Victor NDIAYE, president and founder of Performances Group, has been involved for more than 20 years in reflections and strategies on the emergence and development of African states. In this interview, he returns to the necessary partnership between the state and the private sector.
What is the correct definition of emergence with Asian and African models in mind?
The definition of emergence is the same everywhere: it is possible to optimize the factors that a country has to lift its populations out of poverty and significantly and sustainably improve their standard of living. Indeed, at certain moments in history, we had the impression that it was a question of population and of force to work the land, then raw materials in the basement. In the twentieth century, the Asian model gave the impression that the royal road was industrialization, relying in particular on the demographic dividend and a low labor cost.
With the fourth industrial revolution and the business model changes brought about by the digital revolution and weaker barriers to innovation, the situation changes and the paths are multiple. The most successful and innovative economies in the world (Singapore) or Africa (Mauritius, Seychelles, Rwanda) are not necessarily big industrial countries. What is important for a country is to increase the value it derives from the global market, regardless of the sector, and thereby bring jobs to its people. The central challenge becomes: how to increase the productivity of the country so that its companies are more competitive?
Do we have the general impression that emerging African models are more or less similar and have not yet taken off?
This is not correct. Countries such as Mauritius, South Africa, Seychelles, Morocco, Botswana, Rwanda have made remarkable leaps during the last half-century. By observing them, we have identified five factors that seem to us the most critical in the path to emergence. The first is quality institutions, which disseminate values and a culture conducive to progress: national pride, respect for rules and the public good, equal opportunities and opportunity for all, strict attitude against corruption … is the basic foundation on which three other foundations lie: effective government in the planning and execution of public policies, a strong private sector evolving in an incentive framework for risk taking, entrepreneurship and innovation, and high-performance support sectors, be they roads, energy, schools, hospitals, housing or financial services.
The fifth factor, absolutely decisive, is the existence of growth engines, ie national sectors that are competitive in the international market, and which maintain or repatriate a significant mass of jobs and wealth in the country. We could have started with this last factor, which is the purpose of the strategy of acceleration of growth and economic emergence, the first being the foundations that make it possible to achieve it.
It is therefore the simultaneous strength of these 5 factors that lead to sustainable growth and shared prosperity, hence the Performance Group’s pyramid of emergence to represent the entire model. Our analysis shows that controlling just a few factors of the pyramid is not enough, and that the tremendous trajectory of a country like Rwanda over the last 20 years can be explained by the virtuous circle that it has been able to put in place thanks to the mastery and the good interaction of all the dimensions of this pyramid.
How has an economy like Equatorial Guinea, which has grown phenomenally in recent years, not finally conquered poverty?
Because it is a perfect illustration of a too partial control of the pyramid. Equatorial Guinea has invested between 2008 and 2012 more than US $ 12 billion in infrastructure (highways, new cities, housing, energy, ports, airports, fiber optics …), a fairly impressive effort, in the heart of a region that had many resources but still very poor in infrastructure. Through these huge investments, Equatorial Guinea has had the world’s highest growth rate of more than a decade, exceeding 30% per year. However, since 2013, major works have stopped and the economy is in full recession.
This is a lesson that many African countries need to ponder: growth largely driven by large infrastructure projects, growth that consumes a lot of capital but does not generate enough productivity is a “bubble” and is not sustainable . When, in addition, this growth is financed by debt, you are entering a dangerous cycle for future years.
In the long run, growth in reality does not come only from investment (and thus from capital growth), but also and above all from factor productivity (capital and labor). The question is not only how much is invested, but how efficient is this investment, especially in terms of improving the overall productivity of the factors of production.
And for this, public investment must create a ripple effect on private investment. Of course, in many of our countries, almost everything is to be done and it is tempting to quickly catch up with some great achievements. But countries are not competing to build roads or bridges, but to sell products and services. And it is essential to target priority infrastructures that strengthen the competitiveness of the country’s growth engines.
This is what Rwanda has been able to do, for example by developing in the 2000s the precise infrastructures that its tourism and coffee sectors needed. For coffee, it was for example the investment in hydraulics so that the water arrives at the right moment in the hundred of coffee stations in which the private sector would invest. Public investment thus supports private investment, accelerates the development of the national economic fabric, and allows through taxes to pay the debt of previous investments and to generate more resources for new investments.
And if you tried to draw a parallel between the PES of Senegal and the PND of Côte d’Ivoire?
They have a lot of similarities: a plan that becomes the only standard, an ambitious vision, flagship projects and reforms, some major infrastructure projects emblematic. In recent years, they have also achieved very enviable results, notably a strong growth momentum of 6 to 8% a year, which places them among the best performers in Africa.
But these countries, like many other African countries, must remain vigilant on a central question: Is their growth dynamic of the Singapore or Rwanda type, driven by private investment and the export of growth sectors, or Equatorial Guinea type, so driven by public investment, some big infrastructure projects and internal consumption? Does their growth entail a structural change in the national economic fabric, with the development of national champions and the formal sector, or does it essentially result in large contracts awarded to large groups, often foreign? Does their growth create enough jobs, or is unemployment, especially youth, still endemic? Does growth significantly reduce poverty or enrich some privileged people? Does it reduce regional inequalities or does it reinforce the weight of the capital? In short, does the country fit into a virtuous circle of profitable investment, sustainable growth and emergence, or a vicious circle of unprofitable investment, fragile growth and debt?
Growth is good, but the real indicator of sustainable growth, and therefore of emergence, is the evolution of productivity, and therefore of the competitiveness of the economy. In particular, it allows for the export and massive creation of quality jobs. And as Morocco did a few years ago at the end of the first phase of its Emergence Plan, the countries that begin the second phase of their plans must, beyond the success achieved, have the lucidity of identify their deficiencies and correct them. On this point, the teaching of the pyramid of emergence shows in particular the need to focus more on the development of “growth engine” sectors.
