Africa’s political leaders are taking major steps to build a better foundation for investment, one of its most influential business leaders told the recent 14th annual Wharton Africa Business Forum. Mamphela Ramphele, a former managing director of the World Bank, said that the continent “has made historic efforts to affirm good governance, build strong institutions and fight corruption.”

She cited as evidence a series of contested elections that were held without violence or charges of corruption, and a new entity designed to financially reward former African heads of state who have met standards of good governance. 

Ramphele is chairperson of Circle Capital Ventures, a black-owned investment company with assets in the health, communications technology and industrial sectors. A physician and anthropologist, she was the first black South African to hold the position of vice-chancellor of the University of Capetown.

She was also an anti-apartheid activist who had a long personal and professional relationship with Steve Biko, a founder, along with Ramphele and others, of the Black Consciousness Movement. Biko, who died in a South African prison in 1977, was the subject of a movie titled, Cry Freedom, released in 1987 and directed by Richard Attenborough.

Due to Ramphele’s political activities, she was internally banished by the anti-apartheid government to the town of Tzaneen from 1977 to 1984. She joined the University of Cape Town in 1986 and became a deputy vice-chancellor in 1991, moving up to vice-chancellor in 1996. She was a managing director of the World Bank from 2000 until August 2004.  

The theme of the Wharton Africa Business Forum was “Building New Partnerships: Impacting the Global Economy,” and at least in Ramphele’s keynote speech, there was little mention of the continent’s highly-visible economic and social problems, including AIDS, corruption in economic assistance programs and political turmoil in areas such as The Sudan, among others.

Turning aside the organizers’ requests to talk about her own story, Ramphele, 58, said that she preferred to discuss what she sees as an improved political and economic climate in Africa, including:

  • Increased investment by South Africa in the rest of the continent

  • “Significant macroeconomic gains” throughout the continent, which she called “a prerequisite for sustained growth”

  • A series of peaceful elections in 2006

  • Large-scale expansion across the continent of major retailers, such as Shop-Rite, and the development of shopping centers to house these stores.

“Average annual GNP growth in African countries has climbed to over five percent,” she said, “and in countries like Mozambique, Benin, Ghana, Algeria, Nigeria and South Africa, the economies [are getting stronger and stronger]. Last year’s acquisition of the South African Bank ABSA by Barclay’s PLC was one of the largest acquisitions in the world. Major private equity companies like Blackstone and KKR [are looking] for deals on the continent, and the recently completed RFP process for the development of the Cape Town waterfront saw major [investors] from all over the world bidding to participate. Overall, the rewards remain high and the balance of risks has improved in Africa.”

The Upside of Investing in Africa

Despite problems in some countries, such as high crime, high inflation, corruption and an unskilled labor force, South African companies “have homed in on the upside of investing in African markets — cheap labor, little competition, cheap rents and therefore higher margins,” Ramphele said.

For example, when the Vodacom Group, the Johannesburg-based cellular communications firm, moved into the Democratic Republic of Congo in May 2002 in order to set up the infrastructure for its transmission network, the company “had to charter 52 of its own bulky transport planes, install generators at every tower, hire private security and accept that not one single person in the country had a credit history.  Within three weeks of operation, Vodacom had 50,000 customers. In six months it had 135,000 customers and was adding 1,200 a day, with revenue that exceeded the wildest predictions…. South African companies are more comfortable with the risks that African environments present — and they are being rewarded with great profits.”

Ramphele also defended controversial affirmative action policies in South Africa and other countries, which she described as “temporary measures” needed to bring about evolutionary change “while attempting to quell the need for revolutionary change.”                    

But Ramphele placed greatest emphasis on what she called “historic efforts to confirm good governance, build strong institutions and fight corruption. This effort has been at every layer of society.”

She singled out three developments:

  • The New Economic Partnership for African Development (NEPAD)

  • The recently created Africa Forum

  • And the newly-created Mo Ibrahim Foundation.

NEPAD, the integrated socioeconomic development framework adopted at the 2001 summit of the Organization of African Unity, was designed to combat poverty, “halt the marginalization of Africa in the globalization process” and accelerate the empowerment of women. Ramphele noted that the framework has “a built-in peer review mechanism” that allows countries to evaluate themselves against set standards in these and other areas.

The Africa Forum was created by former African heads of state led by Nelson Mandela of South Africa and Kwete Massire of Botswana. Ramphele said that of its 34 members, 25 were democratically elected former heads of state. Others, she said, “did indeed come to power through coups but left democratically. As they say,” she added, “‘All’s well that ends well.'”

The Mo Ibrahim Foundation, named after its founder, a highly successful Sudanese entrepreneur, recognizes African leaders “who have demonstrated excellence in political leadership.” Ibrahim, a self-described “former Marxist,” is the founder of Celtel International, a mobile telephone company whose operations are concentrated in the poorest areas of sub-Saharan Africa.

The Foundation, launched last month, will award an annual prize of $5 million over 10 years followed by an additional $200,000 for life to a former African head of state who has shunned corrupt practices in favor of legal and ethical conduct.

The prize will be awarded based on the Ibrahim Index of Governance, which, starting next year, will rank all sub-Saharan countries according to the quality of their political and economic institutions. The index was recently developed under the direction of Robert Rotberg at Harvard’s Kennedy School of Government.

In a story last month announcing the start of the Foundation, the New York Times noted that “unlike many projects that target famine-stricken villages or far-flung AIDS clinics, this one is supposed to strike at the political leadership — and post independence culture of autocrats and kleptocrats that spawned such figures as Mobutu Sese Seko of Zaire or Idi Amin of Uganda.”

Ibrahim himself has described the Foundation as an effort to level the playing field between retiring heads of state in Africa and the West. While American ex-presidents, for example, become rich through book deals and the lecture circuit, he said, ethical African leaders leaving office often face poverty. “We want them to have a life after office.”  Winners can also get up to $200,000 a year to devote to the philanthropic enterprise of their choice.

Ramphele described the Foundation as “a ground-breaking initiative” that “aims to promote debate, not just in Africa, but around the world on the criteria by which governments should be assessed.”

The Democratic Impulse

She also cited a growing trend toward resolving differences at the polling place rather than in the streets. “The democratic impulse has taken hold. Since 1994, there have been over 100 elections held in Africa. In Angola’s multiparty elections there were a reported 126 parties participating …. Elections in Zambia occurred with relative calm although (they were) hotly contested.”

In Cape Verde, an island nation off the West African Coast, the incumbent government was defeated by just 17 votes in 2001 but peacefully ceded power. And she said that in her own country, turmoil within the ruling African National Congress had not compromised the constitution or the independence of the judiciary.

Ramphele added, however, that she believes that political stability requires an additional — and more controversial — policy: Adherence to affirmative action codes, called “Black Economic Empowerment” in her country and “indigenization” in others.

In South Africa, the codes are designed not only to redress the economic effects of apartheid but also to empower such “historically disadvantaged” groups as women, the disabled and rural communities. They require the government to use affirmative action criteria in making decisions involving procurement, licensing and concessions, public-private partnerships and the sale of state-owned assets or businesses. Ramphele called the codes a “temporary” but necessary measure and cited the World Bank Development Report 2006 as supporting this approach. According to the report’s opening statement, “inequality of opportunity, both within and among nations, sustains extreme deprivation, results in wasted human potential and often weakens prospects for overall prosperity and economic growth.”

Ramphele called this “a radical departure from the trickle down … development approaches of the last decade or so. It argues persuasively in favor of public policies to promote equity within and across countries in order to enhance sustainable development.”