Africa’s turn? Socioeconomic and business trends in the continent

In a conversation moderated by Eliana La Ferrara, the Chair in Development Economics at Università Bocconi, Nicholas Hughes OBE – Executive Fellow of the Wheeler Institute, founder of M-PESA and co-founder of M-KOPA – and Leonard Wantchekon – Professor of Politics and International Affairs at Princeton University and Founder and President of the African School of Economics – address the future of business in Africa through an examination of economic growth, politics, education and cultural change in the region.  This panel was co-hosted by Elias Papaioannou of the Wheeler Institute for Business and Development at London Business School, and Nicola Gennaioli of Innocenzo Gasparini Institute for Economic Research at Università Bocconi.

Africa’s growth outlook remains positive, but will not follow the arc of South and East Asia

Africa has grown at a rate of 4% over the last 20 years, and boasts half the world’s fastest growing GDP countries – each with at least 7% GDP growth. Much of this can be attributed to a more favourable investment climate, an improving governmental and regulatory landscape and a rise in digital. Despite a contraction of 3% in 2020 due to the impact of the COVID-19 pandemic, Africa is expected to return to a positive growth rate of 3.3% in 2022 – which Wantchekon sees as a clear reason for optimism. He notes that the African growth story does not need to mimic the growth rates seen in Asia for us to be optimistic about the future. Hughes echoes the huge growth opportunity Africa represents: by 2050, 1 in 4 people will be African, a shift in demographics that business cannot ignore.

Much of this growth is centered in a select number of high-performing countries – such as Nigeria, Kenya and South Africa. Africa continues to be highly fragmented, especially when considering regulatory differences between countries. Hughes, in partnership with the Wheeler Institute, previously assessed fintechs at scale across the region and found that this fragmentation was a core reason products could not seamlessly be launched across the continent. He states that establishing a set of common standards across the region could enhance pockets of strong performance whilst providing access to less developed economies, and encourage more pan-African growth. The unevenness in current growth stories could also be overcome by implementing a ‘hub-and-spoke’ model, building on hubs of strong economic performance in each region to facilitate expansion into surrounding areas. Wantchekon notes that this could be crucial to reduce the gap in performance between countries, and foster partnerships between key companies and regions. 

Constraints to growth, particularly institutional constraints, persist – but these same constraints can also bolster innovation

Key growth levers – such as infrastructure, political and institutional stability, and education and human capital – are frequently cited as reasons to doubt Africa’s growth potential. Infrastructure in particular remains a barrier to growth in many countries, one of the physical reminders of the aforementioned fragmentation across the continent. Speaking about his experience establishing M-PESA, Hughes states that although the lack of mobile infrastructure posed problems for business initially, it also presented an incredible opportunity to think differently about infrastructure constraints. Without legacy electricity infrastructure, Hughes identified a further opportunity utilizing the newer ‘light-touch’ mobile infrastructure of M-PESA – and M-KOPA was born. M-KOPA was able to create novel, cleaner infrastructure without needing to invest in older technology – demonstrating how a constraint can become an opportunity.

Next, La Ferrera asked about recent shifts in the African political landscape, and what impact – if any – this has had on the appetite of investors. Although few distortions – corruption, mismanagement – can still be found, the region has reached a level of relative political stability in recent years, states Wantchekon. He notes that democracy is incredibly deep-rooted in African culture, reflected in increasingly high participation rates in popular elections. The missing piece, according to Wantchekon, is popular participation in government at both local and state levels. Consensus is a core component of African culture which was not been woven into the fabric of African institutions enough. Hughes agreed, mentioning that while political uncertainty is an investment risk in many transactions, it is no longer a key factor that holds Africa back. He adds that there is a larger role for the international community to assume here – whether through increasing foreign direct investment, or building stronger political ties and investment relationships – to make Africa more attractive as an investment location and support young democratic institutions.  

