Tuesday, June 12, 2012


The issues of the continent’s economy vexed the best development experts last week at the Africa Development Bank annual meeting in Arusha.

Africa’s economy continues to grow albeit slower than past years but a note of caution was sounded that even this growth might be under threat in coming years.

Uncertainty in the Eurozone and slowing growth in the leading emerging markets may see a lowering of demand for the continents commodities, reduced investment and aid flows will bet the key events to watch out for.

In crafting an African response to this renewed global turbulence the issues of the infrastructure, quality education and cluster formation – concentration of related industries, will be priorities in the short and long term.

But the continent is in agreement t that the private sector will drive this growth. The private sector is the creator of wealth and jobs.

The challenge then is how will the private sector be enabled to take its place as the engine of growth.

We not look very far beyond our borders or very  far back into history at the experience of western economies or even Japan’s post second world war experience to glean some clues.

Amedee Darga, the Chairman of Enterprise Mauritius, has it all worked out.

Speaking during the session “Embracing the service sector as a key driver of Africa’s future economic growth”  at the AfDB’s annual meeting Darga said he thought there was too much talk on the continent and little action.

“It’s simple. You decide on a desirable outcome in the future, keep it in mind and work progressively towards it,” he said with a hint of impatience.

“In Mauritius we decided that we were going to diversify away from sugar, we now have eight sector pillars holding up the economy.”

Enterprise Mauritius – almost like our own Uganda Investment Authority, is charged with accelerating the development of world class companies, but there has been and continues to be a price to pay for this ambition.

“Any government that thinks it can get something from the market without a trade off … it never works,” he said. He explained that to develop into an offshore banking center over the last 12 years they had to allow expatriate labour in to startup the industry because they did not have the required skills locally and provide concessions that other countries balk at.

“It goes back to what outcome you are looking for and what are you willing to pay top attain that objective.”

Almost in the same breath he had a caveat.

“If you think your economy is going to develop on FDI alone you are lying to yourself. You need an indigenous entrepreneurial class. And you have to make a conscious decision to grow this class,” he said.

But how do you prevent against the wrong people but with connections in government taking advantage of such an initiative at the expense of more deserving and competent entrepreneurs – crony capitalism?

“That is where governance comes in. The criterea for support is well laid out and parliament has oversight over the process. And  also don’t support one enterprise but several those who do not meet the objectives are cut off and we continue to support the winners,” he said. A response which makes you want to pack up and move on to the next subject.

Interestingly Garda said the major local winners in Mauritius are just about ten families, who have come through the Darwinian process and continue to benefit from government support based on their proven track record.

For Uganda then formula seems simple; earmark the strategic sectors you want to develop and what it would take to develop them, two identify the players in those sectors worth supporting and have a monitoring system that ensures that the support is being utilized the best way possible.

Even with this system there will be failures but these should serve as lessons going forward.

A credible indigenous capital base is critical if not only because they will invest more of their profits locally but can also serve as conduits for technological development and transfer in a way that the multinationals headquartered abroad can do.

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