Question: Why has private investment in Africa been so weak?
Moyo: Most investors are looking for governments or looking to invest in countries where the government has a clear agenda of how it’s going to grow the economy over a multi-year period. Very often, the…what’s been quite clear from the past historical circumstance very often African government do not have much of a role in that putting that better experience together, putting those plans together. And so, many investors look at Africa and say, “This place must be a basket case.” Because rather than really doing the hard work to trying to finance economic development from other sources to such as foreign direct investments or the bond market are very transparent, the past tradition has been asking for government to raise money through The World Bank and the bilateral donors which is quite opaque. Nobody knows, you know, which country is doing better than another country because it’s all kind of closed and information is not very clear on how these countries are doing. So, this is actually discouraged private investors coming in. Moreover, because of the bureaucracy and the lack of focus on an incentive for governments in Africa to try and raise money from other sources, we find that it becomes so difficult to start a business, for example, in Africa. For some countries, it takes up to two years to get a business license. And that’s to me is an artifact, again, of a system where the government doesn’t really need to find other ways of raising money. They’re okay to continue to sustain the bureaucracy because there’s money coming in from aid.
Question: How can Africa encourage private investment?
Moyo: Well, the good news is that we’re seeing a new crop of African leaders coming up who are questioning the aid system and recognizing that it’s not such a good system for delivery of long-term economic growth and the reduction of poverty. So, for example, ethic extreme we’ve got places like South Africa and Botswana that do not relay on aid to the extent that other African countries do. But we also have countries like Ghana, which are making strides away from aid and towards more private capital solutions to finance development. More recently, I spend sometime in Rwanda and President of Rwanda Mr. Kagame, President Kagame has been very vocal about how aid doesn’t work and how he’s desperately trying to find ways to win his country up of aid and then there’s much more of that, but they are African countries were we actually to beginning to hear this dialogue. It’s a great pity that many of these African leaders who are much more innovative in how they are looking at financing development and reducing poverty in their countries don’t really have an international audience. We don’t hear that much from them, but they have very clear plans on what they are going to do. One of the things that very easy a country can do, for example, is to look and getting a credit rating of which…commonly only 15 out of about 50 African countries have credit ratings and yet credit rating are prerequisite to access the international capital market. So, that just a specific example of what I believe is…a space for a lot more improvement in moving away from aid.