CBC as catalyst for African growth

The Commonwealth Business Council (CBC) is one of those international organisations that keeps popping up in news releases on a wide diversity of business activities but it remains something of an unknown quantity to the average business person in the street.

To find out exactly what it is,

I asked him what he considered the CBC's main function. "We are honest brokers for our members, bringing together different business cultures, different levels of development and national incomes, different priorities - and trying to find linkages that will strengthen the business positions of our members," he replied. The CBC's members are countries that belong to the Commonwealth, a host of some of the largest private sector companies and dozens of multilateral organisations - some of which are not based in the Commonwealth.

In a world in which countries are increasingly arranging themselves into economic zones and trading blocks to extract the maximum benefit from their common positions, the Commonwealth has the potential of becoming a global heavyweight.

The Commonwealth spans countries in Africa, Asia, the West Indies, the Americas, Australasia and Europe. This is a formidable grouping in terms of population, market size, diversity and latent growth potential. It is already the second largest trading block after the EU, handling trade worth $2.8 trillion annually and with FDI outflows of some $100bn. This accounts for around 25% of global trade and investment. Commonwealth member states comprise some 40% of the membership of the World Trade Organisation.

However, unlike the EU, it is a loose trading and political block. Its very strengths are also sometimes it weakness: member countries are situated in far-flung areas of the world; there is a massive gap between the most developed nations such as the UK, Canada and Australia and the economically weaker states such as Zambia or Papua New Guinea.

The adhesive factor

Can such a loose and widely unequal collection of members states function as a not only a collective, but a powerful global collective?

"The glue that holds the Commonwealth together is our common heritage," says Kaul. "Practically all member states were once part of the British empire. We share a common language, roughly common judicial and administrative systems, similar accounting practices, a long history of intra-Commonwealth trade, our political outlooks are similar and yes, despite differences, there is a distinctly common culture within the Commonwealth."

The fact that there is such a vast diversity in economic, social and political development within member states means that someone has to build bridges and connections between the member states and also to create connections between states and the private sector.

This, in essence, says Kaul, is what the CBC is all about. The CBC was established by the Commonwealth Heads of Government in 1997. "Our mission was to involve the private sector more fully in the promotion of trade and investment and to provide a bridge between the private sector and governments, between developed and emerging markets and between large and small businesses," said Kaul.

The idea was to create a space where for example the private sector could sit down with governments and work out policies that would benefit all parties. "With our base of experts," said Kaul," we can weigh in with recommendations on whether a particular type of investment will be sustainable or not; we can look at the cost of doing business in a particular country and if it is scaring away investors, we can make recommendations on how these costs can be trimmed down and so on.

Kaul told me that the CBC's first investment conference was held in Tanzania in 1999. "The former president of Tanzania, Benjamin Mkapa sat through the conference, listening intently, asking shrewd questions and making notes," recalls Kaul.

"We made recommendations on matters such as the taxation regime, visa requirements, liberalisation policies and so on. Within months, the government had moved and changes were taking place. New investment flowed in and local entrepreneurs found barriers to business either being lowered or eliminated."

Tanzania is arguably the most successful economy in East Africa at the moment and is poised to embark on a period of accelerated growth.

Over the years, the CBC's functions have expanded. In addition to organising conferences, it is now considered the voice of the Commonwealth private sector. It helps present the private sector case during the biennial Commonwealth Heads of Government Meetings (CHOGM), the Commonwealth Finance Ministers meetings and a broad range of international institutions.

The CBC has been working with governments and the private sector on several projects aimed at cutting red tape and installing anti-corruption strategies both of which strengthen the investment climate.

It led the private sector consultations for the Commission for Africa and organised the G8 Business Action for Africa Forum as an official event of the G8 Gleneagles summit.

The CBC has also played a key role in setting up an Investment Climate Facility for Africa jointly with the New Partnership for Africa's Development (Nepad).

Business Action for Africa is a coalition of more than 60 African and international businesses. A secretariat has set up, involving all G8 business organisations, for combined efforts to attract investment into Africa.

The Investment Climate Facility which will be run by the African Union and Nepad will be financed by donors and the private sector. The aim is to raise $550m over a seven year period. It becomes operational in September this year. The purpose of the facility is to make African business more competitive and to put in place simpler, better and more appropriate policies to facilitate local and foreign investments.

Accent on competitiveness

Dr Kaul is convinced that most African countries are still not competitive enough. He does not like the 'Africa wide' approach that is so often adopted in foreign countries. "This approach looks at the lowest common denominator and has no practical use. Africa is a continent of 53 countries each with its unique properties and qualities," he argues.

"African countries must compete, against each other and other nations of the world for scarce investment funds," he contends. "The cost of doing business in Africa is still far too high," he says. "When it takes three months simply to register a business and then further delays and obstructions along the way, you are not going to attract too many businesses to invest."

I agree with Dr Kaul - this issue is one of the campaigns we have been carrying out in these pages. The simple law of business states that you lose money for every day you are not doing your business because you have to untangle red tape, or because the relevant offices are slow or inefficient or your goods ; are held up in at the port. No one wants to start a business losing money even before you have begun. It not only keeps foreign investors away, it kills local entrepreneurship.

The question is how do you make the business climate positive and efficient? One way is through the many strategies that are adopted through workshops run by organisations such as the CBC; the second strategy is based on making governments dependent on taxation rather than aid or loans for their funding. If taxation becomes the most important source of government revenue, there is little doubt that the whole business related bureaucracy will smarten up very sharpish.

Dr Kaul is also convinced that African countries cannot build or expand infrastructure, vital to economic growth and greater volumes of business, through their own resources. He wants more public-private partnerships. "When you infrastructure," he argues, "no one can take it away from you. For example, Thames Water (in England) is owned by German organisations - but no one bothers who owns it as long as it delivers good, clean water at reasonable prices."

Despite its growing number of functions, the most important contribution of the Commonwealth Business Council must be its role in galvanising both the private sector and governments into forging a trading block with some teeth. The UK, Canada, Australia and New Zealand are strong developed economies; India, South Africa, Malaysia and Singapore are powerful emerging economies and African countries hold a very large segment of the world's natural resources. This grouping has the potential of becoming one of the most powerful economic blocks in the world if the member states take advantage of the 'Commonwealth factor' to ensure growth and prosperity for the whole community.

South Africa has already overtaken the US as the largest foreign investor in the rest of Africa; Indian and Malaysian companies are investing more heavily in Africa. If their lead is taken up by the northern developed nations, the investment climate in Africa can be changed for the better almost overnight. In return, the industrialised and newly industrialising countries will enjoy access to vast new markets and will be able to count on a steady supply of inputs.

Studies indicate that the cost of doing business within the Commonwealth is already 15% lower than for Commonwealth countries doing business outside the Commonwealth. With greater efficiency, this cost can reduce further, making Commonwealth states highly competitive on the global stage.

As we move into the third phase of Africa's economic empowerment, the CBC can play an outstanding role in bringing all relevant parties together to chart out a new map for the continent's economic salvation.