‘‘Welcoming the International Year on Creative Economy for Sustainable Development: Creative Economy for Inclusive Development and Global Recovery’’

On 25th January, 2021, I had the privilege of joining the UNCTAD Trade Policy Dialogue for the Creative Economy as a Panelist to welcome the International Year on Creative Economy for Sustainable Development. Below are some useful highlights I shared at the dialogue session.

BACKGROUND

The Creative Economy contributes significantly to socio-economic growth and globalization. According to the United Nations, ‘‘the creative industries hold great potential for developing countries that seek to diversify their economies and leapfrog into one of the most dynamic sectors of the world economy’’.

Over the years, CCIs have served as a powerful tool for inclusive growth, sustainable development, inclusive participation, reduced monopoly and created several business & employment opportunities in Africa and beyond.

Despite the myriad of challenges the sector is faced with, it has shown economic resilience over the years. During the 2008 global recession, the creative economy thrived amidst rapid decline in international trade. It witnessed a spike in exports of creative goods and services, reaching $592 billion in 2008 – more than twice in 2002- indicating an annual growth rate of 14% during the period. This trade performance has been consistent, recording an average growth rate of more than 7% between 2002 and 2015.

BUILDING A SUSTAINABLE CREATIVE ECONOMY: WHAT IS THE IMPORTANCE OF THE CREATIVE ECONOMY? WHY IS IT NECESSARY TO INVEST IN THE CULTURAL AND CREATIVE INDUSTRIES IN AFRICA

The creative sector is gradually becoming a vehicle for sustainable economic growth, inclusive development, poverty alleviation and bridging the unemployment deficit in Africa. For many reasons, the creative sector is the future of Africa’s developing economies. As such, it is important for us to invest, leverage and explore its full potential.

CCIs are estimated to employ about 2,4 million people mostly through the informal economy, and generates $ US 58 billion in revenue on the continent, representing 1.1% of the continent′s GDP. Research shows that CCIs employ a much larger share of young people than other sectors. In addition, Cultural and Creative Industries also provide more entrepreneurship opportunities for women and youth. According to the Mastercard Index of Women’s Entrepreneurship (MIWE), Ghana has the highest percentage (46.4%) of women business owners, many of whom are in the creative sector. In the past few years, we have seen the emergence of many creative actors and entrepreneurs within Africa and the diaspora. From advertising, architecture, arts and crafts, design, fashion, film, video, photography, music, performing arts, publishing, research and development, software, computer games, electronic publishing, TV/radio, new media etc., these creatives, artists and entrepreneurs are leveraging on their creativity, ideas and intellectual property (IP), knowledge to build a more formidable ecosystem.

Due to the diverse nature of CIs, the development of the sector will lead to sustainable development across board. CIs are instrumental for socio-economic growth due to a number of reasons:

·        CI development implies concepts that are directly connected to sustainable development, such as intergenerational equity, diversity safeguard, precautionary principles and interconnectedness (UNCTAD, 2010).

·        CIs can easily adapt to sustainability rules and objectives as they do not rely as deeply as other industries on heavy industrial infrastructures (UNCTAD, 2008).

·        CIs are a platform for ethical business models by fostering innovation-led strategies as opposed to cost-cutting ones (UNCTAD, 2010).

·         Contribution to employment and high job creation potential (UNCTAD, 2008). Research shows that CIs account for 2 percent to 8 percent of the total workforce in a given economy (UNCTAD, 2010).

·        Promoting social inclusion, due to the nature of their grassroots activities that can link social groups and foster social cohesion (UNCTAD, 2008).

·        Influence on the education system.

·        The development of CIs also results in cultural value creation (UNESCO, 2010). Cultural value is essential to meeting society’s cultural objectives, which alongside the economic ones, are key to development.

·        The creative sector could enhance capacities for opportunity-driven creative entrepreneurs and industrial leaders to improve livelihoods and job creation opportunities. This would impact local economic development by generating economies of scale. Consequently, existing industries can be positively influenced, diversified and made more competitive. Furthermore, mentoring and coaching programs can be introduced and aptly monitored. This would induce creative attitudinal change, innovative and competitive mind-sets and the behavioral/technical skills required at various levels of the value chain system. Successful entrepreneurial efforts can amplify the reputation of the locality around a specific industry/product/service to further attract new entrepreneurs and clients and increase local external economies. Tapping and unleashing the creative potential of all actors involved as well as integrating rural/peripheral communities (who already work as artisans, producers and service providers in businesses) can result in their organization into “CI hubs” for regional and local development programs to sustain socio-economic growth and enhance shared value in other industries.

