Sangu Delle: In praise of macro -- yes, macro -- finance in Africa

37,660 views ・ 2015-03-09

TED


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Traditional prescriptions for growth in Africa are not working very well.
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After one trillion dollars in African development-related aid
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in the last 60 years,
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real per capita income today is lower than it was in the 1970s.
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Aid is not doing too well.
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In response,
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the Bretton Woods institutions -- the IMF and the World Bank --
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pushed for free trade not aid,
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yet the historical record shows little empirical evidence
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that free trade leads to economic growth.
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The newly prescribed silver bullet is microcredit.
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We seem to be fixated on this romanticized idea
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that every poor peasant in Africa is an entrepreneur.
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(Laughter)
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Yet my work and travel in 40-plus countries across Africa
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have taught me that most people want jobs instead.
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My solution: Forget micro-entrepreneurs.
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Let's invest in building pan-African titans
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like Sudanese businessman Mo Ibrahim.
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Mo took a contrarian bet on Africa when he founded Celtel International in '98
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and built it into a mobile cellular provider
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with 24 million subscribers across 14 African countries by 2004.
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The Mo model might be better than the everyman entrepreneur model,
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which prevents an effective means of diffusion and knowledge-sharing.
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Perhaps we are not at a stage in Africa
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where many actors and small enterprises leads to growth through competition.
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Consider these two alternative scenarios.
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One: You loan 200 dollars to each of 500 banana farmers
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allowing them to dry their surplus bananas
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and fetch 15 percent more revenue at the local market.
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Or two: You give 100,000 dollars to one savvy entrepreneur
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and help her set up a factory that yields 40 percent additional income
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to all 500 banana farmers and creates 50 additional jobs.
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We invested in the second scenario,
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and backed 26-year-old Kenyan entrepreneur Eric Muthomi
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to set up an agro-processing factory called Stawi
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to produce gluten-free banana-based flour and baby food.
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Stawi is leveraging economies of scale
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and using modern manufacturing processes to create value for not only its owners
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but its workers, who have an ownership in the business.
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Our dream is to take an Eric Muthomi and try to help him become a Mo Ibrahim,
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which requires skill, financing, local and global partnerships,
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and extraordinary perseverance.
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But why pan-African?
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The scramble for Africa during the Berlin Conference of 1884 --
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where, quite frankly, we Africans were not exactly consulted --
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(Laughter) (Applause) --
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resulted in massive fragmentation
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and many sovereign states with small populations:
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Liberia, four million; Cape Verde, 500,000.
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Pan-Africa gives you one billion people,
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granted across 55 countries with trade barriers and other impediments,
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but our ancestors traded across the continent
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before Europeans drew lines around us.
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The pan-African opportunities outweigh the challenges,
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and that's why we're expanding Stawi's markets from just Kenya
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to Algeria, Nigeria, Ghana, and anywhere else that will buy our food.
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We hope to help solve food security, empower farmers, create jobs,
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develop the local economy, and we hope to become rich in the process.
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While it's not the sexiest approach,
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and maybe it doesn't achieve the same feel-good
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as giving a woman 100 dollars to buy a goat on kiva.org,
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perhaps supporting fewer, higher-impact entrepreneurs
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to build massive businesses that scale pan-Africa
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can help change this.
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The political freedom for which our forebearers fought
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is meaningless without economic freedom.
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We hope to aid this fight for economic freedom
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by building world-class businesses,
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creating indigenous wealth,
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providing jobs that we so desperately need,
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and hopefully helping achieve this.
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Africa shall rise.
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Thank you.
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(Applause)
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Tom Rielly: So Sangu, of course, this is strong rhetoric.
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You're making 100 percent contrast between microcredit
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and regular investment and growing regular investment.
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Do you think there is a role for microcredit at all?
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Sangu Delle: I think there is a role.
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Microcredit has been a great, innovative way
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to expand financial access to the bottom of the pyramid.
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But for the problems we face in Africa,
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when we are looking at the Marshall Plan
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to revitalize war-torn Europe,
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it was not full of donations of sheep.
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We need more than just microcredit.
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We need more than just give 200 dollars.
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We need to build big businesses, and we need jobs.
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TR: Very good. Thank you so much.
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(Applause)
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