Niall Fitzgerald: Not a burden, but a land of opportunity

There is a stigma attached to being a successful global company in Africa
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The Independent Online

Sub-Saharan Africa is the only region of the world where poverty has continued to rise in the last generation; 350 million Africans live on less than $1 a day. Try for just one day!

If we are to make any progress in reversing this trend, business must engage because trade stimulates investment, investment accelerates growth and growth reduces poverty. This is not to say that aid is unimportant but evidence suggests that in the long run aid does little to promote economic growth and, in some cases, has crowded out private-sector investment and propped up corrupt regimes.

Promoting growth is the only sustainable way to help Africa help itself. Sustained growth requires strong private-sector development and a sound investment climate to attract business interest. A good investment climate creates incentives for all types of firms to grow. And society as a whole benefits from more jobs and more affordable and better goods and services.

The most important impact business can have on the development agenda is through its core business activities. But Africa today receives less than 5 per cent of total private-sector investment in developing countries. Why are businesses reluctant to invest in Africa?

Firstly, conventional wisdom suggests that Africa is a poor place for business. If we are continuously confronted with words like "corruption", "disease" and "poverty" when we read about Africa, how does that impact our image of Africa?

Secondly, and more insidiously, there appears to be a stigma attached to being a successful international company in Africa. This is despite the fact that doing business responsibly has a huge positive impact on society, generating direct and indirect employment, as well as transferring skills, technology and know-how.

Thirdly, and most importantly, there are real barriers to doing business in Africa, including high transaction costs, lack of infrastructure, absence of a well-developed internal market, an uncertain legal environment and corruption.

Despite all these issues, I remain convinced that the opportunities for business in Africa are immense - just look at what China is doing in Africa. As a nation it has truly "discovered" the African market, offering everything from cheap home electronics for consumers to football stadiums for governments. Although China's immediate interest is oil to fuel its burgeoning economy, its presence in other sectors, such as railways, mining, pharmaceutics and construction, is growing.

In 2004, China's total exports to Africa were nearly $14bn (£7.5bn), up 36 per cent over the previous year while imports rose 81 per cent to about $16bn. More than 700 Chinese firms now operate in Africa, in what many see as a co-ordinated, strategic move to secure control of key assets for the future. And where China goes, India will follow, as evidenced by substantial new Indian investment in Africa.

So the opportunities are there for those with the ability to see beyond the conventional image of Africa. But what can we as business leaders do to encourage more investment in Africa?

The Commission for Africa called for a "sea change" in the way the world's business community engages in the development process in Africa. One driver for this change is the Investment Climate Facility (ICF) for Africa, a public-private partnership funded by companies and donors that is due to be launched at the World Economic Forum Africa summit in Cape Town, next month. It is the combined response of the international community and Africa, and it will work closely with such organisations as the New Partnership for Africa's Development (Nepad), the African Development Bank and the African Union.

The ICF will offer business an opportunity to drive the development agenda and contribute to the global campaign to eradicate poverty. It will work to bring about more business-friendly policies, laws and regulations across Africa, promote a more effective dialogue between governments and business on investment climate reform, and improve Africa's image as an attractive investment destination.

I believe our generation will be judged on whether we positively contribute to resolving the two great issues of our day - Africa and climate change. There is a great opportunity in front of us to leave a positive legacy on Africa. Building the foundation on which Africa can grow and prosper would be one of the greatest triumphs of this century. We all carry a personal responsibility to make that global challenge a reality.

The writer has been chairman of Reuters since 2004. He was chairman and CEO of Unilever from 1996 to 2004