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This chapter is from the book

Entrepreneurship Is Alive and Well in Africa

At a lecture I gave to a group of entrepreneurs at the Lagos Business School in 2006, the question came up once again: What about the role of politics in business development? This is a natural question, and the political environment can have a tremendous positive or negative impact on business development. This can be seen in the serious rioting in Kenya over the presidential elections in December 2007, as I was finishing this book, which killed more than 1,200 people and displaced more than 300,000. Political rivals Mwai Kibaki and Raila Odinga ultimately negotiated an end to the conflict through a power-sharing agreement. (Despite these problems and their impact on the tourist industry, business bounced back quickly. The planned IPO of Safaricom in April 2008 sparked an "IPO fever," which attracted many first-time investors such as kiosk owners and taxi drivers.) Certainly, more stable governments, good economic policies, and pan-African initiatives such as the New Partnership for Africa's Development (NEPAD)—as well as private initiatives such as the Ibrahim Foundation's governance prize—are having a beneficial impact.

The African business environment is continuing to improve. A 2006 report from the World Bank's International Finance Corporation concluded that Africa had moved from last place to third for improvements in ease of doing business. (Although the rate of improvement was high, the highest-ranked country on the continent for ease of doing business was South Africa, ranked 29th in the world.) Countries such as Tanzania, Ghana, Nigeria, and war-ravaged Rwanda were among the most improved. At least two-thirds of African nations had achieved at least one positive reform.18 Among the improvements are better governance, the deepening of democracy, cancellation of the debts of 14 countries, signs of reductions in tariff barriers, and positive African state interventions in Sudan, Côte d'Ivoire, and the Democratic Republic of Congo.

Haiko Alfeld, director for Africa of the World Economic Forum, noted in 2006 that the continent has "emphatically and irreversibly turned a corner." African Development Bank president Donald Kaberuka said in a summer 2007 interview in the new publication, African Banker (the publication of which is also a sign of the growth of banking and investment), the economic climate for Africa "is at its best in 30 years."19

However, entrepreneurs and successful businesses are not waiting for governments to get their acts together. These entrepreneurs have built their businesses through the twists and turns of economic, political, and military unrest. It requires great flexibility. When the Nigerian government banned imports of furniture and clothing, retailer Park n Shop quickly went into the furniture manufacturing business. It replaced an entire floor of imported furniture in its Lagos store with the products of its own domestic manufacturing. When government restrictions on gasoline all but shut down gas stations in Zimbabwe, they converted themselves to restaurants. Small entrepreneurs in Victoria Falls turned their private homes into gas stations, making runs across the border to neighboring countries for cans of petrol.

The entrepreneurial spirit is alive and well in Africa. Entrepreneurs solve problems. Take away electricity, and they sell generators and inverters. Take away a stable financial system, and they make their money on speculating on foreign currency. Take away their employment, and they set up kiosks in the street. Entrepreneurship and the development of consumer markets may be a more clean, stable, and powerful driver of long-term progress than political reform. Professor Pat Utomi of the Lagos Business School once suggested, only partly in jest, that if all the oil in Nigeria were given to the soldiers and politicians on condition that they would leave the nation alone, the nation would be better off.20

African countries have proven remarkably resilient. Idi Amin's repressive regime in Uganda drove out not only Indians but also many of their businesses, including Kakira Sugar Works, founded by Muljibhai Prabhudas Madhvani. He had arrived in the country from India in 1912 and set up a trading firm in Jinja. The Madhvani Group was nationalized, and all Asians were expelled by Amin on August 5, 1972. The company's production continued to decline until 1983, when it was shut down. After Amin's overthrow, the new Ugandan government invited the Madhvani Group back into the country in 1985 in a public-private joint venture, and Madhvani Group acquired 100 percent ownership of Kakira Sugar Works in 2000. When it needed more power, the company began to construct a 20-megawatt power plant, which will allow it to burn sugar byproducts and sell energy back into the national grid. When this cogeneration power project is completed in 2009, electric power sales will exceed sales of sugar. It was a long, hard road, but the business has come back stronger than ever.

Africa's success in spite of politics is not so different from the story of India's rise. A few years ago, a poster at the World Economic Forum in Davos summarized the nation's progress: "In ten years—three elections, three governments toppled—one direction." Although we often emphasize the way that politics affect business, remember that business affects politics, and market development has a stabilizing influence on the economy. While politicians look to change regulations and charitable organizations look to make up deficiencies, entrepreneurs create wealth. They ask: What are the opportunities?

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