In discussing politics and state control, the question of monopoly power naturally arises – many large corporations in Africa, especially in utilities and communications, remain fully or partially state owned. When asked about the concern of monopoly players in the region, Hughes believes that customers in Africa have the ability to – and will – vote with their feet. Hughes takes Safaricom as an example: despite holding a market share of close to 90% in Kenya, they have been incredibly reactive in their response to customer needs and finding routes to scale, contrary to how a stagnant monopoly power may operate in the market. However, Wantchekon warned that we may risk ignoring pockets of power concentration so as not to scare investors, and instead advocated for increasing transparency in protecting competition and preventing corruption, while at the same time, ensuring that regulation does not penalize entrepreneurship.

Education continues to be a critical area for reform across Africa. The quality of learning, coupled with population growth, has limited human capital development and exacerbated the gender gap. Wantchekon advocates for large-scale system reform in this area. He notes that the current intellectual elite lacks diversity, which can be addressed by a) providing international training for top-level policy makers in finance, economics and management, b) creating opportunities for Africans to study abroad and utilizing the resultant diaspora effectively, and c) encouraging African universities to take a more active role in producing regional research and insight to support this educational revolution. Often, encouraging international experience leads to fears of ‘brain drain’ – a claim Wantchekon believes is over-exaggerated. Africans who are educated or work internationally still remain a strong part of the African voice. The test is not the zip code where you reside; instead, the test should be where scholars and professionals choose to invest their efforts. University programs that bring the diaspora back into Africa, such as offering visiting lecturer positions, should be more aggressively utilized to attract talent home.    

The entrepreneurial spirit of the younger generations is a key growth opportunity in Africa

Following on from the conversation on education, La Ferrara enquired about whether the skills in the current labour force match what’s required in the fastest growing sectors. Hughes spoke about the acceleration of technical skills in the region over the last 15 years – which, when coupled with a growing entrepreneurial spirit, has developed a flexible workforce able to work across distributed teams and amongst novel challenges – such as working restrictions imposed during the pandemic. Hughes also spoke of the advantages this generation has to be free of legacy systems, able to design ways of working with digital modes at the center from the outset. Many leading companies are investing to take advantage of increasingly skilled labour in Africa – for example, Microsoft recently launched their software engineer apprenticeship program in Nairobi, while Antler initiated their VC funding program in Nairobi, attracting pre-seed start-ups from across the continent. Although these companies are likely to attract top talent away from local businesses, these programs offer an unmatched opportunity for mentorship and training – which will hopefully be brought back into locally owned businesses in the future.

Wantchekon and Hughes also spoke about increasing efforts to address the gender gap across entrepreneurship and STEM. In 2020, the African Development Bank identified the funding gap for female entrepreneurs at $40B and launched a program to address this gap, making lending more readily available to women entrepreneurs. There have been enormous strides made in addressing the gender gap across STEM in Africa too – Benin is 6th in the world in terms of number of female engineers. With further investment and targeted funding, there is real potential for some African countries to lead the way in closing the gender gap in future.

Preservation of culture requires dedicated attention and investment

What does a rise in capitalist culture and a movement towards a more ‘Westernised’ way of life mean for the way the youth understand their traditional culture, asked La Ferrera, and is there a reason to fear cultural erosion here?  Wantcheckon highlighted the importance of community-based culture across Africa, and how this is a powerful agent for social mobility: when communities are driven by a collective will to invest in their children’s futures, their success becomes shared between all members of the community. Wantchekon warns that his concern here is not a loss of culture, but instead a lack of investment in preserving culture and communicating this effectively to future generations. Governments should be spending 3-4% of their GDP on developing African-centric research and education, which is fundamental to both pedagogical advancement, and the protection of social and political history in the region. . In addition, establishing and funding museums or educational programs that include strong local leaders is a key method of preserving community knowledge and culture.

Hughes emphasized the importance of understanding local culture for businesses. Through his experience at M-KOPA, it become obvious early on that gaining the support of community leaders was imperative for them to operate successfully within that community. Harnessing the power of communities can be incredibly positive for business in Africa – when done correctly.

