Outsourcing Africa’s Economy – Dare Odutokun @legendarey89

Nigeria’s current finance minister Ngozi Okonjo-Iweala remarked at a TED global conference that the best way to help Africa is to invest in it. An excellent proposition? Not quite.

Methinks the suggestion is flawed and incapable of addressing the challenges in Africa. Leading Think tanks and policy institutes have sold us quite exquisite and enthusiastic analysis about how Africa is the best place to invest in the 21st century. African governments are quick to endorse such reports, and sometimes present them as proof of their efforts. It has become a sort of trend at every Global forum on Africa; the slogan is Invest in Africa. And to attract these investments, African politicians, naively, sign away their nation’s wealth in the name of bilateral and multilateral agreements, most of which they barely understand. It is, however, a grave misconception to think that these agreements will provide the impetus for economic growth and development.

But isn’t investing in Africa a much better alternative to aid?  Definitely it is. However, that is not the answer to Africa’s needs.

What is really happening is that Africa’s economy is been outsourced. We want a reduction in the infrastructure deficit, minimal poverty rate, and a highly educated and skilled labour force. But then, to reach these goals we look outside of ourselves for the answers. Now maybe I should ask, is China in Africa to help Africa get out of the woods or to secure for itself a supply of resources to feed its expanding economy? Same question applies to India, Brazil, Germany, the UK and the US. When African governments go abroad to campaign for investments, what they are really saying is that we cannot do anything for ourselves.

There are no denying Africa’s enormous potentials. It is home to over a billion people, and with unemployment a major issue, it makes a viable source of labour. However, foreign corporations prefer to bring in their expatriates for high-skilled work, and pay them huge salaries in contrast to low salaries that local less-skilled workers earn. The culprit of this unfair situation is the moribund and under-funded education system. The significance of this is; Africa is a good place to make huge profits with cheap labour.

Capital flight, which is a constant trend on the continent, is a consequence of an overdependence on foreign aid and FDI. Matter-of-factly, the loyalty of foreign corporations lie in their home countries hence, profits must find their way abroad. Here is a practical scenario; an African government decides it wants to build a railway. A credit facility is obtained from a consortium of local banks and foreign lenders. It then contracts a Chinese company to undertake the project. The work gets done and the Chinese get paid in billions which they transfer to China. Meanwhile, the burden of repayment is heaped on tax-payers.

Africa needs to wake up and realise that an economy based on exploiting mineral resources for exportation is valueless. Jobs are literally shipped abroad when resources are exported; it is a case of aiding the expansion of other economies. It is comparable to a football league where teams in the top division get a steady supply of raw soccer talents from their feeder teams or teams from lower divisions. Africa’s economy has become a sort of “feeder economy”.

Take Nigeria’s case, it only earns petrodollar from the sale of its oil. The upstream sector employs less than 7% of the population, which means no value chain results from oil exploration. Worse still, refined products are imported as refineries are moribund.

Foreign domination invariably cripples local initiatives. Few indigenous companies possess the capacity to favourably compete with foreign corporations. This is a consequence of not-well-thought-out policies, and economic environments skewed in favour of foreign competition. Many African countries are signatories to the charter of the World Trade Organisation. In what way has this organisation helped balance Africa’s trade deficit?

I am of the opinion that there is nothing wrong in foreign companies seeking to expand into new markets. FDIs should come into Africa but the present form in which they operate takes more than it gives to the continent. The global media may present us indicators showing and predicting growth rates but poverty is not reducing and standards of living are not improving commensurately.

A different approach is presently required. Indigenous companies, no matter how small their scale of production is, hold the key to Africa’s prosperity. Governments must begin to engage them, seek policy advice from them and incentivise them to develop.

Africa’s redemption –political, social and economic- lies in the minds and hearts of its citizens. Its economy will be built by African businesses –small, medium and big- and governments must start listening to them.

I am not championing economic isolationism and nationalism but I know Africa’s bread cannot continue to be fed to foreigners while citizens scramble for crumbs.

Dare Odutokun



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