.”
Despite the criticisms, the African solutions to African problems concept remains especially relevant today in economic terms and sheds light on how to create new investment trends that reject one-size-fits-all modalities.
Despite the criticisms, the African solutions to African problems concept remains especially relevant today in economic terms and sheds light on how to create new investment trends that reject one-size-fits-all modalities. Solid growth of African economies over the past decade is thanks in part to novel solutions to uniquely continental circumstances. Mobile transfer innovations like M-Pesa were revolutionary responses to limited banking penetration in many African countries. Many of Africa’s urban slums, with their constraints on transportation and infrastructure, have spawned micro-economies that adopt technological solutions to drive innovation. In these densely populated areas, a single mobile network tower gives economic power to people who lack a power grid, internet access and broadband. The U.N. claims that 85 percent of jobs worldwide are created in informal economies.
ABC looks at unique African economic trends that are opening new channels of prosperity.
“A city like Lagos has 20 million people, but just two shopping centers,” said the billionaire investor Ashish Thakkar in February at the Mining Indaba conference in Cape Town. “We are going to leapfrog in the whole e-commerce play.” The Mara Group founder was highlighting how e-commerce was fast becoming a substitute for traditional brick and mortar retail outlets. Indeed, larger online retailers like Nigeria’s Konga and Jumia have boomed in crowded cities that lack a viable postal system. According to estimates from a McKinsey & Company report, e-commerce could make up 10 percent of retail sales in Africa’s largest economies, resulting in $75 billion of annual revenue by 2025.
Rising middle class
Shoddy governance and low personal freedom have been identified as leading impediments to prosperity. Yet a growing African middle class has the chance to demand more from their governments, including greater accountability, better education and a friendlier business climate. Africa’s middle class is already increasing consumer power and driving private sector growth that will lead to more entrepreneurs, more innovation and higher standards of living. In Nigeria, the increase in disposable incomes has driven demand for financial services. More than 90 percent of Nigeria’s middle class has a bank account, according to Renaissance Capital, and more than half dined at least once per month in a restaurant. These are both signs of a durable consumer class.
In Sub-Saharan Africa, 90 percent of the rural population has no access to electricity. Renewable energy won’t be a panacea to Africa’s power shortages, but several rural areas could bypass the fossil fuel economy altogether through off-grid solutions. Projects that tap into abundant wind and solar energy in the Sahara desert alone have led to the creation of new enterprises and boosted job growth. Today, 11 million people in Sub-Saharan Africa use solar power and that figure is bound to grow as technology improvements and efficiency gains continue driving the price down. A modern photovoltaic panel per watt costs just $.30 per watt, compared to $1 per watt for a natural gas-fired peaking power plant. The price point explains why so much financing is going to renewable projects in Africa. In February, the new joint venture Lekela Power announced it would spend $1.9 billion to produce up to 900 million megawatts from wind and solar projects in South Africa, Ghana and Egypt. Even so, there is still a lot of room for growth.
In September 2013, women held 64 percent of seats in Rwanda’s parliament. This level of inclusivity is unparalleled anywhere in the world and it has prompted the enactment of key reforms that have given women more economic freedom. In other African countries, however, the participation of women in government and the economy is severely inhibited. But according to the latest Africa Prosperity Report, “the number of women in formal-sector businesses and in leadership positions is increasing.” Female entrepreneurs dominate in micro-enterprises. If they can expand their businesses into larger formal companies, this will spur greater growth.