China continues to invest in Africa for the long term, bringing both risks and opportunities

When discussing the African growth story, one can no longer leave China out. Paradoxically, growth in Africa has benefitted hugely from holding governments accountable, strengthening democratic institutions and a growing public consciousness – fundamental societal preconditions that China does not share, leaving open the possibility of corruption. It is a tough topic: one on hand, China has invested meaningfully in Africa for the long-term; on the other, it has not provided the democratic leadership that we would expect from a Western investor. However, the door remains open – that is, if other foreign powers wanted to invest more in Africa, they would be welcomed. Hughes rightly adds that we cannot criticize China for wanting to invest whilst the West stands by. Moreover, China has made significant investments in core areas such as infrastructure and energy, efficiently integrating markets or regions not previously connected. In any case, Wantchekon identified the need for a coordinated, regional strategy to balance the benefits of Chinese investment with the impact of this on the political economy in the region.

The case for optimism: the youth of Africa

In closing, both Hughes and Wantchekon named the spirit and skillset of the youth in Africa as the most important thing inspiring their hope for the future – a sentiment heavily emphasized throughout the conversation.  Both felt that this is a resilient generation, primed to take advantage of digital opportunities ahead and eager for growth. Increasing social and ethnic cohesion, coupled with a growing sense of regional ‘legitimacy’, is fueling more discussions of what pan-African opportunities might exist – such as the potential for a regional currency, or the establishment of new trade zones – and inspires the possibility of what Africa will grow into in future. It certainly looks to be Africa’s turn – led by a generation unafraid to speak with an unequivocally African voice.

Nick Hughes, OBE, is Executive Fellow of the Wheeler Institute and the Co-founder of M-KOPA and founder of M-PESA. Nick has been at the forefront of mobile commerce activities in emerging markets for over 15 years, pioneering digital fintech solutions that solve real problems. M-KOPA has won multiple awards for its innovative business model and today has reached over 850,000 customers in East Africa, predominantly rural households. Holding a PhD in Applied Science and an MBA from London Business School, Nick has also won The Economist’s Innovation Award for Social & Economic Impact for his work on M-PESA. In 2017 Nick was awarded an OBE in the Queen’s Birthday Honours list for services to ‘innovation in Africa’.

Leonard Wantchekon is a Professor of Politics and International Affairs at Princeton University, as well as Associated Faculty in Economics. A scholar with diverse interests, Wantchekon has made substantive and methodological contributions to the fields of Political Economy, Economic History and Development Economics, and has contributed significantly to the literatures on clientelism and state capture, resource curse and democratization. He is the Founder and President of the African School of Economics, which opened in Benin in 2014.

Eliana La Ferrara is the Fondazione Romeo ed Enrica Invernizzi Chair in Development Economics at Università Bocconi.  She holds a Ph.D. in Economics from Harvard University (1999) and a M.Sc. in Economics and Social Sciences from Università Bocconi (1993). Her research covers topics related to development and political economics, and has been published in leading academic journals such as the Quarterly Journal of Economics, the American Economic Review, the American Economic Journal: Applied Economics and the Journal of the European Economic Association. She is the recipient of various research grants from the European Research Council (ERC) and the European Commission.

Elias Papaioannou is co-academic director of the Wheeler Institute and economics professor at London Business School, focusing on international finance, political economy, applied econometrics, growth, and development. In the academic year 2019/2020, Elias held the Varian Visiting Professor of Economics at the MIT Department of Economics.

Nicola Gennaioli is a Professor of Finance at Università Bocconi, IGIER and CEPR. His research interests revolve around the intersection of psychology and finance and economics of political and legal institutions. He has published several papers in leading international journals.

Victoria Henderson (MBA 2021) has three years’ experience in management consulting at Bain & Company, and a background in Law and Politics. She is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.


  1. Aimé


    Very interesting article. It shows many ways of business opportunities, with risks analysis indeed.

    I’m interested in water sectors’ contribution in the africa economic development.

Leave Comment

Your email address will not be published. Required fields are marked *