Mar 7

CAN AFRICA CATCH UP WITH THE REST OF THE WORLD?

Smart Growth leadership series part 5: Can Africa catch up with the rest of the world?

In the A+ Part 4, The New Normal blog post we contemplated if Asian companies are ready for smart growth. In this post we look at economic growth prospects on the African continent.
Over the past four decades or so the development challenge has been a rich world of one billion people facing a poor world of some five billion people. The Millennium Development Goals established by the United Nations mirrors this thinking.

However, says British economist Sir Paul Collier, it has now become clear that this way of conceptualising development has become outdated. Most of the five billion, about 80 percent, live in countries that are indeed developing, often at amazing speed. The real challenge of development is that there is a group of countries at the bottom, concentrated in Africa and Central Asia that are falling behind and often falling apart.

Sir Paul says that with hard work, thrift, and intelligence, a society can gradually climb out of poverty, unless it gets trapped. He identifies four traps, namely: the conflict trap, the natural resources trap, the trap of being landlocked with bad neighbours and the trap of bad governance in a small country.

Africa offers huge growth potential despite the traps and in recent years the continent became quite a favourite with international investors – spurred on by more than a decade of remarkable economic expansion in Asia (what we call the easy growth period). Asia has recently entered into a new, tougher growth environment – the smart growth period.

And it is easy to see why Africa became so popular in the smart growth period. The African opportunity is presented by the 1 billion strong population and the nearly 2 trillion US dollar market. The economic size of the entire African continent is roughly the size of the economies of Russia or India when the 54 nations are viewed as one economy. The four largest economies, South Africa, Nigeria, Egypt and Algeria, account for more than half of the continent’s economy.

Sadly, most of the countries in Africa still rely on commodity exports (the natural resources trap), which make them very vulnerable to the slowdown in the Far East.

In addition, a study in 2012 by Korn/Ferry International in Asia found that more than 85 percent of engagements (twelve out of fourteen), their client organizations did not have a critical mass of top leaders most likely to impact on smart growth. Asia will, therefore, struggle to accelerate Smart Growth Capacity and readiness in the coming years.

Sadly, many businesses around the world are looking for Asia to be the hero that will drive top line growth in the next decade. This does not bode well for Africa. The continent’s 54 countries can no longer wait for Asia, but will have to embrace smart growth as well to unlock economic growth.

Companies, also here in South Africa, must ask how many of their leaders who were stars in the easy growth era are equipped to make the transition to smart growth.

Inventive and growth-savvy leaders will make a huge difference in corporate perfor­mance in this era of smart growth. The search for management talent is shifting to smart growth leaders, those who can create 20 percent growth in zero-growth markets, according to Korn/Ferry.

Follow our focus on whether Africa is ready for smart growth. Part 6 of the A+ Smart Growth Leadership series will highlight how to measure Smart Growth Capacity. Given the stark changes they are facing, companies must ask, “How many of our leaders who were stars in the easy growth era are equipped to make the transition to smart growth?” Measuring the readiness of leaders to change, adapt, and spur growth is not an easy task. We will discuss how managers cannot rely on a cocktail of financial/commercial results and some model of exhibited behaviors (competencies). The verdict is often wrong.