Investment in Africa is on the rise as global companies are recognizing the vast opportunities that the continent has to offer.
According to a recent report published by the Center for Strategic and International Studies, in partnership with Chevron Corp., public capital accounted for 71 percent of financial flows to the developing world in 1960. Today that figure is 9 percent. While aid makes a tremendous difference, it's the private sector, through its flows of capital, technology, and knowledge, that has become a vital force in the development of Africa.
Like other developing regions around the world, Africa is too vast and its countries are too diverse to follow a single script, but the lessons we have learned from more than a century of operating in this energy-rich region can be applied by other companies interested in investing in this growing market.
Most importantly, we have learned the value of investing in local supply chains and how this helps improve economic conditions in the countries where we operate. Increasing private sector investment in local supply chains helps raise business and manufacturing standards, which can help promote fair competition, a stable fiscal and contractual environment, revenue transparency, and rule of law. It is also is a catalyst for job creation, the rise of a skilled workforce and economic diversification.
Multinational companies can derive great benefit from engaging with local suppliers that can serve their needs, so it is in their interest to spend the time to qualify them. By doing so, these companies are helping to develop local businesses that can produce to international standards and codes of conduct.
At Chevron, we have seen many of our local suppliers expand from serving us, to serving others in our industry as well as other industries. As these local businesses grow, the positive economic ripple effect multiplies.
Businesses should also make it a priority to convene and work with local organizations, national leaders, local/regional officials and other stakeholders to address challenges in ways that are scalable and enduring.
For example, Chevron supports the Extractive Industries Transparency Initiative (EITI), a country-driven initiative that strives to improve governance in countries rich in oil, gas, and mineral resources by creating and implementing uniform standards of revenue transparency. Twenty-one African countries have joined EITI; Chevron has contributed to this success through its long-standing membership on the International Board and its work with host governments.
Finally, companies should also recognize that economic and international development partnerships between the private and public sectors are not merely philanthropic endeavors -- they are critical business investments.
Over decades of experience, our approach to community development has fundamentally shifted from donors to partners; from building bricks to building capacity; from short-term projects to multi-year endeavors, and from shared ceremonies celebrating a launch to shared progress that celebrates results.
Time and money
Corporations should approach these programs as a collaborative member of the community, not just a corporate donor. Our social investment experience has convinced us the private sector can play a valuable role in breaking the cycle of poverty and disease, while supporting economic development at a scale that can be felt at the national level.
Angola is a good example. The country experienced an important turning point on April 4, 2002 with the end of a 27-year civil war. The war had caused more than 4 million people to be displaced and the country's infrastructure was in ruins. Angola's president invited Chevron to help the country rebuild. By forming public-private partnerships with organizations like USAID and the United Nations Development Program, Chevron was able to pioneer a groundbreaking program aimed at catalyzing economic diversification and growth. The program helped rebuild commercial farming and launch the country's first microcredit bank. Today, Angola is a more peaceful and prosperous nation, with a budding entrepreneurial culture and civil society.
If the last 100 years operating in Africa have taught us anything, it is that to invest in Africa is to partner with Africa. Forging strategic on-the-ground relationships can result in more streamlined business operations and increased returns in the future for both multinational corporations, host nations and their people. Now more than ever, the American private sector must seize the opportunity to fuel long-term economic and business success while helping to improve Africa's security, stability, and a better quality of life.
This post originally appeared on MarketWatch, on July 15, 2013.
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