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The Case of Africa: Islands of Opportunity in a Sea of Challenges

"Africa is humanity's last frontier in the search for development," President Jakaya Kikwete of Tanzania recently remarked.4 This last frontier mentality encapsulates the need for a catalyst, for fundamental change, to the manner in which business and development are approached in all BoP markets.

Understanding the unique nature of BoP markets, especially Africa, enables us to identify and address the barriers to transformative change. The important component is to see opportunities where others see the need to fix problems.

To understand the case of Africa, consider the empirical evidence. The economic and human indicators are dire. Over the past 42 years, $568 billion (in today's dollars) has flowed into Africa, yet per capita growth of the median African nation has been close to zero.5 Despite massive efforts, the number of people living on less than one dollar a day barely changed between 1990 and 2005, declining just 5 percent to 41.1 percent. An important factor to consider is that economic flow is diluted by population growth. Further, the share of the poorest 20 percent has not increased over the 1990-2005 period.

Over the same 15-year period, mortality rates for children under five dropped by less than 3 percent, and only an additional 5 percent of the population have gained access to basic sanitation, leaving 37 percent of people without this necessity.6 One composite for general progress across all categories, the Human Development Index, placed sub-Saharan Africa's rank in 2007 at 0.514, showing little improvement over the life of the index and ranking well below other regions.7

However, there is promise too. Africa is increasingly recognized for the breadth of commercial opportunities it provides. Its population numbers almost a billion with an estimated 42 percent under 18.8 The low level of development, combined with rapid population and economic growth, means opportunity for the taking.

The story of Africa's cellular operators is one compelling example. Africa is the fastest growing mobile market in the world with mobile penetration in the region ranging from 30 percent to 100 percent and in most countries exceeding the fixed line penetration.9

In 2005, the $3.4 billion Zain's acquisition of Celtel was one of the largest deals in emerging markets. In the process, African entrepreneurs like Mo Ibrahim have made fortunes. Similar opportunities exist in sectors such as financial services, healthcare, and infrastructure.

Africa's opportunities are stifled by the continent's performance as a business destination. African nations lag the rest of the world in economic competitiveness. Forty-eight out of the last fifty nations in the World Bank's Doing Business survey hail from Africa.

The gloomy picture painted by these rankings reflects a daily struggle for businesses. Routine procedures, such as the time to file corporate tax returns, take on average three times longer in Africa than in the West. Most businesses cannot count on consistent and affordable supplies of power, water, and other basic infrastructure.

The Survival Trap has also had an impact on Africa's standing in international trade. According to a recent World Bank study "Despite continued commitment to reduce tariff and non-tariff barriers to trade, Africa's share of world exports is on a downward trend. African countries have been unable to gain strong presence in the global manufacturing market and thus remain highly dependent upon a narrow range of primary commodities for their export earnings, leaving them vulnerable to market shocks."10

International aid strategy has failed to create sustainable prosperity, largely due to a failure to support business. A debate is currently raging between the proponents of more aid with Jeffrey Sachs as the lead spokesman and, on the other side, those who want Aid Dead, to borrow from the title of Dambisa Moyo's book.

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