The Problem

Unrealised Potential

The problem is simple. Africa has never been able to realise its full potential. The answer has now become a lot less complicated than at any time in history. Forty years ago China had a very low GDP. It is now the second biggest economy in the world for two reasons:

It is a country with a vast amount of cheap labour.

Therefore it was in the best self interest of other countries to begin manufacturing their products in China at a much lower labour cost than they could possibly do at home. For the respective countries to do that they needed to feel that it was economically viable to do that.

Therein lies the heart of why Africa has not succeeded in the second reason. Attracting the level of foreign investment that China was able to do.

Sovereign Risk

This means that not only must we understand the rules of doing business in a location, but once we understand and work within them they cannot change for the worst.

There are other reasons why the current system is unsustainable. Also forty years ago, according to the book “The Lords of Poverty” the average person in the developing world was 30 times poorer than the average person in the developed world. After $3.5 trillion in aid to the poorer nations the average person is 89 times poorer than us. There are reasons for this:​

Developed governments give money to developing countries who spend it without accountability. There are many examples of leaders who do not care about their people.

When infrastructure projects are funded by Developed governments they insist that the contracts are awarded to contractors from the country of the funder, regardless of who is best qualified and equipped to carry out the work. When this happens contractors almost always inflate the price.

Projects are rarely completed on time or to specification. Money is usually siphoned off. The developing country then pays an inflated price for an inferior product and is also charged extortionate interest rates in addition to the quoted price.

Aid projects are very rarely created with the vision of empowering the local people. A prime example of this is the infrastructure projects that are funded by countries that import their unskilled workers when there are so many unemployed Africans.

There is a great reluctance to “teach people how to fish” and a strong desire to maintain a status quo that works only for a small self interested few.

A prime example of what is possible is that in Liberia, Sierra Leone and Guinea you have six times Australia’s rainfall. You could create agricultural projects that would be able to feed the whole of Africa. This has a twofold benefit:

You would drastically reduce the number of African people dying from starvation.  The poorest countries in the world would not have to import food with money they do not have.