Growth Potential and Sustainability Challenges in Africa

Authors

• Racheal Meiers

  Former Director, BSR

While on a recent trip to Egypt and Kenya to research employment and entrepreneurial opportunities for women in export-processing zones, Betsy Fargo and I found that both countries are on the verge of expansion in a number of critical industries, creating growth opportunities as well as potential sustainability challenges.

In Egypt, the textile and apparel industries are poised for significant growth; Egypt’s cotton market has traditionally been quite closed, but has seen significant growth in recent years. 2008 saw a 52 percent increase in cotton exports as well as a 36 percent increase of market price of cotton in all forms and lengths. Currently, the largest importer of Egyptian cotton in the global market is India, but there is also potential for full value-chain production in Egypt. The Suez Canal and major ports on the Mediterranean mean easy and fast transport to European markets. As infrastructure improves, other sectors such as software and electronics manufacturing may increase as well.

Kenya’s increasingly sophisticated ICT infrastructure—with fiber optic installations, a Sh76 billion ICT Park under development in the Athi River industrial area, and regionally competitive education levels and English skills—is unique to the region. IT call centers represent a strategic growth industry.

Innovative solutions to development are also underway in the financial services, mobile communications, and alternative energy sectors in Kenya. Mobile phone companies are linking with banks to provide savings accounts for lower income, rural populations. A recent example is Safaricom’s partnership with Equity Bank’s MKesho. And Kenya already gets the majority of its power from hydroelectricity, and explorations are underway for solar, wind, and other opportunities.

While learning of these opportunities, however, we also discovered potential sustainability challenges, including:

• Weak labor law enforcement: In Kenya, Ministry of Labor inspectors are few in number and inadequately trained. Additionally, excessive but often incomplete inspections often lead to bribery and limited impact on poor practices.
• Underdeveloped environmental standards policies and regulations: Water, waste, and energy are significant issues in both countries. The high cost of energy in Kenya is one of the reasons for hydroelectric and other alternative energy exploration.
• Lower labor standards in Kenya: As a result of job shortages in Kenya, workers (especially female workers) frequently accept temporary contracts with no benefits or job security.
• Risk of migrant labor abuse in Egypt: Labor shortages in the country could increase existing flows of migrant workers, especially in the manufacturing sector. Labor migrants are more vulnerable to rights abuses due to weaker protection mechanisms by both the government and the private sector.
• Low status of women in both countries: In some cases, this leads to rights marginalization, under-employment, financial dependence on male family members, health risks including HIV and female genital mutilation, sexual and domestic violence, low education, and limited formal skills development.

As a growing number of global companies take advantage of the economic growth in Africa, there are also opportunities to support social and environmental sustainability in Egypt and Kenya.

In particular, increased participation by Kenyan and Egyptian women in the formal economy can create enormous opportunities for companies investing in Africa, and can go a long way to improving the conditions of those women, as well as social and environmental conditions more broadly. Women tend to invest their earnings in their children and families, thereby improving education and health indicators and boosting low-income families’ financial security: In 2009, 20 percent of women in Egypt were unemployed (compared to 10 precent of men), while in Kenya, only 20 percent of women are employed in the formal sector. As companies turn their attention to these two countries, employing, training, and empowering women will become a strategic priority.