Africa Business Communities

Maria Auma: Africa Economic Integration - Leapfrogging to the Future

Recently I have been doing a lot of reading ahead of a couple of conferences that I will be attending this year. A lot of the issues reiterated strike home one time too often, and I felt that I should speak out my thoughts regarding the impact this has on Africa as a whole.

First of all I would like to say thank you to those Africans that are working tirelessly to turning Africa’s dialogue around, the likes of Aliko Dangote, Chinua Achebe, Chimamanda Adichie, President Paul Kagame, Ashish Thakar and the countless entrepreneurs re-writing the story of Africa. It is their belief in Africa’s potential both past, present and future that gives hope to the strategic direction of our continent. But this article is not simple meant to pour out praise to pioneers of industrial change. Rather, it is to bring about a rude awakening to the status-quo that is Africa. Let us begin.

Cost of Trade:

I am sure many of you will agree with me that Africa is indeed the most expensive continent in the world to transact trade. Travel by flight is almost unfeasible for many the average entrepreneur that is considering expanding their client base. A two-way flight from Entebbe to Cameroun is twice as expensive as booking a round trip to Dubai from Entebbe. I don’t wonder why most of my friends end up doing business with United Arab Emirates more than they would do with any other African country. And yet, there is room for us to trade with each other. The population of Africa alone is 1.166 which makes up 23% of the World’s total population. If you think about it, even with the average 2 dollar a day conundrum, we could be able to exchange services at a fairly reasonable price. Of course for this to work, there will have to be a lot of economic re-adjustments especially with regards to import and export taxes, excise duty, VAT and visa fees running across inter-trade borders. We should be able to trade goods and services at reasonable prices between each other without lumping on tax after exorbitant tax. It’s crippling to our growth to say the least.

Many times I keep wondering to myself why I have to pay exorbitant visa fees moving within Africa when the same mileage would cost me more than half the price in Europe, or China. What is wrong with our system that we cannot see the importance of creating an enabling environment in Africa? In East and Southern Africa, there are low-cost jets that are being introduced to restore balance in the supply and demand curve, namely Easy Jet and Fast Jet. But as much as their prices are fairly affordable to economy class passengers of established air carriers, they are still not affordable to the target market that they were created for. Perhaps this could be a problem with pricing as a whole in Africa, or with the minimum wage of working individuals – that is a macro issue that demands attention in its own right.

I tried discussing this with a partner in Kenya, and he disclosed to me that he would not see the economic sense in booking a flight to Entebbe from Nairobi if ultimately the business he was going to transact in Kampala could not cover the cost of the air fare. I did see his point here, and this is a barrier to entry that a lot of entrepreneurs struggle with; paying through your pocket for an air ticket without the guarantee that you will be able to recoup that expense.

E-commerce and the Tech Era

In order to be able to transform Africa’s economy, we need to be prepared to make drastic changes. African governments should stop thinking about Africa as a “scrambled and partitioned” continent. Those days were meant to mark territory and those days are over! If we are to leap-frog into the future, we need to break down those very barriers that hinder our growth. In the tech space for example, e-commerce products like Lamudi, Jovago, Hello Food of AIG and Kaymu have found a way to side-step country boundaries and virtually make money online. However, these products still face the challenge of market penetration, pricing and relevance. Of the three, pricing is the most significant.

I have used all the three services and find that as much as the intent to deliver services is sincere and good, the price structure is unreasonable and borrowed from the American business model where the almost 80 per cent of the entire 230 million adult population own smart phones and have credit cards with online linked accounts to quickly make a transaction. In Africa the reality is drastically different. A small majority of the working class knows the difference between a debit and a credit card, and even fewer have one and know how it works. Electronic payment is largely shunned upon as untrustworthy and fraudulent with most business men preferring to do an EFT within the safety of the traditional bank. I for one, have embraced the technology era, and use e-payments for the convenience it provides.

I digress. If you have ever tried ordering from HelloFood you quickly realise that the price almost doubles from what you would have paid had you simply walked into the same restaurant. Therefore, why would a customer spend more for the same, even if the idea is to save them the time of having to go to the restaurant? Isn’t there a better way for companies like HelloFood to restructure their pricing and find better cost-sharing models that will still allow them make a decent profit margin?

When pricing products or services in Africa, we need to keep in mind that our earning power primarily differs from that of China, Europe, and the US – unless of course we are designing the service for the rest of the world except ourselves, which would very well defeat the purpose of inter-trade and the objective of strengthening our economy.

Infrastructure Development

I had a light-hearted conversation with Ndubuisi Ekekwe, founder of African Institution of Technology regarding an article he had written for the Havard Business Review and he revealed that in order for e-commerce to flourish, we need to invest more in the infrastructure that will support these sectors. If you look at the history of America’s economy, you will realise that it had to undergo an industrial revolution at various stages to expand and grow. In case, you are not much of a reader, you will appreciate the special documentary, The Men Who Built America that will give you an insight into how America became what it is today.

A juxtaposition of America then and Africa now will show you that we need to invest in our transportation, manufacturing, telecommunications and mining sectors in order to enjoy the fruits of economic growth. Roads, railways and air carriers serve to connect and transport goods and services from one place to another, without which we cannot trade. Are we connected enough, or are we operating under limited capacity? Can a farmer in the deepest village be able to transport his wares to the second village in the shortest time possible without having to worry about the conditions of the roads?

These may seem like very simple-minded problems, but magnify them onto the map of Africa and you quickly realise the obstacle poor inter-connectedness creates. If unchecked, poor infrastructure can create a snowball effect that might greatly impact the lives of the affected. A bad road means the farmer will not sell his wares that day, meaning there will be a shortage of money in his pocket to spend, and one of the family expenses will have to be foregone; this could be tuition for his child, who as a result of poor roads, cannot be sent to school because he (the father) cannot raise enough to pay school fees on time.

Expanding the Entrepreneurs Horizon

How then therefore, can we forge a way to leapfrog into the fourth revolution? We may not have yet gone full circle with the second and third, however, this should not impede us from completely jumping into the future of social economics. In order to do this, we need to commit as Africans, not as East Africans or West Africans, to unite under one economic bloc and harness the power that comes with that. It is not surprising that at Davos 2015, the theme for Africa was “Powering Africa”. And yet, even with policy makers sitting on panels and deliberating the best strategies, one year down the road we have very little to show.

A webinar I attended run by Climate Action Programme indicated that Africa has the potential to earn over one billion dollars in revenue from power alone. But the reality on ground is that there are a lot of economic and political constraints. For one, it is fairly difficult to find entrepreneurs that grow their ideas with the big picture in mind. Seminars and workshops I have attended have left me somewhat disappointed about the way we as Africans think with regards to the future of our continent. Perhaps it could be because we are thinking in terms of our individual countries and not regionally. We need to broaden our horizon, take a step back and look at the bigger picture. We should shift from being observers to being actors, otherwise the rest of the world will determine that we are comfortable staying asleep while they continue to conquer space and time.

In conclusion, in order to leapfrog to the fourth industrial revolution we need to integrate our economies into one economic and political region, forsake individualistic ideologies of borders and boundaries, boost trade with each other, encourage foreign direct investments in infrastructure, and even find ways to finance our own economies, and embrace the digital era. This may be asking a lot of the current governments, but it is certainly something that the younger generation will consider more and more. It will not take long for us to realise that the only way to help Africa transform is by helping each other. The answer lies within and not with-out.

Maria Auma is CEO of Blue Luxury Investments, Kampala, Uganda.


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