Sunday, January 6, 2013

Free Enterprise Is Coming to Africa

While much of the developed world is working off its debt binge, Africa has been moving ahead.

Africa’s progress has not been propelled by massive amounts of foreign aid from guilt-ridden Western celebrities and billionaires. It has advanced economically thanks to Chinese and other foreign business investment.

Free enterprise is coming to Africa.

For some time now I have been posting about the negative effects of guilt-generated charity to underdeveloped countries. MS just sent me an old, but still pertinent, interview with Kenyan economist James Shikwati about foreign aid’s ill effects in Africa.

Shikwati explains how foreign aid destroys local African businesses and farming. It mostly produces a class of corrupt government managers who use the money and the food for themselves, their cronies and their tribesman. When Westerner hand out free food, African farmers go out of business. Thus, the populace comes to depend on free food.

In 2005 he begged the West to stop seeing Africans as pathetic victims who cannot to help themselves.

Surely, Africa suffered from colonialism. Now it is suffering the effects of the do-gooder effort to atone for colonialism. Unfortunately, do-gooders privilege government bureaucracies and place no faith in the Africans themselves or in the free market.

Sound familiar?

Since Shikwati had his say, the aid his not ceased. What has changed is Chinese and other foreign investment.

In recent years, China has been scouring the world for raw materials to fuel its economic boom. Finding massive quantities in Africa it has invested in the continent. You cannot run mines and industry without infrastructure, so China and other nations have been building it.    

Companies are investing in Africa because it is good business.

Africa has attracted, The Daily Beast reports:

… China’s largest sum to anywhere in the world. Tourists leaving Kenya’s Jomo Kenyatta Airport now pass a sprawling landscape of cranes, machinery, and workers building the Chinese-financed, 16-lane Thika Road superhighway. American companies are also making strategic moves. Over the last two years Walmart completed a $2.4 billion acquisition of South African retailer Massmart, IBM announced a $1.5 billion investment in African-focused technology company Bharti Airtel, and U.S. private-equity giant the Carlyle Group launched a sub-Saharan Africa investment practice.

Without offering foreign aid Chinese businesses have done more for Africa’s economic development than the armies of celebrities and billionaires who are whining about how much we owe the Africans.

In the past, Americans may not have connected with Africa much at all; perhaps a friend who was in the Peace Corps or a donation to a celebrity charity. Media coverage has largely been a stream of poverty, war, or corruption, with an occasional safari. But new developments, largely in the business sphere, are changing that narrative rapidly. The simplest breakdown: Africa is growing, Africa is modernizing, Africa is the next consumer market, and Africa’s influence is rising.

From New York to Davos, business discussions echo with references to Africa’s astounding economic growth. While most of the globe is still reeling from the great recession, Africa is booming. It had six of 10 of the world’s fastest-growing economies of the decade to 2010 and is projected to claim seven of 10 to 2015, outpacing the entire Asian region. “Compared to dismal rates in the rest of the world, Africa’s growth is exceptional,” said Gustavo Galindo, a portfolio manager with Russell Investments. “It surprises me many U.S. investors don’t realize the opportunities this creates, [with] some African stocks gaining 15 percent to 20 percent returns.”

The Daily Beast describes what is going on:

In Freetown, Sierra Leone, traditional market traders who previously practiced under-the-mattress banking are getting their first ATM cards and small-business loans. With 80 percent of sub-Saharan Africa’s adult population unbanked, its financial-services sector is projected to grow 40 percent by 2020. In mobile phones Africa has now overtaken Europe in the number of connections and the U.S. in number of users. Apple is expanding shops for iPhone sales across the continent to meet demand of a mobile market predicted to number more than a billion users by 2020.

Of course, there’s still the corrupt bureaucracy to deal with. And the do-gooders will still work to undermine it in the name of their own good feelings.

Africa’s progress tends to prove the wisdom behind Carlos Slim’s response to the Bill Gates/Warren Buffer charitable extravaganza:  “Charity never solved anything.”

And it also demonstrates the wisdom that Nicholas Kristof showed when he explained, in a moment of rare lucidity, that the people of Haiti would do better with more Coca-Cola factories and less charity.

Footnote: Unfortunately, the advent of free enterprises seems limited to sub-Saharan Africa.

In North Africa, the crack Obama/Clinton foreign policy team has managed to empower Islamist fundamentalists who have no interest in free enterprise. In fact, they have no interest in free anything.


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n.n said...

Charity should be characterized for rehabilitation. It should be short-term, focused, and accountable, which is why proximity and mutual interest are imperative to its success. Its goal should be to return individuals who momentarily falter to self-sufficiency and subsequently to become productive members of their society.

There is a small minority of people around the world who are both physically and mentally incapable of positive contributions to their society. We should not sabotage the development of the majority by conflating their circumstances with the needs of this minority nor through liberating them of responsibility to themselves and other people.

It is dissociation of risk which causes corruption. It is dreams of instant (or immediate) gratification which motivates its progress.

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