Africa needs big ideas and ambitious plans

Old economic policies based on resource extraction and cheap labour no longer work says Gyude Moore. To move forward, Africa must embrace new thinking

In early December 2019, the Dangote Oil Refinery took delivery of the largest monument ever conceived to petroleum’s impact on Nigeria. The crude oil distillation tower, said to be the biggest ever constructed, weighed in at 2,252 tons and is nearly 113 metres high. What is striking about the new refinery, which should become operational next year, is what it says about Aliko Dangote’s outlook for both Nigeria and Africa’s future. At the dawn of the second decade of the 21st century, it is a bold bet – a $15bn wager on the direction of Nigeria’s economy and place in the world.

But it is also a bet on the past. A reliance on oil – which still accounts for around 85% of Nigeria’s export revenues – is indicative of a dearth of ideas as our continent faces a future for which it is woefully unprepared.

Responding to change

Dangote has a longer planning horizon than the average African politician. Presidential candidates are guaranteed one term and possibly two, save for the odd president tempted to go for a third. Their horizon is thus limited to those two elections, their incentives seemingly incongruent with long-term thinking and planning. Too much private and public sector long-term planning involves doubling down on an industry whose future is increasingly questionable.

In 2015, the then oil minister of Saudi Arabia, the world’s largest crude exporter, said that the kingdom might phase out its use of fossil fuels by mid-century. Financial Times columnist Pilita Clark commented that “the statement represents a stunning admission by a nation whose wealth, power and outsize influence in the world are predicated on its vast reserves of crude oil.”

The statement was not driven by Saudi’s environmental bona fides; Saudi Arabia was responding to the reality of the pace at which changes were occurring. The 2019 Coal Cost Crossover report from renewables analysis firm Energy Innovation claims that 75% of the US’s coal power stations could already be run more cheaply on local wind or solar, with the percentage rising to 86% by 2025. Tesla is now America’s most valuable car company. At a $93bn market capitalisation it is worth more than GM and Ford combined. GM may have sold 20 times as many cars as Tesla in 2019 and Ford six times as many, but Tesla’s electric vehicles are now seen as the coming growth market by investors.

Big thinking required

There is a race for big ideas happening everywhere. Governments must now make strategic choices about where they will invest. Private companies are making the same choices with equal magnitude. The hope is that the private sector, with clear self-interest will join civil society to push governments to begin long-term thinking, planning and policy actions. This is not an argument that Africa’s energy choices should be limited to renewables. Africa is not the world’s conscience and Africa must not assume the burden of ameliorating an environmental crisis it did not create. This is about planning for the next 25 years or more. The big questions are going unasked and unanswered, a state of affairs too costly for the poorest continent.

Compare this with China’s approach: even as the US took victory laps over “winning” the first phase of the trade war, it was reported that China aims to raise its level of self-sufficiency in the manufacture of key components such as chips to 75% by 2025, thereby upgrading its high-tech industries and reducing imports. Or take Morocco, ranked the 22nd most water-stressed country in the world, which is planning to spend $12bn over the next seven years to improve water supply and thus consolidate its agriculture sector.

In her book, The Dragon’s Gift, Deborah Brautigam relates how China, when it was a poor backwater with abundant natural resources, struck a deal whereby Japan would finance the building of its infrastructure in exchange for raw minerals. China graduated from that stage, harnessing the full power of the state to develop expertise and aim for Chinese dominance of future technology. China formed partnerships with foreign companies, forced foreign investors to share intellectual property. The result: China has more unicorns (startups worth more than $1bn) than any other country and roughly 34% of the world’s 5G patents, which is 10% more than its nearest competitor, South Korea.

Start with agriculture

Africa requires homegrown solutions to its unique long-term threats. Where we lack the research capabilities, we need to form useful partnerships, as Ethiopia and others have done with China on space research. I recommend starting with smart industrial policy on the agricultural value chain. It holds the greatest promise and the optimal path to industrialisation.

Africa has the greatest exposure of any continent to the risk of economic fallout from climate change. Our continent is home to 17 of the 20 countries most dependent on agriculture globally and the continent is now as dependent on agriculture as it was in 1981. We require big ideas and ambitious plans. Africa needs industrial policy that targets agricultural research and thus pursues partnerships with Australia, China, India, Israel, Japan, and US agricultural universities. Our industrial policies should provide and seek targeted agriculture scholarships, purchase appropriate innovation platforms in agricultural value chains and make it available to domestic firms. There should be incentives, with clear qualification criteria, for domestic entrepreneurs.

With leadership from governments in concert with the private sector, the continent will move on from the model of low-skill labour and raw material extraction that the world believes to be our specialty. External actors alone will not lead us into the future we deserve.