Africa’s growth prospects: a view from the trenches

One of my favorite (non-academic) articles on development was in last year’s NY Times Magazine’s profile of Andrew Rugasira, a Ugandan coffee entrepreneur.  The article is titled “Can Coffee Kick-Start an Economy?” and it was fascinating throughout.

It turns out that Rugasira has just published a book called A Good African Story  that I will definitely be purchasing.  In an article about the book and its author, Rugasira offers various nuggets about trade, African development, fair trade, and non-trade barriers.  I couldn’t possibly say it better than him, so I will just quote him on the various topics.  The whole article is worthwhile though.

The need to hear from real African entrepreneurs: “I was really surprised at the extent to which entrepreneurs on the continent don’t publish their business experiences, yet everybody talks about the private sector being the engine for growth and no one ever visits the engine room and sees what’s really going on. The first reason I wrote the book was to really get it written because African business people don’t write. Secondly, it was to really bring a kind of empirical perspective to the debate. Lastly, it was to encourage other entrepreneurs and to show them the pains other entrepreneurs, like themselves, were facing. I don’t think it’s very helpful if you write with hindsight and with reflection that allows you almost to be able to revise.”

The real obstacles to development: “The governments say they have removed all the tariff barriers, but what about the non-tariff barriers?  “How about access to market issues? How about the failure to raise capital? People talk about agriculture being the next big thing, they say Africa’s growth is at 6% or 7%, but hang on a minute, I mean, I have visited 36 banks but none of these financial institutions wanted to lend me money, it wasn’t just even me.”

“I went to school here in the UK,” he replies, “so in theory it should be easy for me. I have some networks, I know the culture. But it took me two-and-a-half years to be able to sell my product. It took 14 trips back and forth. Imagine an SME [small and medium scale enterprise] in Africa without the inherent advantages I have. So with all the talk from the Commission of Africa, I said, no, I really have to document this stuff in a book.”

“For example, the governments are not delivering services efficiently. Capital for young entrepreneurs isn’t available, infrastructure is poor and there is no reliable energy. All these things are lacking, and are constraining young people from doing business. The cost of importing a container from Dubai to Mombasa is $1,800, and taking that same container from Mombasa to Kampala costs $3,800.”

Fair trade: “Fair Trade is not a sustainable model,” Rugasira insists. “It is a Western kind of charity model that cannot work. It cannot develop or claim to be developing, growing farming communities by adding pennies to pounds of coffee, and then doing all the roasting and packing overseas. Smallholder coffee farmers are poor because they don’t have an access to the inputs that will get them to a higher level. They are at the lower end of the value chain, that’s why they are poor. They don’t diversify their crops and they have insecurity in terms of their finances.

“So to turn around and say that [fair trade] is a solution, I can’t accept that. If anything, it becomes like an unintended obfuscation and distracts the conversation from the real issue. Agriculture has been proven to have two to four times more potential to bring about prosperity than any other sector. But fair trade is not the solution. Dealing with the structural issues is.”

One thought on “Africa’s growth prospects: a view from the trenches

  1. The lack of access to capital for SMEs is a big one that I’ve seen in readings. There’s financing for the big stuff, and for politically connected firms – and there’s some funding on the really small level. But not so much for the middle stuff.

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