How can we harness business to build a prosperous Africa?

#1


In 2005, when the UK last held the Chair of the G8, the Commission for Africa drew together a comprehensive and practical mix of measures to create a strong and prosperous Africa, and the G8 agreed an ambitious package of support to accelerate the region’s development.

The Commission for Africa also marked a step change in how the private sector was engaged as a partner in development. In the wake of the Commission for Africa, a group of companies came together to form Business Action for Africa, as a business-led platform to drive advocacy, engagement and action in support of Africa’s future.

Produced by Business Action for Africa, in partnership with the Initiative for Global Development, the New Africa Report (published as an online series this week on Business Fights Poverty) makes clear that there has been significant progress in Africa, together with a far greater recognition around the positive role that business can play in securing long-term growth and development in the region.

To coincide with the 2013 G8 Summit, join me and a panel of experts to share your views on the following questions:

  • Since the landmark Commission for Africa and Gleneagles G8 in 2005, what are the key areas of change and progress in Africa’s journey to secure more sustainable and inclusive economic growth, and where do gaps persist?
  • What have we learned about how best to engage the private sector in Africa’s development?
  • How can African governments and institutions further unlock business’s contribution, and how will the current G8 agenda help to accelerate further progress?

Editor's Note:

RIchard Gilbert is Deputy Director of Business Action for Africa.

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#2

DFID is ramping up its work on economic development and is putting the private sector at the heart of its approach. Working together with business, we are looking more strategically at how we can drive economic growth that leads to job creation, boost trade from developing countries and reduce the barriers to responsible trade and investment.

Supporting economic development in poor countries is not only fundamental to poverty reduction. It also creates the trading partners and markets of the future, which is good for the global economy and good for the UK.

In her speech to the London Stock Exchange in March, the Secretary of State announced a stronger focus on economic development and job creation. This will focus on creating the foundations of economic development in poor countries and is expected to include three core areas of work to help drive growth and leverage more private investment:

  • Reducing the overall barriers to trade and investment;
  • Unlocking the ability of entrepreneurs in developing countries to themselves drive economic growth through their own businesses; and,
  • Increasing levels of inward investment, including from UK companies.

More information on what DFID is doing on private sector development can be found on our webpages and through following our private sector development twitter account @DFID_PSD

#3

Some major global trends which are potential game changers for Africa’s future development have become increasingly apparent since 2005. Of course the financial crisis put a dampener on Africa’s growth, but in fact Africa weathered the crisis remarkably well. This increased resilience was partly because of the growing importance of the emerging markets such as China and India as investors and trading partners with Africa.

Linked to this, is the growth in demand for natural resources, and for land and food, arising from growth in the emerging markets, which represents a significant opportunity for African countries, many of which have significant natural resource assets and are economically reliant on agricultural production. African governments have an opportunity to capitalise on this increased investment, by demanding more from the companies investing, in ways that will ensure increased employment, training, technological progress and linkages with local suppliers which will boost domestic private sector development. This would help to tackle the concerns that have arisen about jobless growth and promote more inclusive forms of growth. It will also be important to manage natural assets sustainably, so as not to undermine economic prospects in the long term.

Another area where there has been considerable change since the mid 2000s, is in the way that governments and the development community engage directly with the private sector to promote development goals, rather than simply focusing on getting the investment climate right through policy reform. A particularly interesting example of this is the trading corridors approach which has been developed in Africa, whereby governments, businesses and donors collaborate to develop a strategy for the development of a particular region, by each committing to invest resource in its development in a complementary way. This more joined up approach should help to enhance returns to each of the players from their investment, compared with what they could achieve by themselves. More of this kind of partnership building – including through the New Alliance for Food Security and Nutrition the G8 initiative launched in 2012, could help to transform African growth prospects – for more on this see my recent blog on this webpage!

#4

What did the Commission for Africa achieve and what did this mean for folk businesses in Africa

They are some basic things that should be addressed that are sometimes not to do with money per se but rather where we focus our attention. The SME sector is a huge driver of most African countries’ economies and by implication this the nature of most enterprises owned by women. To what extent do we pay attention to the challenges faced by businesses at this level?

