Renewing Africa’s competitive spirit – Five lessons and opportunities from the global economic crisis

[Business Action for Africa]

Nicky Oppenheimer
Chairman, De Beers Group

As a consequence of the global economic down turn, African leaders face many difficult challenges and tough policy choices. How should Africa respond to the economic crisis and what are the lessons and opportunities we should pay attention to over the coming months? I am confident that Africa can rise to the challenge if we act collectively and if we accelerate our ongoing reform efforts aimed at greater competitiveness and economic diversity.

From my perspective, there are five key lessons to take out of the current crisis. Despite the evident weaknesses in global financial systems and regulation, globalisation remains a powerful force for good. The first lesson we need to recognise is that international trade and the flows of real investment across borders as drivers of growth are not what have failed and led to our current predicament. While it may be appealing to think so, my long term optimism about the benefits of globalisation remains as resolute as ever.

If anything, we should ensure we do not default to tempting protectionist measures. In fact we should actively take steps to open our markets and press others to do the same. The second lesson we have learned, in this respect, is that African leaders need to continuously engage with, and play a constructive leadership role in the global forums that address these key issues.

Falling remittances, commodity prices and aid flows will hit African countries hard. There is no doubt that many states, already fragile, could become even more so as a result. Recent experience has shown us that we can no longer assume a commodity super cycle. Lesson number three is thus a reminder that how well we prepare for the future depends on how well we use commodity inflows to broaden our economic base.

We need to ensure that efforts to reform global financial systems do not hinder the emergence of effective developing country financial institutions. We cannot remain at the mercy of costly finance provided by weak institutions. We need to build confidence amongst consumers that banks can be trusted with their savings, reinstate a sense of value in the banking sector and build a reputation for fairness and fair returns. Lesson number four is that in order for confidence in investment and credit systems to return we must seek appropriate reforms and greater transparency.
In the short-term African leaders will have to manage the economic and political fall out of lower revenues and aid flows. African nations will need to resist the temptation to play politics and roll back reforms to ease temporary domestic pressure. Key policies need to be protected, for example trade reform and health, education and infrastructure projects, which create the long term conditions for growth. We cannot discard the market related reforms which have acted as drivers of growth. Good governance, open markets and strong institutions remain fundamental to Africa’s development.

Finally, the fifth lesson is that there is an urgent need to improve Africa’s competitiveness. Competitiveness is the life blood of growth, and growth is the lynchpin of social harmony and political stability. By improving competitiveness and deepening integration with global markets, we can reduce vulnerability and increase growth. As the Spence Commission emphasised, sustained growth is not a miracle and it is attainable for developing countries with the right mix of ingredients. We need leaders who know how to advance growth, seize global opportunities, and who understand how to incentivise private sector investment to enable economic diversification and global integration.
In conclusion, long term priorities should not change despite the economic turbulence. On the contrary goals associated with the promotion of competitiveness should be accelerated. With growth and competitiveness as a national and regional priority, resources can be mobilised, policies written and new solutions brought to bear. This is our opportunity and it must be grasped.

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[Sidney Clouston]

Dear Mr Oppenheimer:

I will just focus on your first lesson. International Trade and if I may embellish on that because I want to include
the Millennium Development Goals of Agenda 21 of the United Nations interest. Consider the participation of the Poor in the business plan which we have near ready for the Sustainable Energy Center of Excellence and
the Biomas/ Biofuel products. These products need at first feedstock and therefore Rural Development is a
planned activity. Sustainable Development combined with Rural Development for Western Africa can be a way
to increase trade. The Poor with an income perhaps even a wage that permits some demand beyond basic food and water, which can be positive in nature for jobs not only in Africa but in Europe as well. Global Trade
can improve with demand. Feedstock for BioEnergy both electrical and transportation is now in demand and it
is anticipated to be so even more in the not too distant future. Furthermore, the lowering of Greenhouse Gas
is feasible because of root systems that sequester the carbon and a near + or - zero footprint of the harvested
feedstock. Rural Development can in fact lower the Slum populations and delivery of education to the new or
enhanced rural communities is planned. I would appriciate your help on addressing your first lesson with our
effort associated with the Energy Commission of NIgeria and the UN as well as NGO and For Profit Businesses
that are involved with the suggested by Kofi Annan at the World Summit on Sustainable Development (WSSD)
in 2002 as the Type Two Partnership framework. Two groups have invited our Businenss Plan. Accion - Credit
Swiss Bank and Barclays Bank of Dubai-London. May we continue a conversation?
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