Supporting Entrepreneurs, Improving Governance

South Africa's leading business newspaper, Business Day, had an op-ed the other day that focuses on two important issues. The first is that governance in Africa seems to be improving. One of the co-authors of the piece, Mo Ibrahim, is the entrepreneur who started the Mo Ibrahim prize -- a large financial award to the African leader who best exhibits qualities of good governance. It's an interesting idea: reward leaders who voluntarily leave office and who help set their countries on a path to greater openness, effectiveness, and transparency.

The other issue the op-ed address is the need to improve Africa's competitiveness in world markets. The authors correctly point to the abundance of creative, hard-working entrepreneurs doing business in Africa. There's not a shortage of entrepreneurial talent rather, business people, and especially the small-scale entrepreneurs, face a plethora of costly challenges: bad roads, high tariff rates, complicated export/import regulations, inadequate security, and lack of credit.

The editorial then goes on to highlight work done by the Danish government, which created an Africa Commission a year ago (the Danes are substantial donors in Africa). Here's a page with the summary of the report's recommendations, you can download the full report from this site. I haven't read the report yet, but the op-ed authors say that it finds traditional foreign aid to be unsustainable. The Commission calls for new initiatives to improve African competitiveness. For example, one set of projects would train people and improve human capital in an effort to strengthen African commercial agriculture. Another set of projects would work on improving access to electricity (it's tough to run sewing machines, for example, with erratic electric supplies). The Danes will also work with the African Development Bank to provide more funding for small and medium-sized enterprises (SMEs).

This is an interesting, and hopefully, fruitful approach. And a key shift, at least in terms of the rhetoric, is that governments should improve the regulatory environment in Africa and reduce corruption so that Africa's entrepreneurs have more and better opportunities to flourish.