Cover Story
Associated Press/Photo by Karen Prinsloo

Minding Africa's business

A new brand of entrepreneurs and economists say Africa can prosper the old-fashioned way-by earning it

Issue: "Africa, Inc.," Oct. 10, 2009

June Arunga watched mobile phone use in Africa skyrocket: "It was like the discovery of the wheel." She and business partners at BSL Ghana Limited had an idea. With many parts of the continent cut off by poor electricity, nonexistent landlines, and too-expensive computers (or computers so old they operate on DOS), cell phones are the continent's lead form of communication. Africa has the largest telecom market of any continent in the world-300 million of the world's nearly 3.5 billion cell phones, and growing by the millions each year.

But while phone use has taken off, financial services lag: Eighty percent of African households have never opened a bank account. They wait in long lines to pay an electric bill with cash. Villagers making beautiful crafts have no way individually to market them beyond the village or to engage in ecommerce.

Arunga and associates saw a business opportunity: Turn mobile phones into mobile currency. The cards for prepaid phone service, called "scratch cards," can be sold in denominations of $5-$1,000. Using an embedded code that can be sent as a text message, mobile phones can make online purchases and money transfers. A further selling point for state-owned telecoms: Phone numbers can serve as tax identification numbers, boosting government revenue normally lost in the continent's vast cash-only economy.

We see you’ve been enjoying the content on our exclusive member website. Ready to get unlimited access to all of WORLD’s member content?
Get your risk-free, 30-Day FREE Trial Membership right now.
(Don’t worry. It only takes a sec—and you don’t have to give us payment information right now.)

Get your risk-free, 30-Day FREE Trial Membership right now.

The Kenyan-born Arunga, 28, has credentials and visibility to push a bold venture. With a law degree from the University of Buckingham, she founded a film company, Open Quest Media, and worked with a BBC film crew in 2003 to produce a documentary of her own 5,000-mile journey from Cairo to Cape Town called The Devil's Footpath. She also has worked on behalf of business ventures across the continent. But government officials and overseas execs, who own most of the continent's telecoms, stopped her and her partners cold: Pushing commerce via telecommunications, they told her, could risk foreign aid packages and overseas contracts. What Arunga discovered, she said, is that in the global competition for finance, "money will go to Africa for charity-with no prospect of accountability whatsoever-but no one can wrap their head around investing in African business."

While Arunga has been pushing money-making proposals on investors, she and a new host of business-minded Africans-buoyed by a potent brew of homegrown ideas and Western financial savvy-are running head-on into what should by now be obvious: Government-to-government aid to Africa is hurting trade.

"Study after study after study . . . have shown that after many decades and many millions of dollars, aid has had no appreciable impact on development," writes Dambisa Moyo in her 2009 book Dead Aid. "Aid has financed consumption rather than investment; and foreign aid was shown to increase unproductive public consumption and fail to promote investment."

Like Arunga, Moyo grew up in Africa. Harvard- and Oxford-educated, she worked two years for the World Bank before joining Goldman Sachs. Ever since Dead Aid came out in March, it has been on the New York Times bestseller list.

At 40, Moyo represents a post-colonial generation of Africans that has firsthand knowledge of the cycle of poverty, has seen how free markets and the private sector work, and believes many Africans can escape impoverishment through economic growth rather than charity handouts.

"It bothers me that we would rather focus on what I call the four horsemen of Africa's apocalypse-war, disease, poverty, and corruption," says Moyo. "Everybody wants to have the photo-op with the starving baby, but the world is asking us to raise our children on this continent under a very negative perspective, and one that's couched in pity. Any psychologist or psychiatrist will tell you that if you tell someone constantly and long enough they are not good enough, not equal, they are poor, they aren't going to amount to anything, they need to be helped-that can't be a formula for long-term sustainable development."

Arunga, who now calls Ghana home, has been striking the same theme in lectures and interviews: "There is basic human dignity that comes from people being involved in the market and solving problems and making a living from being useful rather than receiving charity. I don't think charity is a way to wealth, and I never heard of one telling their children it is either."

The continent as a whole, according to Arunga, has a "branding problem." Potential investors don't comprehend its resources or capacity.

When Arunga pitched the mobile phone plan, one potential U.S. investor asked, "Do people have mobile phones?" When Arunga explained that they do by the millions, the investor asked, "But who do they call?"

Comments

You must be a WORLD member to post comments.

    Keep Reading

     

    Good credit

    Competency-based programs offer college credentials without the debilitating cost

     

    Soaring sounds

    Three recent albums highlight the aesthetic and emotional range…

     

    Numbers matter

    Understaffing the U.S. effort in Iraq from the beginning…

    Advertisement