Opinion

Africa’s New Generation of Innovators

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The Paradox of Power
In their groundbreaking 2002 article “The Fortune at the Bottom of the Pyramid,” C.K. Prahalad and Stuart L. Hart described the vast opportunity facing multinational corporations that can adapt their business models to address the needs of the billions of “aspiring poor” inhabitants of developing countries around the world. In more recent years, Hart and his colleagues have taught us to shift our perspective from making a fortune from the base of the pyramid to creating a fortune with it, and also to be more mindful of environmental consequences when crafting strategy. The compelling vision these scholars have set forth—of an inclusive capitalism linking business, government, and NGOs in common cause—has engaged the best efforts of those constituencies for a decade and a half, with some notable successes.

But now many of the multinationals that pursued this opportunity have become discouraged by its sheer difficulty, and nowhere more so than in Africa. In February 2016 Barclays Bank announced its intention to exit the continent as part of a general pullback from emerging markets that are not developing as quickly as anticipated. In June 2015 Nestlé announced that it was dramatically retrenching in Africa: cutting its workforce by 15% across 21 countries, pulling out of two countries entirely, and reducing its product line by half. Other Western consumer-goods icons, including Coca-Cola, Cadbury, Eveready, and SABMiller, are also leaving African markets once thought to hold great promise. According to recent data from the United Nations Conference on Trade and Development, foreign direct investment in Africa fell by a third, to $38 billion, in 2015, against an overall trend of increased investment in developed economies.

Among the obstacles frequently cited by multinationals, four stand out for both their stubbornness and their familiarity; indeed, we’ve heard the same objections for decades. Most pervasive, perhaps, is the enervating effect of corruption. Corporations are understandably leery of institutionalized corruption and so seek to invest in countries that pass a litmus test dictated by the company itself or by international agencies that measure perceptions of corruption. Here, regrettably, Africa does not show to advantage. Its countries are typically found toward the bottom of the World Bank’s ease-of-doing-business index and Transparency International’s corruption-perceptions index. In explaining his company’s decision to exit Nigeria in 2015, Jan Arie van Barneveld, the CEO of the Dutch staffing firm Brunel, said, “We had the feeling that we were being constantly cheated and bribed.”

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