Rwanda and cause for optimism in Africa

September 30, 2013

The Milken Institute held a roundtable discussion on the future of governance and investment in Africa on Thursday as part of its Access to Global Capital Initiative. Hosted by Liquidnet in New York on the occasion of the 68th gathering of the United Nations General Assembly, the roundtable featured Paul Kagame, president of Rwanda; Tony Blair, former prime minister of the United Kingdom and founder of the African Governance Initiative; Strive Masiyiwa, chairman and founder of Econet Wireless; Seth Merrin, chairman of the Initiative and founder and CEO of Liquidnet, the global institutional trading network; and Mike Milken, chairman of the Milken Institute. The panelists reflected on recent successes and the path ahead in sub-Saharan Africa, with an emphasis on the experience of Rwanda.

While much of the discussion conveyed a profound optimism, Kagame took a moment at the outset to speak about the recent terrorist attack in Kenya that left more than 60 people dead. Kagame called it an affront to all who want what is best for Africa and promised that Rwanda is ready to work with Kenya to prevent further violence.

The conversation that followed overviewed the recent progress across the continent. As the panelists noted, Africa has exceptional workforce demographics for the future, with a median age below 20, compared to 45-plus in Germany and Japan. Foreign direct investment has surpassed $40 billion annually, triple the level of a decade earlier. That's likely to continue to grow.

The panel returned repeatedly to three key themes: good governance, human capital and the priority of access to financial capital. Blair called governance the ability to turn potential success into reality, saying he is "increasingly optimistic" about the quality of governance in Africa. Regarding human capital, Milken highlighted the fact that African governments spend more proportionately on education than those of any other region. And although "capital is very timid" in Africa, Masiyiwa said, countries, including Rwanda, are seeing significant new inflows of investment.

For the last decade, the Rwandan economy has grown an average of 8 percent annually. Kagame credited "institutional and human capacity" for this success. Merrin recalled how the quality of governance impressed him during his initial visits to the country. Referring to Econet's recent decision to expand there, Masiyiwa said that "Rwanda ticks all of our boxes": political stability, the rule of law and a skilled, educated workforce. "We didn't enter Rwanda for philanthropy," he added. "We went into Rwanda because it made good sense for our investors."

Expanding access to capital will be essential if high-growth African nations are to sustain recent gains -- and their neighbors replicate those remarkable growth rates. For this reason, the Milken Institute Center for Financial Markets, based in Washington, D.C., has launched an initiative called Strengthening Capital Markets in Developing Countries. The project will examine how individual nations can build and enhance their capital markets, explore pathways for the regional integration of African capital markets, and, alongside the Access to Global Capital Initiative, promote participation in the international financial system.

Further success in Africa, as Blair said in New York, will depend on the "quality of inward investment." In other words, business ties that create jobs and accelerate development. Rwanda, like other countries on the continent, has pursued reforms to make it a more attractive destination for dynamic foreign companies. These nations are also spending aggressively on education, preparing their young populations to seize opportunity when it comes. For its part, Rwanda allocates more than 17 percent of government outlays to education, according to the World Bank. Across Africa, investors are recognizing the potential of this once-neglected region, and according to the five panelists, there is much cause for optimism.