The 2018 Harvard Business School's Africa Business Conference gave attendees the opportunity to explore why Africa will be an engine for world economic growth throughout the next decade. The diverse group of speakers and attendees created a collaborative environment discuss some of the most important sectors on the continent: agriculture, infrastructure, healthcare, and banking. CID was excited to be present at this important conference, and we are happy to share these key insights.
African market outlook
The time for the pessimistic narrative about the future of Africa is over, said Razia Khan, Chief Economist at Standard Charted. The commodity market offers the strongest opportunity of African development. Unlike other regions of the world, Africa was narrowly impacted by the financial crisis and the current low interest rates make borrowing more attractive for investments in the continent. The situation is very similar to the conditions that were present in Asia back in ‘90s.
However, the potential financial growth cannot be sustained without an intense spread of infrastructure. While investments are intensifying the rate of economic growth, a clear consequence of this trend is rising interest rates. Taking caution is mandatory. During the next years there will be a concentration of long term debt maturities, and this could stress the African markets. There is, still, high volatility, so Khan believes it would be a mistake to take the growth as granted.
The main trends that could make the headlines for Africa in the near future are fundamentally agriculture, infrastructure, banking, and healthcare.
Karim Lotfi Senhadji, Chief Executive Officer at OCP Africa, confirmed the great results that widespread fertilizer production and adoption have had on the African agricultural industry. Agriculture is not about philanthropy, but rather a very profitable business. The international growth opportunity for the sector is focused on creating a virtuous cycle that involves the producer and consumers. The final aim is the reduction of the costs in the value chain by 60%. Finally, he remarked that there is great urgency for stimulating local investments rather than waiting for large international funds to make investments, attracted by the highly profitable opportunity offered by the African continent. CID is a strategic partner to facilitate such investments. Contact us here if you are interested in learning more about opportunities in African agriculture.
All in all, agriculture is under performing when one considers its potential. This is due to poor quality of seeds, poor infrastructures, and a gap of knowledge of agro practices. The main message of the discussion was that an efficient supply chain must be established that could involve all the players and would focus not only on effective products and services, but also leverage knowledge by spreading good practices to reduce the wastage in the long run by about 70%.
The most feasible vehicle to deliver the infrastructural development in Africa is the Public-Private Partnership, or PPP. This system combines government and private funds together to stimulate a rapid improvement of the expensive infrastructure that Africa sorely needs. The system is easily explained: the private party signs a deal with the government to take over the risks of the investment and the management of a certain project. The combined financing greatly insures that the project is completed—and the remuneration is strictly linked with the project’s performance.
While there are many political factors in these deals, the conference did not focus on them. It is nonetheless important to understand the infrastructure issue in the context of the expanding Chinese influence on the continent. Chinese firms often employ variations of PPP’s to invest in infrastructure. To learn more about this, read out latest work on the topic here.
A fundamental problem in the African economy is the widespread use of cash. The cash economies across the contentment are one of the main causes of corruption, and they dramatically reduce the access to credit. The two main correlated needs are the expansion of the credit customer base, and the innovation in credit scoring. At the same time, the solutions used today in many developed countries like the US and European nations works through high speed internet networks. The high price of internet and the low rate of smartphone adoption throughout Africa combine to make implementing well known solutions very difficult—which makes innovation crucial.
Entrepreneurial ingenuity has been applied to this problem, and one of the results shown at the conference was Ecobank, which aims to tackle the problem of increasing financial inclusion. Ecobank is a low-cost wholly digital bank. The combination of these two elements is an unquestionable valuable service, since establishing a large physical operating bank raises the issues of the cross-border payments, high fees which increase the cost of the transactions, and general difficulty of having regional integration of customer bases. This is just one example of the many startups looking to improve the banking systems in Africa.
Unlike the mainstream ideas of healthcare development being the adoption of highly technical technologies to predict serious illnesses, the real frontier in Africa is simply a more effective ambulance system that can respond to incidents in less than half an hour, since the current wait time is an average of two hours. An example of a private solution to this issue is called Rescue, which operates in Nairobi. Rescue’s successful model is based on using existing landlines and SMS services which are both affordable and prevalent, rather than specialized IT systems. This approach shows how “cutting-edge” healthcare in Africa is simply any service that can get the customer what they need when they need it. While the rest of the world considers this a basic aspect of any business, in the African context it is more difficult since many services that are being developed are aiming to fill basic needs.
Another startup presented at the conference that focused on medical products and services was Zipline. This company provides a convenient delivery service using drones, which gives them the ability to better connect doctors and patients. Using the service, a doctor can send and “launch” an order of medicine to a patient using existing SMS networks and have it delivered in short time.
These are just a few examples of interesting solutions for implementing basic services to develop the healthcare sector in Africa. Unfortunately, upon closer look, there is a negative aspect to some of these firms: most of the founders of these startups are not African people, but rather “tech geniuses” that in many cases have never been to these emerging markets. It leads one to imagine how technological evolution could thrive if there were more educated Africans working on African problems. Nonetheless, it was great to see so much interest in this sector.
In conclusion, we strongly suggest to everyone interested in investment and entrepreneurship, particularly in an African context, to take part in the Harvard Africa Business Conference next year. The network of participants is diverse and engaged: it ranged from politicians to journalists, but also included many young students and professionals with an outstanding entrepreneurial spirit, looking for new allies and advisors to pursue new ideas.We were most encouraged to see a community of young African students engaged in a learning process in the best universities in the world, but already eager to give back to their home countries as soon as possible.
The conference ended on a fantastic speech by entrepreneur Daphne Mashile-Nkosi. She shared her experience transforming a mining company, normally associated with exploitation of the locals for the profit of foreign companies, into a social project for the benefit of all the community. She ended her presentation on an inspirational note about gender disparities in Africa: “if men can be successful entrepreneurs, I can do the same”.
The central takeaway from Harvard Africa Business Conference 2018 is that today, reinventing basic services is the most profitable opportunity to empower the young population in Africa. CID is ready and eager to be your partner to explore these investment opportunities, and we look forward to seeing you at next year’s conference!
Alberto Girelli is an innovation enthusiast. He recently graduated from Hult International Business School with Dual Degree Programme of International Business and Finance. He is currently studying business in Africa. Alberto is a 24h speaker about business and finance. Follow him on twitter @gireabi