African lessons that Enabled Growth

South Africa’s Finance Minister, Enoch Godongwana, recently delivered what was widely seen as a practical and pragmatic Budget Speech for the country. It contained some relief for embattled consumers, emphasized building the energy sector as an enabling infrastructure for the economy, and offered a renewed focus on small business, which is a key creator of jobs.

But will it be enough to get the country’s economy going again? Right now, the jury’s out.

The reality is that the 0.9% growth rate mooted by the Minister is probably not nearly enough to address South Africa’s fiscal risks and ambitions. And that got me thinking: how have other African countries in similar positions been able to kick-start their economies? What have their leaders focused on?

A prime example that comes to mind is former Liberian President Ellen Johnson Sirleaf, who in 2005 inherited a country that had just emerged from a brutal civil war. She focused on rebuilding the country, attracted billions of dollars in foreign direct investment, negotiated billions more in external debt forgiveness, and saw the lifting of UN trade sanctions. She increased the national budget from $80 million in 2006 to over $672 million in 2012, with an annual GDP growth rate of more than 7%.

Today, Liberia’s growth is projected to reach 4.3% in 2023, driven by the expansion in mining, services, manufacturing, and agriculture.?

Zambia is another flourishing success story. Its GDP grew 4.6% in 2021, thanks to high copper prices, post-election market confidence, and continued recovery in agriculture. Economic activity remains positive, with a strong trade surplus supporting a healthy current account surplus.?

Africa’s biggest economy, Nigeria, hit a 3.52% year-on-year growth rate in the three months through December 2022, compared with 2.25% in the third quarter, according to its National Bureau of Statistics. The country also leads the continent in fintech innovation, raising $1.2 billion in venture capital funding in 2022 alone.

What lessons can other African countries (and businesses, for that matter) take from these success stories? I see several golden threads that offer a way for our continent to accelerate into its potential.

They get their houses in order.

The research is clear: there’s a direct correlation between a country’s ability to maintain rule of law, control of corruption, and accountability, and that country’s economic growth. In other words, governance matters.

So the fact that two of the continent’s biggest economies, South Africa and Nigeria, have been ‘greylisted’ by the Financial Action Task Force (FATF) certainly doesn’t help their efforts to grow GDP. What the greylisting says is they aren’t being decisive enough in tackling illicit financial flows. The message is simple. If you’re serious about growth, you’ll double-down on governance, compliance and transparency.

They don’t tell, they show.

On the face of it, South Africa’s Budget Speech said all the right things. But saying is one thing. Doing is another. To rebuild Liberia’s economy, Ellen Johnson Sirleaf rolled up her sleeves and got to work. She went down to grassroots level herself to clear blockages and facilitate growth. As business leaders, we know this: success isn’t built by sitting in your ivory tower. It’s done by building relationships and leading by example.

They invest smartly in infrastructure.

The World Economic Forum sums it up beautifully when it says the future of people and the planet will be shaped by the capital investments realized over the next 10-20 years. The right investments ‘can propel more efficient, cleaner, and inclusive economic growth and create further private sector opportunities,’ says the WEF.

South Africa’s Budget Speech showed some bold moves that aim to turn its current fractured energy parastatal into a driver of new energy sources for the country and the entire region. Countries that take their energy and logistics destinies into their own hands are putting themselves on a fast track for growth.

Right now, every country and business is looking for ways to grow in the face of the global permacrisis. Whether they succeed depends on how well they do the basics.

It’s time for our continent to stand up and be counted.