Africa's challenges and opportunities take centre

17 October 2005

Africa's productivity is lower than that of competitors in the developing world, but there is more scope to improve productivity by cutting infrastructure costs than by trying to reduce labour costs. This is according to Vijaya Ramachandran, World Bank consultant and keynote speaker at the UCT Graduate School of Business' (GSB) Doing Business in Africa conference.

This was the second year that the GSB hosted the conference, and this year's event was endorsed by NEPAD.

Ramachandran, an assistant professor at Georgetown University in the US, presented the findings from data collected by the World Bank's regional programme on enterprise development.

According to Ramachandran, labour productivity was often presented as the biggest problem facing African countries struggling to compete with cheap imports from countries such as China and India.

However, the lack of infrastructure and access to finance in Africa was found to be a major stumbling block.

"The high costs of power, transport and other indirect costs, as well as business environment-related losses, all played major roles in depressing the productivity of African firms," she said.

The World Bank's research showed that for strong performers like China, India, Nicaragua, Bangladesh and Senegal, indirect costs tend to be between 7% and 12% of total costs on average. This is about half the level of labour costs. In contrast, indirect costs in African countries (excluding Senegal) tended to account for 20% - 30% of total costs and often exceeded labour costs.

According Dr Hesphina Rakuto, deputy chairperson of NEPAD, skills development is also an important part of the development solution.

"Good policies must be accompanied by the investment in skills - let us invest more in our human capital. Yes, strong political will and courage, infrastructure and resources are all essential, but we do need people centred programmes that will".

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