Africa's business climate new priority

By Mark Kapchanga Source:Global Times Published: 2012-11-27 20:45:06

Nothing, it seems, is as painful in Africa as its escalating poverty levels. The number of the needy continues to rise, despite efforts to check it.

The problem is predominant in rural areas, where more than 70 percent of Africa's population lives. Here, people depend on agriculture for food and their livelihoods.

The erratic rains, coupled with costly farm inputs have forced many of those living in these regions to abandon their key source of income. This has worsened the situation, with latest figures indicating that more than 218 million people in the continent live under extreme poverty. This means they cannot access basic needs such as education, medical care, food, shelter and clothing.

Eastern and Southern Africa are the worst hit zones, accounting for the world's highest concentration of poor people. While there have been a number of theories on the reasons behind the escalation of poverty in Africa, there is a consensus that colonial systems played a major role in this.

They brought into the continent policies and institutional structures that only favored urban zones. This meant that rural areas would continue being under-productive and vulnerable to attacks from food scarcity, unemployment, insecurity and killer diseases.

The rising insecurity and HIV/AIDS pandemic in these regions have made matters worse.

The rural population in Angola, Burundi, Democratic Republic of Congo and Uganda rely heavily on donors and relief support. However, a sign of reprieve is in the offing with the coming of Chinese investors in the country. The "going-out" policy, which Chinese firms have perfected, has seen huge plants set up mainly in rural areas. The approach involves competitively acquiring strategic resources, establishment of new markets and expansion of international trade for Chinese exports.

Unlike other developing regions, Africa's population is turning out to be more youthful by the day. It is projected that young people will make up 75 percent of the total population proportion by 2015. However, the number of the illiterate has also been soaring. Currently, over 133 million young people, or 50 percent of the youth population, are illiterate.

To many people, this might turn out to be a huge challenge for Africa in future. However, China seems to have spotted the potential these young brains might have. Its deliberate efforts to set up shop in such high-risk areas with poor roads and lack of electricity tell it all - it is determined to transform Africa's future.

Already, some firms are engaging in corporate social responsibility programs that have seen them stock books in school libraries, connect learning institutions to electricity as well as sponsor bright but needy students in different fields.

In turn, China would be banking on this massive population to propel its labor-intensive businesses such as modernization of roads, energy and mining.

For two years now, Africa has been the third largest recipient of Chinese foreign direct investments after Asia and Europe, with the amount averaging $90 billion. These funds have been invested in seven key blocs, known as Trade and Economic Cooperation Zones, which China has identified in the continent. They include Zambia, Mauritius, Nigeria, Egypt, Ethiopia and Algeria.

In a further development that may turn the once ignored rural areas into productive zones, China is also extending loans to small- and medium-sized enterprises. It has already stated that it will provide $1 billion for enterprising youths.

By the end of 2009, Chinese companies had provided hundreds of thousands of employment opportunities for the local people, increased the host countries' export revenues and improved the people's living conditions.

As China investors penetrate further into Africa's rural areas, however, it is critical that it is given all the support it needs. We have seen situations in the past where investors propose to put up a multi-billion investment in such regions, but due to poor security, such developments fail to take off. Africa must afford such a basic need for business community.

This calls for a concerted effort for authorities in Africa to ensure business climate is improved.

It is discouraging to see international investors exposed to bureaucratic and normally duplicating licensing procedures. It is indeed time that all new businesses licensing requirements were put under one roof to ease the registration procedure.

This is how Rwanda has managed to be international investors' country of choice in the continent.

The author is a journalist on African issues based in Nairobi, Kenya. mkapchanga@gmail.com



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