·        The development of a dynamic CI sector and the support provided to creative undertakings fosters greater adaptability. This leads to resilient entrepreneurs and a solid SME community, which in turn can have a positive impact on local economic growth and development. Developing creativity does not mean endowing people with one specific technical skill, but rather to promote creative entrepreneurial and design thinking as well as inventiveness (“thinking outside the box”) and resilience among employees, job seekers and entrepreneurs. In addition, endowing them with crosscutting skills and abilities that allow them to better capture new business opportunities, innovate and adapt to new techniques, materials, work situations, market changes and political circumstances will contribute to building the resilience of both individuals and communities.

WHAT ANNAN CAPITAL PARTNERS IS DOING IN THE CREATIVE ECONOMY

The impact investment market is on the rise and its growth continues to provide capital to

address challenges all over the world. Realizing this, we decided to bridge the gap between investors and investment opportunities in Africa by identifying impact investment opportunities and sustainable projects in emerging and developing markets across the continent. We identified the Creative Economy as one of Africa’s most burgeoning markets and major contributor to sustainable growth. Creative entrepreneurship plays a major role in developing dynamic CIs, through creation and innovation as well as bringing businesses and communities together in networks. It is more crucial than ever for creative entrepreneurs with business acumen, commercial abilities and emotional competencies to complement the usual skills and services of traditional artisans in order to transform the sector through a social impact approach.

African Fashion Foundation (AFF)

African Fashion Foundation is a non-governmental organization that empowers fashion designers and creative professionals from Africa and its diaspora to succeed in the global fashion industry. We provide professional and educational developmental opportunities in partnership with established players in the fashion industry to support the success and progression of the African creative economy. We have been able to invest in and support many budding designers and fashion brands on the continent. We have also launched various projects including Scouting for Africa, Kayayei Project, The Artisan Hub and most recently, Recycle, Rework, Reuse- a fashion sustainability project to address the issue of fashion waste and how to create sustainable product life cycles. 

Impact Fund for African Creatives (IFFAC)

Scheduled to launch in 2021, the Impact Fund for African Creatives (“IFFAC”) is a €100 million impact investment fund focused on creative businesses in the fashion and lifestyle industries in Africa. The Fund aims to address a lack of capital and management skills required to leverage the power of African creative and cultural industries. IFFAC intends to expand the social capital of African countries thus contributing to the United Nation’s Sustainable Development Goals and promote inclusive growth in these economies.

Conde Nast Orange Economy

The Orange Economy, will be published in partnership with Condé Nast International Private Publishing. The publication seeks to highlight an overview of Ghana’s creative economy; contributions, progress, drawbacks and the way forward. It will also set the pace to spotlight other creative economies across the continent.  

Ethos Club

Ethos Club is a community of impact focused change makers creating, collaborating, and innovating. Ethos Club intends to build that community. A community of creatives – in Africa - coming together to create, grow, and play in a collaborative environment. Ethos is a home for Africa’s creative community - a private members club and workspace for a diverse community of creatives, entrepreneurs, and thought leaders. Ethos Club will be launched later this year.

The Women’s Empowerment & Investment Group (WEIG)

The Women’s Empowerment & Investment Group (WEIG) is a women-led investment holding company set up to invest capital and expertise into high-potential Small & Medium Scale Enterprises (SMEs) that prioritize female empowerment & entrepreneurship. In 2020, WEIG, in collaboration with GUBA and Annan Capital Partners launched a women’s empowerment stimulus fund (COVID-19 Stimulus Fund) in response to the COVID-19 pandemic. WEIG in partnership with CNBC Africa and The Global African Investment Summit (TGAIS) also launched a webinar series, The Board Room Africa to interview policy makers and top CEOs in Africa on how they are pivoting their businesses, adjusting their strategies and building resilience post COVID.  

Frallain  

A dynamic creative sector can empower entrepreneurial-driven women, youth, rural and urban groups as well as peripheral communities to respond to market opportunities to produce innovative goods and services through ‘shared value’. This can be achieved by utilizing the given country’s rich creative cultural heritage and diverse creative knowledge/references of developing economies. A targeted environment of policy support measures, micro-credit schemes as well as venture funds and business support mechanisms need to be established and directed towards this end in order to attain sustainable results. That’s what Frallain seeks to do. Frallain Group is a leading promoter and provider of risk capital for African luxury brands. Frallain provides a platform with industry experts in Fashion, PR, Sales and distribution for the commercialization of these brands and integrating tangible social impacts into the brands' philosophies. We invest in brands that have a social impact approach geared towards women empowerment and job creation through local artisans and collectives in Africa.

Semblance Project

The Semblance Project offers digital fashion experiences through virtual and digital solutions to a smarter sustainable fashion industry.

THE IMPLICATIONS OF COVID AND THE OPPORTUNITIES FOR CCIS IN THE NEW NORMAL

Due to the devastating effects of the COVID-19 pandemic, the Creative Economy has been posed with many challenges. Nonetheless, many businesses have re-invented due to digitization and e-commerce, there are a lot of benefits CCIs can derive from the new normal despite the harsh implications of the pandemic.  