When we talk about national champions, are we referring to the Korean Chaebols or Sonatel?
Both. The competitiveness of a country is not, of course, the competitiveness of its state or its citizens, but that of its companies. The United States is the world’s leading economic power, because yesterday they had Ford, General Motors, ExxonMobil, Coca Cola, Citibank, Mac Donald’s, to which today Apple, Microsoft, Google, Facebook, which sells to the rest of the world their products and services. South Korea actually has its Chaebol, LG, Samsung, Hyundai, Kia Motors, Daewoo. Morocco has conquered the African market with the Office Chérifien des Phosphates, Attijariwafa Bank, BMCE, Royal Air Maroc, Morocco Telecom, insurer Saham, the real estate group Addoha. These big companies are the real engines of economic transformation and the emergence of a country: they are the ones who must be competitive in the international markets, which must pull up small and medium-sized companies in the country. dealing with a part of their activity and inculcating them international norms and standards, and it is they who must supply the country with the virtuous circle of wealth and job creation.
How then to understand that African countries, which aspire to emergence, grant as many projects, sometimes with their own budgetary resources, to foreign companies rather than national companies, which sometimes even are present and fight over international markets? What is evident in the sport has to become so in the economy: a country can not build a strong national team, able to win international medals, when it uses its meager resources to strengthen the players of other teams!
Of course, this does not mean a closure of the foreign investment market, whose role remains critical in spreading new techniques and improving the organization and governance of companies. Thus, international strategic partnerships must also develop because, in a global and competitive world, a national champion is not necessarily a 100% national company.
Maroc Telecom, 53% of which is owned by an Emirati company, is clearly considered a Moroccan national champion. Is it the same with Sonatel that you mentioned earlier and which, despite its diversified capital1, remains by far the largest Senegalese multinational? Each state must therefore ask itself these questions: who are our national champions to conquer international markets and initiate our economic emergence? And how does the state intend to support them to lead these battles together?
How can these different plans be integrated into UEMOA, ECOWAS and the African Union?
When we look at the ranking of the 100 largest African companies (excluding the financial system), there is only one UEMOA company, Sonatel. And she knew how to become one by building a sub regional group, with a presence in 3 UEMOA countries and 5 ECOWAS countries
Thus, not only do our economies have few large companies, but about half of them are just local subsidiaries of foreign groups. In the end, this leaves few champions, whether to resist global competition in our markets or to conquer foreign markets. Thus, faced with multiple proposals for opening our markets, for example in the framework of EPA-type agreements, this development of African champions is an emergency and the success of the plans of emergence will also have to be measured by the number of champions who will emerge.
But we do not become a world champion overnight: Like Nsia or Sonatel, we are often first a local champion, then regional, then continental, then world. And in view of the small size of our national markets, the sub-regional groups (Uemoa, Cemac, Cedeao, Ceeac) offer the ideal framework to bend their arms.
For this reason, the creation of large regional markets must be accompanied by competitive policies that favor the emergence of regional champions, notably through easier access to markets (approvals, regional tenders) and increased reconciliation and mergers. between local businesses to create large regional groups. The UEMOA financial system, with its unique approval, illustrates this evolution and today provides some of its biggest regional and continental champions: NSIA Bank, Sunu Assurance, Orabank, Ecobank.
Do you believe in ZLECA?
Absolutely. What has been said at the regional level is valid at the continental level: the ZLECA, with the objective of increasing intra-African trade from 16% today to 60% in 2022, is an essential condition for accelerating the growth of emergence of African champions on a global scale. However, it assumes that a number of conditions are met for the customs union to be effective and balanced.
Firstly, the guarantee of a rigorous and neutral application of the rules of entry on the markets, avoiding current practices of discrimination on the products of other African countries. Secondly, a significant investment in transport infrastructure to move our highly fragmented economies towards a single continental market.
Thirdly, voluntarist policies to support smaller companies and smaller countries to compensate for the natural tendency to concentrate trade towards the most important economic poles.
Is the emergence of Senegal and Africa for 2035 possible?
Absolutely. The long history shows that development is possible everywhere, without geographical distinction. The only real requirement is institutions on the one hand that ensure that a small group can not grab power or wealth to the detriment of others, on the other hand that promote and encourage excellence, take risk and innovation.
Whatever the level from which it departs, such a system propels the energy of a Nation forward and inserts it into a virtuous circle of progress. It is for this reason that the United States is the world’s leading power, and it is for this very reason that Rwanda has undergone a profound and positive transformation for two decades. The pyramid of emergence also shows us that it is possible to go fast, provided that it is precise and coherent in its implementation.
When you have a good plan, you should not come out with new ideas or new measures every day. In broad outline, Rwanda is developing its Coffee Plan or Tourism Plan developed since 2002, because it took the time to co-build with all stakeholders and to decline them in a detailed and precise manner. , with the offer to be developed, the target markets, the skills to be trained, the infrastructures to put in place, the reforms required in the context of the business, etc: The effectiveness comes from the precision of the plans of rigor in their implementation implemented.
The emergence of Africa by 2035 is not only possible, it is ongoing, by the will of Africans, with good dynamics and successful examples of success. Stimulated by strong regional integration policies, each country must mobilize its own genius and find its way. This not by multiplying the measures and projects, but rather, like the symphony of an orchestra, by inserting itself into a virtuous circle where the action of the various actors (State, Civil Society, Enterprises) and the behavior of the citizens Consistently contribute to achieving a strong and shared ambition.
