Africa is on a remarkable growth trajectory, with many analysts predicting economic growth to remain above 5% for the foreseeable future. This is to some extent underpinned by a strong rate of demographic expansion. Indeed Nigeria, the host of last week’s World Economic Forum on Africa, is expected to surpass the USA in population size by 2050.
But all this growth is set in a rather different ecological context to that of the 19th and 20th century economic growth spurts of Europe, the Americas, Japan and China. Resource-rich Africa’s growing economies are facing expansion after the global commodity price spikes of the last decade wiped out the price falls of the whole of last century. Meanwhile, the world is now trying to wean itself off fossil fuels, while many economies in Africa still rely heavily on coal. So to anyone interested in sustainable development, Africa’s next steps are fascinating.
Perhaps it isn’t surprising, in this context, that African CEOs overwhelmingly outnumber their peers from other regions in seeing global sustainability challenges as “very important” to the immediate success of their companies. According to last year’s UN Global Compact and Accenture CEO study on sustainability, in which 1 000 global CEOs took part, nearly three quarters of African CEOs cited sustainability as a major factor – as opposed to under a third from Europe.
Innovation on the ground
It is easy to assume that this commitment to sustainable business is more rhetorical than real. But if we look at the situation on the ground in Africa we can actually see where innovative companies are adapting their business models to cater for and even benefit from adaptation to sustainability challenges.
A good example is Guinness Nigeria, owned by UK brewer Diageo. The 2007 hike in malting barley prices hit Guinness Nigeria’s business hard. Barley generally has to be imported to Africa as it doesn’t survive well in the harsher climatic conditions. However, the long-term response was to build an Africa-specific business model around sorghum, a much hardier grain which needs much less water to thrive. The company has invested US$250 000 (R2.6-million), working with local governments to train smallholder farmers and secure a sustainable local supply. By 2012 sorghum accounted for 70% of Guinness Nigeria’s grain volume, cutting costs and reducing the risks of poor harvests. This model has since been adopted in all Diageo’s African operations and is playing a central role in securing the sustainability of the company’s operations across the continent.
Cellphones for solar power
Another good example is Kenya based M-Kopa Solar which brings together innovative finance, mobile technology and renewable energy to provide low-income homes with electric lighting. Underlying this innovation is the rapidly growing Kenyan economy, which despite strong growth still lacks investment in energy infrastructure, leading to frequent power shortages. As a result, an estimated 3-million Kenyan homes – or 80% of the population – live off-grid and spend an average of KSh70 (US$0.80) daily on kerosene to light their homes. Kerosene burned in houses for illumination is a major contributor to air pollution and is harmful to health.
M-Kopa Solar’s customers buy a solar home system on a mobile payment plan, with an initial deposit, followed by 360 small daily payments. M-Kopa teamed up with Safaricom, operators of the hugely successful M-Pesa mobile money programme, to deliver a technology mix which enables the same cellphones charged by the panels to be used to pay for the electricity generated. Consumers benefit not just from cheaper and cleaner lighting, but have also reported an increase in monthly incomes by as much as 50% from the extended workday.
Measuring the full impact of sustainable models
A final example might be Actis Capital, the former investment wing of the UK’s Commonwealth Development Corporation with US$4.6-billion (R46.6-billion) in funds under management, exclusively for investment in emerging markets like Africa. Actis has developed an Energy Impact Model and a measurement tool with the aim of measuring the impact of an energy project well beyond just its financial return. Actis systematically measures its investment’s impact on people, wider communities, infrastructure, environment and governance. The model pinpoints where action is required and then tracks performance over the whole life of the investment. This means that environmental, social and governance issues are fully integrated into all of Actis’s investment decisions in Africa.
The key to these success stories is that they have responded to specific sustainability challenges by adapting their businesses models. My question is how we administer the same shove to organisations with fewer immediate challenges, such as those in more developed economies. In the end, supply chain risk will be a global problem so the faster all businesses can lock in resilience the better for global as well as African prosperity.