Africa is now the most active and youthful continent, and with the proper kind of leadership, it has the potential to become the next growth miracle for the whole globe.
Africa is becoming an increasingly attractive destination for international investors as the world economy searches in vain for sustainable sources of development. Africa is not only the continent with the highest rate of population expansion, but it also has the youngest population in the world. In addition, recent trends indicate that its expansion is moving in the direction of becoming more sustainable and egalitarian. Beginning in the middle of the 2000s, the percentage of total foreign direct investment (FDI) for the continent that was contributed by extractive sectors such as oil and gas started to decrease. A new pattern of expansion has formed, with the industrial and service sectors taking the lead.
In light of these changes, we can see that a more pan-African way of doing business is beginning to take form. With 54 nations and a wide range of substantial regional distinctions, it is arguable that the continent has at least as much diversity as either Europe or Asia. African nations are expanding their economic linkages with one another at a time when big economies seem to be turning away from closely integrated global commerce. The African Continental Free Trade Area (AfCFTA), which began operations in this year, is the most extensive free trade area of its type in terms of the overall number of nations that are participating. According to the United Nations, if all goes according to plan, the decrease of tariffs between African states, in addition to other trade-liberalization initiatives, may boost the gross domestic product of most economies on the African continent by as much as three percent.
Leadership based on collaboration
Yet, modifications to legal frameworks and policies won’t be enough to bring Africa’s latent potential to light on their own. Many presenters at a recent roundtable discussion for the new INSEAD Africa Initiative discussed the obstacles that would need to be conquered in order for the initiative to be successful. For instance, African businesses have established themselves as global leaders in leapfrog industries such as financial technology.
The continent can only advance to a certain point based on the successes that are fueled by inventiveness and invention, which in turn overcome the restrictions of infrastructure and ecosystems. In terms of access to fundamental requirements like food and healthcare, gaps still exist, particularly between quickly developing cities and isolated, rural regions. This is especially true in the United States. To satisfy the requirements of both social progress and economic expansion, a novel model of leadership that is collaborative and open to participation is required in both private industry and public administration.
In the past, inadequacies in infrastructure and capital markets, as well as gaps in institutional framework, meant that most successful businesses were large, diversified conglomerates. Examples of these include the Dangote Group in Nigeria and the Bidvest Group in Southern Africa. Both of these groups are based in their respective countries. Even when they weren’t part of a formal conglomerate, a significant portion of the commercial activity in Africa could be traced back to a very small number of large-owning families. This was true even when they weren’t part of a conglomerate. Even for the most agile and disruptive market entrants, the chances of success were slim, and they were confined to relatively tiny subsets of the economy.
A significant portion of this is shifting as a result of the establishment of new digital platform businesses in the fields of e-commerce, fintech/payment systems, media, ride sharing, and temporary employment. These types of businesses are addressing some of the underlying causes of the issues that have historically prevented new entrants from entering the market. Specifically, they are doing this by lowering the transaction costs that suppliers of goods and services must bear in order to satisfy a diverse customer base. They are paving the way for new avenues of development in major economic areas that are headed by the private sector. They are also making new chances available for businesses to make a positive contribution to the growth of society.
For instance, large e-commerce businesses like Jumia and Konga could be a major force for good if they offered their goods and services to economically disadvantaged rural communities. These communities currently have to travel considerable distances to reach their nearest markets in order to purchase a variety of essential goods. In order to expand their reach into rural areas, governments need to clear the path for businesses to enter certain sectors and establish cost economics that are sustainable.
Not only must intra-African logistics become better, but also intercontinental financial flows have to get more streamlined in order for the AfCFTA and global trade connections to attain their full potential. Only then will they be able to fully realize their promise. In the realm of digital financial payments, organizations like MFS Africa are working to develop interoperability, which is desperately required, while also contributing to the cost reduction of transactions. (Dare Okoudjou, who has an MBA from INSEAD and founded and serves as CEO of MFS Africa, was one of the speakers at the roundtable.) These are only few instances among many more. Start-ups and entrepreneurs inside established organizations have shown extraordinary innovation all across the continent by discovering novel, locally appropriate solutions to market deficiencies. These solutions have been developed to address a variety of market issues. They are just as eager to develop solutions for social needs in the areas of healthcare, education, and government services, but in order to do so, they need help from governments in the areas of finance and policy.
In addition to locally owned and operated companies, global multinational corporations also have a significant part to play in the growth and development of Africa. These corporations contribute know-how, finance, and access to bigger markets to the continent. Innovations such as the African Risk Capacity Group, which uses pooled funds from various countries to underwrite pertinent risks ranging from floods to disease outbreaks, contribute to Africa’s allure to global multinational corporations and make the continent more competitive in the global marketplace. (The Director General of the Group, Ibrahima Cheikh Diong, participated as a guest speaker in the roundtable discussion at INSEAD.) But, without the local knowledge, international players are sometimes at a loss when confronted with the challenges and obstacles that locals have been used to overcoming.
Due to the high degree of dependency that exists between these many stakeholders, it is very necessary for businesses to adopt a collaborative leadership style in order to make a significant contribution in Africa. This may imply that large multinational corporations will have to accept open and transparent collaborations with local businesses. These partnerships will include extensive exchanges of experience and credibility between the two parties.
In turn, government officials have a responsibility to regard the private sector not as a possible danger, but rather as a potential collaborator, and cooperation policies need to be developed appropriately. In conclusion, business executives in both international and African enterprises need to refocus their attention on the social contracts that govern their organizations.
Read more: How Universal Basic Income Might Rescue Capitalism
An agent of beneficence
The schools of business have the potential to be the driving force behind this development and transformation. INSEAD is particularly well-equipped to make a difference on this score due to its emphasis on sustainability, its long-standing “force for good” mission, and its worldwide presence that is matched by a truly global identity. All of these factors combine to make INSEAD particularly well-equipped to make a difference. In this context, the Africa Initiative, of which we serve as academic and executive directors, will organize and coordinate the work of the whole institution.
The institution is now engaged in a campaign to increase the number of students from Africa who are accepted to study at INSEAD, to facilitate their success while they are there, and to include them as active members of our global alumni network. There are currently efforts under way to increase the number of scholarships available at INSEAD in the hopes of attracting a greater number of the continent’s most talented future leaders. We have high hopes that they will take what they have discovered and spread it throughout their own professional networks and organizations, so causing a ripple effect of collaborative activity.
INSEAD is creating collaborations with African colleges with the goal of “teaching the teachers,” as stated by Dean Ilian Mihov during a break-out session at the roundtable event. This will allow INSEAD to create competence in collaborative leadership at scale. An initiative known as the Africa Fellows Programme has recently been established with the goals of facilitating learning in both directions between African and non-African business experts and enhancing overall research endeavors. In addition to the development of further cases and other instructional resources, an annual conference and other activities for the dissemination of research findings are now in the planning stages.
The INSEAD Africa Initiative aims to promote business as a genuine force for good on this enormous continent by increasing knowledge of Africa’s distinct and diverse people, environment, enterprises, and innovations; by sharing educational best practices; and by developing a lively community.
