In the latest Africa’s Investment Destination Index released in April, Nigeria was ranked 19 out of 54 African countries. In effect, if a foreign investor was to make a choice in which economy to do business, Nigeria would be their 19th choice. It is a steep fall for a country, which not so long ago was ranked as the third-fastest growing economy in the world.
For much of Africa, the ‘Africa rising’ slogan is wearing thin. A big problem is that many African economies are rentier states. In effect, when there is a boom in the sale of natural resources, the economy looks healthy. At best, this creates a superficial climate of prosperity; at worse it fosters complacency. The revenues from such booms are largely frittered away by the political class. Little effort is ever made to close the infrastructural gaps that could aid SMEs.
According to the index, some economies are steaming back to life. Zambia is a clear case in point, in fifth position. Egypt’s economy stands third; a clear sign that it has put the political turmoil of the last few years firmly behind it. This strengthens my belief in an Africa that is capable of rising above its challenges, an Africa that has the resources to courageously confront the future. At the same time, there is a sadness that some African countries are not focusing on their economies enough to become favorable destinations for foreign direct investments.
More African countries need to start paying attention to changing economic and investment realities. When we understand how money and investment works on a global level, we can better understand how to attract it. The digital takeover is the new conversation, and start-ups that have found brilliant and effective ways of simplifying daily life are the new magnets for venture capitalists.
Previously, governments shaped the economic focus in African countries. Now the private sector has more opportunity to drive growth, even against the backdrop of infrastructural and institutional gaps. Nigeria’s tech incubator, the Co-Creation Hub, which is solely private sector driven, appears more vibrant than the Botswana Innovation Hub (BIH), which is piloted by the government. The former attracted the attention of Facebook’s Mark Zuckerberg, culminating in his first visit to Nigeria.
At the Forbes Under-30 Summit in Israel, in April, where I was one of the selected speakers, venture capitalism and foreign direct investments in emerging economies was predictably top of the agenda. Since I featured on FORBES AFRICA’s 30 under 30 list in 2016, I was fortunate enough to attend the Forbes Under-30 Summit in Boston, USA, in October last year. It gave me the opportunity to interact with investors and entrepreneurs. These events create opportunities for young African entrepreneurs, like myself, to find ways to shape the future of our own businesses and economies, in collaboration with important global capitalist actors.
The discussions at the summit in Israel touched on new frontiers for investment. Interestingly, Africa hardly features in this conversation. There are investors with money to spend, but the continent is yet to position itself to welcome these opportunities.
This is where tech incubators can act as catalyst for economic growth. Zambia and Côte d’Ivoire are showing promising signs in attracting this sort of FDI, but Nigeria has the potential to attract much more if there is a policy to develop spaces for tech incubators to thrive. Tech incubators can generate ideas to solve economic, social and even governmental problems, while also attracting foreign capital.
In Nigeria, BudgIT uses charts and infographics to explain government revenues and remittances. Initially, investment group Omidyar Network injected $400,000 in BudgIT. Less than two years later, it won a $1.4-million grant from the Bill & Melinda Gates Foundation. BudgIT proves start-up ideas can plug governance gaps and attract foreign capital at the same time.
This is not to suggest that every tech company has to solve governmental problems. Tech incubators can be used for economic and social needs, while making a profit. Every round of funding an organization receives puts it in a position to scale up its activities. This is one way the private sector drives growth in an economy.
Tech incubators, and other spaces for technology-driven solutions, are urgently needed on the continent if we are to join the global business train. Currently, Africa is still stuck on the platform at the station. – Written by Obinwanne Okeke, a FORBES AFRICA 30 Under 30 alumnus