General News of 2014-04-29

Capital flight bane of Africa’s dev't — Ibrahim Mahama

The Chief Executive Officer of Engineers & Planners (E&P), Mr. Ibrahim Mahama, has said the main problem facing Africa is that of capital flight, saying “no money stays in Africa”.

Apart from using part of the money generated in Africa to pay salaries, he observed, the rest was repatriated to foreign countries.

He, therefore, warned that if the continent did not come up with action-oriented strategies towards harnessing the resources of the continent for self-growth and prosperity, the repercussions would be costly.

He also said if Africa did not take up the challenge to develop the continent, the reality would dawn belatedly that the opportunities on the continent had been taken over by foreigners.

Mr. Mahama was speaking at a management retreat organised by the Afri Exim Bank in Dubai in the United Arab Emirates recently.

He said one other challenge militating against the growth and self-sufficiency of the continent was lack of access to needed financial resources for businesses.

He said, for example, that there had been instances when African entrepreneurs had come up with viable business proposals but had been unable to raise the needed capital to execute them.

“If we are looking to build African champions, we need to move on the ground and see what and where the financing is really needed,” he noted.

There were times, he said, when he had projects and approached local banks but was not successful in raising the funding, adding that it would have been impossible for 10 local banks to pool resources to raise the needed funding.

It was regrettable, he said, that when investment opportunities opened up in Africa, the politicians always told the local investor that they were not capable of raising the needed funding.

“And sometimes when you look at the project, it will only cost $200 million, but if it is, being given to a foreigner, it will cost the country a billion dollars,” he asserted.

He was of the opinion that it should be possible for local banks to pool resources in helping local businesses raise the needed funding for the development of the continent, without fear of having the accrued profits repatriated.

That, Mr. Mahama observed, would build the capacity of local industries and ensure that resources generated provided the maximum cushioning for those with lucrative ideas but inadequate resources.

Africa, he said, was gradually being shipped away in bits by foreign interests, without the opportunity to negotiate, and wondered where the continent might have gone wrong.

“Where we went wrong is that we don’t have access to capital. Africa needs capital and the problem of Africa is within us,” he said.

Mr. Mahama said there were huge gold deposits in Guinea, for instance, but that resource had been given out to foreigners and suggested that it would be good for Africa’s entrepreneurs to team up to mine the resource for the benefit of their people, instead of the present arrangement where the profits were repatriated.

In prescribing a way forward, Mr. Mahama called for a re-think of the banking proposal system available to the private sector which quite often limited access to credit, no matter how viable a business model might seem.

Africa, he said, had higher returns and better profits than Europe but admitted that “In Africa, the challenges are many but the returns are much greater”.

Banks in Africa, he noted, did not go cross-border, thereby limiting the options available to a local investor in another African country.

He was of the view that more banks, such as the Afri Exim Bank which provided support for indigenous African businesses, were needed across the continent to effectively bridge the funding gap that existed for local entrepreneurs.

“We need more of the Afri Exim banks in Ghana to listen to local entrepreneurs and the projects they have,” he urged.

He recounted that as a young businessman with few resources, the various banks he did business with in Ghana lacked the capacity to provide him with the needed funding as he progressed and expanded his operations.

That challenge, he said, persisted until he was introduced to the Afri Exim Bank that saw the company’s profile and was impressed by its performance, adding that it took the bank seven years to come to his aid.

“But with determination, we stood the test and proved ourselves by ensuring that we delivered on our services,” he recounted.