Digitization and technology have redefined the structure and market dynamics of CCI value chains, and led to changes in the creation, production, distribution, dissemination and consumption of cultural goods and services, as well as in the remuneration of creators. These include the dematerialization of some cultural products, direct connections between creators and consumers, the blurring of boundaries between cultural production, distribution and consumption, and increased connectivity between countries. Distribution channels have also grown tremendously (for example, Netflix, Google, Apple) providing broader and more access to catalogues of cultural works for consumption.

There were more virtual events, innovation and experiences – At the height of the pandemic last year, Congolese fashion designer, Anifa Mvuemba, launched a 3D virtual fashion show. This concept was widely celebrated.

On the other hand, it has also led to the increasing complexity of CCI value chains. A “hybridization of business models” is being consolidated with a growing number of companies with new business models that coexist with others that apply very traditional models. Digitization has also led to a concentration on a small number of privately owned global platforms, implying that economic interests and market optimization primarily drive investment in cultural and digital infrastructure. The crisis seriously affected the most lagging sectors (artistic crafts, performing and visual arts, cultural heritage) while at the same time significantly accelerated the growth of those that were already highly digitized (music, video games, animation and multimedia), or that were quickly catch up (film, TV / radio, fashion, books).

WHAT CONSTITUTES FOR LOW INVESTMENT IN CREATIVE & CULTURAL INDUSTRIES?

Despite being a burgeoning sector, many creative entrepreneurs and professionals have had to bootstrap their businesses or rely on micro loans (from family and friends) grants, stimulus funds, accelerator programs and venture funding opportunities to stay in business. Currently, the traditional financing market is not equipped to respond to the specific challenges and needs of the sector. These challenges tend to discourage investment, leaving behind very interesting alternative investment opportunities within the fashion industries among others.  

Although CCIs evolve in a great diversity of market segments, with different levels of demand and competition, there are some common characteristics that make them different from other markets and that are often neglected by financial institutions and traditional banks, for example:

·        Intangible assets: About 90% of the Creative Economy’s assets are intangible. The creative sector relies heavily on intangible assets such as intellectual property rights, copyrights, licenses, and royalties. The main problem is that banks and financial institutions do not recognize the economic value of such assets.

·        Long recovery periods: The value generated by these intangible assets take a longer period of time, with the time factor increasing the uncertainty of the value, making it difficult to ascertain the current market value. For example, a lot of things go into fashion value chain; from ideation, concept development, pre-production to post production. After launch, it might take a longer period for brands to recoup funds or make profit especially when they don’t have large scale distribution channels or bulk orders. Same for the publishing sector as well other sectors in the value chain.  

·        Guarantees: Most creative brands and businesses rely primarily on individual talent and very little on tangible assets. Therefore, banks cannot hedge the risk of their intangible assets with other collaterals.

·        Lack of framework: Currently, there is not much of robust legal or institutional frameworks and policies that protect the main assets of these companies - intellectual property rights. As markets go global, this protection becomes much more difficult for entrepreneurs to address on their own.

·        Passion projects:  Many creative companies are driven by passion and are established because their founders want to freely express themselves. In such instances, wealth generation is rarely the primary focus. These entrepreneurs may not always have adequate structure and technical know-how to run their passion from a business angle.

·        Project orientation: Most creative enterprises are project oriented. This often prevents them from developing a long-term "corporate" vision and relying on strong business models with clearly identified market opportunities in advance, making them less attractive to equity investors.

TACKLING THE DRAWBACKS: MEASURES TO BE TAKEN BY POLICY MAKERS, CREATIVE ECONOMY ACTORS AND PRIVATE INSTITUTIONS

Policy makers, creative actors, governments and the international community must respond quickly by developing policies to minimize the negative effects of the pandemic on the creative industry:

·        Develop a national stimulus fund which will support and allocate funding to CCIs in each country.

·        Allocate resources for investing by providing risk-controlled, concessional repayable loans and patient equity investments to boost the opportunities of the creative sector.

·        Provide training opportunities for CCIs in skills such as leadership and management, entrepreneurship and supply chain, as well as mentoring for the companies in which the new fund invests. There is a great need to improve the capacity of companies so that they can be subject to financing by the fund or other financial institutions (including angel investors and venture capitalists). 

·        Develop effective and robust polices as well as legal and regulatory frameworks for the creative industry

·        Invest in infrastructure development for the creative sector

·        Create awareness on the impact of CCIs

·        Strengthening of capacities, resources and training by investing in local content through human capital development and capacity building

·        Support business growth by enabling access to tangible and intangible assets for creative SMEs

·        Facilitate access to funding

 For more information on how you can support the creative economy. Kindly visit https://annancapitalpartners.com/   / https://africanfashionfoundation.org/.

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