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Africa: learn to ride the change, Blair tells investors

Tony Blair on AfricaTony Blair's Africa Governance Initiative works with African governments to improve regulation and investment oversight. (Photo:"I am an optimist on Africa for both objective and emotional reasons," Tony Blair said in his keynote address at the Investing in African Mining Indaba in Cape Town on Tuesday, before going on to list pragmatic reasons for his optimism.

"Ten of the 15 top growing economies in the world are in Africa; this year, African growth should be around 5%; the middle class should double in five years and the population should double in 20 years," he said. In addition, the composition of Africa's economy was changing, in terms of both gross domestic product (GDP) and foreign direct investment (FDI).

Change was at the core of Blair's presentation. "I am here to talk to you about the challenges of change in Africa and in the relationships in Africa."

Applying this to mining, he said that while other sectors were starting to take a bigger slice of FDI than mining and extractives, even taking declines in commodity prices into account, the industry was still important for the continent.

At the same time, new players were entering the market, reflecting the shift in geo-politics. China's influence in Africa was now immense, surpassing that of historical interests such as former colonial powers. The US was also turning to Africa, as evidenced by its Africa Power programme, among other measures. Other new interests included India, Brazil and Middle East countries.

"This change is producing a paradigm shift in Africa… And the relationship between the North and South is moving from one of dependence to one of partnership."

African governments were also changing their approach to investments in extractives. "This is part of a trend," Blair said. "The outside world is looking at Africa differently; African countries are wanting to take their destiny into their own hands, and to build partnerships."

Five principles for investors, host countries

He then listed five principles, arguing that these were needed to guide successful investor-host country partnerships.

Firstly, investors today, particularly in oil, gas and extractives, were looking beyond investment in a commodity alone to investment in transport and energy infrastructure. This dovetailed with host countries' insistence on investment of mutual benefit.

"Today, there are large pools of funds eager to invest in Africa," Blair said. "I think there is great opportunity for those mining companies that have to invest in infrastructure in order to make their investments productive."

Secondly, for investors also to benefit from such investments in a country, governments should be willing to make changes, institute reforms, and work to improve local skills.

Thirdly - and obviously - there had to be transparency and absence of corruption on both sides. "Corruption is not merely wrong, it is impossible to access investment from the West if there is corruption," Blair said: "Sometimes it takes a long time to rid a system of corruption, but governments today need to get rid of it."

The fourth principle revolved around the thorny issue of taxes and predictability of taxation, while the fifth principle spoke to the business environment itself.

'A head of government is a CEO'

Blair's Africa Governance Initiative, founded in 2008, works with African governments to improve regulation and investment oversight - focusing, he told his Mining Indaba audience, on the fifth of the above principles.

"Today, not just in Africa, the single element in the success or failure of a government is transparency and the ability to get things done. There is great difficulty running a government. You can talk well when campaigning, but you need to implement this once you are in office."

And once you are in office, the former UK prime minister said, you find that you have become a CEO.

"So, how do you get things done [when you have had little experience]? How do you prioritise? This is what [my foundation] focuses on. Prioritisation is hard, especially when your country has so many hardships to deal with.

"You also need to be able to engage in contractual relationships with investing companies as an equal to get the best deal for your country. So, the fifth principle is that if the relationship between investors and countries is a partnership, it is important that government listens to business, and business listens to government."

Africa was going to change enormously over the next decade, Blair said. "Those of you who know a long-term bet over a short-term bet, I think Africa is a great place to come to and a great place to invest in for the future."

And to companies already invested in Africa: "I know you face challenges that are very difficult to overcome, but personally I think you made the right choice."

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