By Adetunji Adeniran
As a co-founder and director of a fast-growing Social Innovation Company and someone actively working in the social space, I have learned quite a bit about how emerging economies (Africa especially) respond to new initiatives especially when it comes to social innovations.
Innovation in any field is not new to Africa and I can point to researches and papers that trace ingenuity and bold ideas to Africa- The Egyptians, Ethiopians, Benin Kingdom all attest to ancient wisdom. However, the tables have turned and Africa has become the recipient rather than the originator of innovations. How then does the modern young continent respond to new ideas?
Frontier Markets in this context are different types of ‘developing countries’ that are more developed than the least developing countries but too risky to be considered an emerging market based on criteria such as high levels of poverty, weak human resources, economic vulnerability.
Many countries in Africa belong to this category. As at September 2011, there were 59 frontier markets (with exception of Colombia which is now considered an emerging market) according to International Finance Corporation and with the inclusion of some countries by the West African Economic and Monetary Union.
These Frontier Markets are characterised by challenges (opportunities) and are pursued by investors seeking high, long-run return potential as well as low correlations with other markets. Some Frontier Markets such as Nigeria, Argentina were emerging in the past but have regressed to frontier status. The good thing about these markets is that, over time, they will become more liquid and exhibit similar risk and return characteristics of developed emerging markets.
Nigeria is a typical case study of a country that has the potential of being a developed emerging market in the nearest future. The country is a middle-income, mixed economy sitting on $376.6bn nominal GDP and ranked 27th largest economy in the world and the largest in Africa.
Although hindered by years of mismanagement especially between early 1970-80 (years of oil boom, Structural Adjustment Programme etc), the economic reforms of the past decade (2001- 2013) have put Nigeria back on the track towards achieving its full economic potential.
However, in the past three years, the economy has once again slipped into the era of the past characterised by mismanagement, policy summersault, and poor implementation. During the recession which lasted between 2016-2017, the inflation increased to over 20 per cent.
In fact, there was a rise in housing, water and gas by over 22 per cent in 2016. Between 2013 and 2018, 31 million more people fell bethe low poverty line bringing the statistic to about 91 million people (48 per cent of the estimated population). Unemployment has consistently been rising from 10.4 per cent in July 2016 to 23.1 per cent in 2018. Furthermore, tough macroeconomic conditions are forcing both local and major International businesses to exit the country for other markets. An example out of many is PZ Cussons that recently reported its new initiatives to focus more on European and Asian markets despite having the biggest market in Nigeria.
To combat the extremity of poverty in the country, a new government (formerly the opposition) led by the All Progressive Congress (APC) earmarked N500bn ($1.4bn) for ‘Social Investment Programme (SIP)” which involves ‘sharing’ money to the ‘poor’ and giving conditional loans to market traders. There are a couple of challenges with this though which many experts have criticised; How does the government determine who is poor or not? How sustainable is this model for successive government?
On the first question, the Vice President of the country claims that the programme is working based on a list provided by the World Bank. That alone raises an eyebrow when you think of the failed Structural Adjustment Programme (SIP) proposed and implemented by the same bank in the 1980s.
Expectedly, its sustainability is also questionable because the two leading political parties have distinct ideologies. What becomes of the ‘poor’ if or when a new government take power? A point of note also is that such programme will continue to breed an entitled generation that will rather rely on crumbs from the government if such a model is allowed to linger on. Such practices take the initiatives to innovate from the people we are trying to help and thereby causes a roadblock to sustained innovation.
To solve or alleviate the myriad of challenges facing the economy, it is advised to imbibe more sustainable social innovation strategies. Social Innovations are new social practices that aim to meet social needs in a better way than existing solutions.
These are ideas in education, community development, healthcare, employment and labour relations deployed to strengthen existing systems. Some of these innovations in public practice have been pioneered particularly in Scandinavian and Asian countries and Social Entrepreneurship, which is the practice of creating new organizations focusing on non-market activities are highly encouraged.
There are a couple of Institutional Supports case studies from developed markets which can be replicated in frontier markets. For example, the US government in 2010 created an office for Social Innovation in the White House, which is funding projects that combine public and private resources (Social Entrepreneurship) with foundations that support social Innovation.
Policymakers in the UK, Australia, China, Denmark are also supporting social innovation and its practice. The European Union’s Innovation Strategy was the first well-funded research and development strategy to emphasize social innovation. Another great model is the Social Innovation Academy, a fully digital academy for social innovation, co-funded by Erasmus and the European Union.
Finally, educational institutions in frontier markets need to also launch and support the teaching and research in the area of social innovation and social enterprise.