Writer Kylie Barton, Ecodesk
According to new research conducted by Wharton Business School, rising production prices in China will force companies to look elsewhere for cheaper suppliers. As a rapidly expanding economy, this trend clearly provides African businesses with an opportunity. But will the continent learn from China's lack of transparency, something which has dogged the country's reputation and longer term viability as a reliable supplier? As the global economy shifts towards a model which incorporates increased visibility and accountability in supply chains, can African businesses exploit the world's thirst for transparency to create new business opportunities and a more stable, economic and responsible supply base for world business?
The International Monetary Fund (IMF) says that African GDP will rise by at least 5 per cent this year, compared to the global average of 3 per cent. As China's dominion wains due to lack of transparency, higher wages, and a stronger currency according to the report; many commentators are looking to the continent to find the new home for global mass production.
This has increased the interest surrounding the currently fluid concept of what Africa's capitalist development looks like. Termed 'Africapitalism' by Tony Elumelu (a Nigerian Banker and leader in the African business world who met with Obama in June), the concept is being constructed to include a generous focus on sustainable development and social factors unlike the traditional notion of capitalist development. Far departed from the Chinese model, Africapitalism demonstrates a willingness to not simply 'develop', but to innovate - to outdo existing models to ensure that Africa's presence is sustainable and not simply a flash in the pan.
The model turns the traditional concept of CSR on its head and suggests that growing Africa's economy should start with socio-environmental concerns and work openly to minimise risk for overseas investors to ensure that the growth generated as a result is sustainable in the long term. For some, this is merely rhetoric. The United Bank of Africa started in Nigeria and now a pan-African business is proof however, that the model is working.
Elumelu says: "We [Africa] are starting late and there are implicit benefits to this. People have made certain mistakes and you learn from these mistakes."
Supply chain risk is one of the results of those mistakes. This year alone there have been multiple examples spanning the globe; Eastern Europe, Bangladesh, and Vietnam to name a few. These disasters are the result of a lack of transparency, and of multi-national corporations being ignorant to the latter tiers of their supply chains. Instead of simply relying on a top down solution, this issue must be tackled from both sides. African businesses have a chance to develop in such a way that transparency starts from the bottom, giving customers more confidence in the ethical effect of their product or business; making investment in Africa a safer bet in both the short and the longer term.
It is no secret that Africa suffers from corruption but so does China, India and Indonesia. However as a 'developing' nation it still has the opportunity to change this culture. Ex UN Chief Kofi Annan who was born in Ghana said:
"African countries needed to improve governance, and the world's richest nations should help introduce global rules on transparency… transparency is a powerful tool."
This is a unique opportunity to ingrain sustainability and transparency into the meaning of 'Africapitalism', to ensure that businesses who wish to minimise risk and ensure continuity of supply head to Africa. Transparency is an issue that is at the top of the global business agenda post G8 with members signing the Open Data Charter. This states that open data 'sits at the heart of a global movement' and contains the potential to enable greater accountability, efficiency and growth. These are three qualities where Africa could excel from the offset by mixing low cost development with transparency to provide international investors with the assurance that services will have continuity and be low risk.
Speaking at an event to celebrate the 50th anniversary of the African Union, an organisation central in the shaping of Africapitalism' UK Deputy Prime Minister, Nick Clegg said that Africa is being transformed and is now looked to as a great "continent of opportunity."
"African countries," he added, "face a choice between the economic models of authoritarian capitalism and liberal democracy... lasting stability depends not just on opening up our economies, but creating open societies too. We [UK Government] want to support greater transparency; and to publish more G8 government data in an open and accessible format – so it's of real use to citizens across the world. Information empowers citizens and allows them to take control of their own development."
Transparency will be imposed on Africa from the West in one way or another. It has already started with conflict mineral declarations. The Dodd Frank legislation forcing American companies to look into the use of conflict minerals and the socio-political issues surrounding their use will filter down the supply chain to the smallest of African businesses. It is perhaps only a matter of time until this evolves into a culture of transparency and is extended to other materials of interest and environment metrics.
Pressure from procurement departments will only force the issue, as we are already seeing in the UK and U.S. with a number of companies making it mandatory for suppliers to be open about sustainability. So the opportunity for African businesses is to be pro-active and use transparency as a selling point, a benefit to business, not a hindrance. This will give businesses increased confidence in the region and will go some way to making Africa the alternative to a faltering China.
Image: © Getty
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