Sunday, September 13, 2009

The future of the world is Africa

Dr Nick Blazquez - Managing Director, Diageo Africa

Over the last five years we have seen Africa’s economic growth averaging more than 4% per annum and private capital flows increasing from US$11 billion in 2000 to US$53 billion in 2007. For Diageo the African region delivered 65% of Diageo’s net sales value (NSV) growth and 38% of Diageo’s operating profit in the first half of 2009. Diageo’s businesses in Africa employ over 4,500 people and last year we provided £317 million in tax contributions to African exchequers. However, this very foundation is being undermined by a financial crisis and economic downturn that is none of Africa’s making.

As is the case everywhere we work, we do have to be conscious that governance gains made by many African nations are not threatened as tougher economic conditions and food price rises can lead to societal tensions. For Diageo in Africa, a major part of how we do good business is recognising that we have a responsibility that stretches beyond those we employ to the communities they are part of and to the localities where our brands are enjoyed – and it is this that we must protect as much as the bottom line.

Diageo is only one part of this puzzle – but we are playing our part. This crisis calls for inventiveness. It demands new ways of thinking and new momentum to tackle Africa’s infrastructure and trade deficits. This can only be truly delivered in partnership with the private sector. Challenge funds, which allow companies and development organisations to share the risks associated with enabling private sector-led innovation, are becoming increasingly important. One example is the work we are doing to develop the cultivation of sorghum for brewing in Cameroon, which is supported by the Africa Enterprise Challenge Fund. The project aims to create a sustainable market for local grain, raise agricultural standards, yields and farm incomes.

The challenge we face is to replicate and scale up these important initiatives. To do this, we have to create more flexible partnership and funding mechanisms that allow local companies and organisations operating at the grass roots to more easily unlock vital sources of financial and technical support. Greater local ownership will allow us to tap in to key local knowledge and experience, and potentially offers a more effective way to manage and deliver these type of projects, by-passing more centralised corporate and donor structures. This will require a change in thinking and approach that currently predominantly favours larger scale initiatives.

Africa offers immense opportunities for companies to do good business and I truly believe that G8 governments can help themselves during this economic recession by helping to foster an investment climate in Africa so that businesses, like mine, can provide employment opportunities that balance the gender gap; to generate tax revenues that assist governments to implement social and education programmes; to develop and provide technologies to improve agricultural productivity and increase food security; to train staff and build our human capacity; and to provide investments in the community that address basic needs such as access to clean drinking water.

It will happen when businesses can thrive, wealth can be created and poverty can be reduced. Vijay Mahajan in his excellent book ‘Africa Rising’ said it straight: ‘The future of the world is Africa.’