I am by nature an optimist. A long and challenging life has tempered that optimism with a large dose of realism but I am definitely a “glass half-full” kind of man. As a regular contributor to The Exchange I don’t really want to blame another contributor for tipping me over the edge into downright pessimism but, having read the excellent piece by Eric Kimunguyi entitled, “Europe taking on the world to lock out agriculture” I am not of good heart. In fact, I cannot remember a time when I have been less optimistic about the financial future of the world economy.
The world financial system is even sicker than the world’s population. The Covid-19 pandemic is still having devastating effects on human health and wealth around the world – some 18 months after it first appeared. The world’s leading economies are broken and are still printing money to subsidise their balance sheets as the chill wind of inflation begins to blow across the world.
If we are waiting for the Europeans and the US to rescue a post-Covid-19 East African economic bounce-back then we will wait in vain. For far too long we have all been guilty of looking at the export markets of Europe and US for our goods and services as the promised land of greater volume and higher profit. This has often meant that good African businesses have neglected their home markets, and even the continental market, to pursue the dream of Dollars, Euros and Pounds.
My strong sense is that the post-Covid-19 world will move away from globalisation, localise its supply chains as much as possible, and that the world will become a far more protectionist place. Eric’s aforementioned article talks about the hammer blow to Kenya (and all of East Africa) if the European Union is allowed to redefine the parameters it uses to judge whether food is safe or not – and therefore whether it is permitted to be imported into Europe. There is no scientific basis for this move which in my opinion is being implemented only to create barriers to non-EU farmers and offer agricultural opportunities for the woefully poor and under-employed southern half of the EU.
Hass Avocado is the latest agricultural craze here in Uganda. Green gold – smallholders, subsistence farmers and commercial growers alike spent much of 2019/20 planting the avocado trees that would make them rich. As you enter Kigezi from Ntungamo there is even an Avocado House with a huge Hass avocado model standing outside it. The only viable export destination for all these ripe avocadoes is Europe and the UK. But if Europe doesn’t want them, what then? And don’t forget that the continent of South America also wants to sell into Europe – and all this at a time when European consumers are more and more aware and uncomfortable with the environmental consequences of “food miles” – the distance food travels from farm to plate and the effect that has on our wonderful but fragile planet.
There are many other warning signs that the global economy we have become so used to is not in good shape economically, politically or psychologically. A vastly overvalued stock-market, inflation increasing, massively indebted economies, global tax legislation to punish corporations that attempt to minimise taxes, a huge increase in non-performing loans, a spiralling housing market in the UK, a level of government indebtedness in Africa to China and World Bank that is unsustainable and the continued rise of populist politicians across the globe. Incredibly it appears that the orange one is planning another Presidential bid in the US. What’s to feel positive about?!
Only this – that Africa is a continent of 1.3bn people with an increasingly educated young population – it is a huge market in and of itself.
Given that history has proven time and time again that Europe and the West cannot be trusted in their dealings with Africa I strongly believe that now is the time to concentrate all of our business and investment efforts within Africa and to create businesses and investments that do not require income from outside of Africa to justify their existence and make them viable.
Export needs to be the icing on the cake and not any part of the main ingredients. The Indian economy finally realised this truth about three years ago. Every tech business in India used to be asked “How do we scale this outside of India?” One day someone woke up and realised that you don’t have to take a great Indian business to the US because there are 1.36bn people locally. Who needs 328m Americans?!
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Of course the opportunity for Africa is very different to that of India – we are a much bigger geographical area; we are made up of more than 50 sovereign nations, and we have a huge number of languages. But the African businesses that will thrive and survive in the next 20 years are those that can exploit the African opportunity by building businesses that are profitable in their country of origin first, their neighbours second, and the broader African economy thereafter.
The areas that I believe are the most exciting for exploitation by Africans for Africans are as follows:
- Education – the old Western education models are no longer fit for purpose and we need to rid ourselves of the poor delivery methods and the irrelevant curricula. A digital infrastructure offers a platform on which to deliver outstanding and relevant education to Africans of all ages.
- Logistics – from moving people to their workplaces to shipping online shopping to the purchaser Africa has a long way to go to offer a seamless and enjoyable customer experience. There is huge opportunity here.
- Health and wellness – as life expectancy moves upwards quality of life becomes more and more important. African products for African consumers!
- Agro-processing – it has often been said that Africa could feed the world. Africa needs to start feeding Africa with foods it processes itself before, perhaps, sending those processed goods to Europe and the world without fear of exclusion.
- Pharmaceuticals – like many in Uganda I am waiting for a second dose of Covid-19 vaccine that may never come because of the health crisis in India from where the majority of the shots are sourced. This is insane. East Africa is a far cheaper place to manufacture the medicines that we need and this is an area where there is a moral and political imperative as well as a financial one.
There is plenty of private money hoarded in bank accounts. The job for all of us who love Africa and want to protect our countries, our continent, and our own businesses is to harness some of the venture capital and private equity to equip us to stand alone profitably.
Jon Pedley is Chief Operating Officer, Investment Owl.
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