There are also issues to do with the business culture and the extent to which this is understood in any given situation as its potential impact on the success or otherwise of an enterprise

#5

That is a good question Ida, and something that we at DFID think is important.

DFID is working to increase access to finance for small and medium-sized businesses that is critical for their growth. For example, in response to G20 calls for greater support to small businesses, DFID has contributed £75m (2012-2019) to the global Small and Medium Enterprises Finance Facility, delivered through the International Finance Corporation (IFC). Expected results (attributable to DFID) are:

  • Provision of at least £5 billion of additional finance to over 200,000 SMEs across 15 DFID priority countries
  • At least a quarter of loans will be for women-headed SMEs
  • At least a quarter of all results are expected in fragile states

DFID is also working with international businesses to open up their value chains to incorporate small and medium sized enterprises in developing countries, including smallholder farmers. For example, the Africa Enterprise Challenge Fund is working with SAB Miller in South Sudan to develop a smallholder cassava production system for 12,000 small farmers to supply SAB Miller’s brewery in Juba.

#6

I agree Ida - I think a key point around the contribution of business is distinguishing between business as a partner in development and creating the enabling environment that allows businesses to thrive, especially the small and medium sized businesses that will generate the majority of jobs for the region's fast growing population. Small businesses are also important drivers of economic diversification and innovation.

#7

Welcome to this online discussion! We're delighted to welcome a great panel together to discuss how to harness business for a prosperous Africa.

Q1: Since the landmark Commission for Africa and Gleneagles G8 in 2005, what are the key areas of change and progress in Africa’s journey to secure more sustainable and inclusive economic growth, and where do gaps persist?

#8

To begin with a lot of Governments have realised the importance of creating an environment that supports private sector growth, hence we see a lot of political good will in regards support for the private sector which in turn leads to sustainable economic growth.

#9

Thanks for reminding us about the Gleneagles Summit in 2005. It marked an important turning point for the African Development Bank's engagement to support private sector led growth in Africa. During the summit the Government of Japan pledged a billion dollars of financing through the African Dev Bank to support a range of activities from infrastructure finance to MSME development on the continent. Five years later, we celebrated the successful delivery of that billion dollars and Japan subsequently pledged a second round. Looking back, that summit effectively turbocharged the Bank's efforts to promote development through the private sector. The Bank's financing to the private sector grew from $200 million per year in 2005 to roughly $2 billion per year today.

#10

Ida, I think you are absolutely right, money or finance is just one element of the support equation. In our experience in Africa via Zimele we find that SMEs benefit from mentoring (being a committed business partner in anon paternalistic way) and secure market access. Another factor is to focus resources in partnering with successful existing initiative instead of competing with them, complementing their offering to strengthen the environment where SMEs operate.

#11

Good point Ida. There are lots of ways to support SMEs in Africa, including through investment climate reforms, efforts to promote access to finance, to develop markets through value chain approaches and market development programmes such as M4P, and to build entrepreneurial skills, including awareness of business culture through training and mentorship schemes. We have been doing some work on the latter with Youth Business International, looking at how entrepreneurship can best be promoted in different country contexts.

#12

Greetings - I would like to ask the panel a question about education - since we know that it is such catalyst for development, which is good for business and markets. Would you please tell us how businesses are supporting education for the development of Africa.

#13

I would just start of by quoting Paul Polman in his remarks from the High Level Panel on the post 2015:

"•Throughout the Panel’s conversations in London, Monrovia and Bali we have all put an emphasis not just on WHAT the Post 2015 goals should look like but HOW they will be delivered.

•When we have spoken about “the HOW” the idea of Public Private Partnerships has often been raised."
We cannot continue to talk separately of Business Development in Africa without talking about Development Partnerships. We should learn from ground breaking experiences in health over the past 15 years by which companies like UNILEVER and ANGLO AMERICAN spear headed great "co-investment" partnerships with the Global Fund and other health initiatives.
We have an ever greater challenge today on food and nutrition security combined with climate change. We need public private partnerships to take off and we need more cross sector partnerships to deal effectively with the breadth of the challenges.
Michel
PPP Europe
#14

I don't see enough attention paid to consistent rules. Tax avoidance is very high and civil courts are nonfunctional. Across Africa it is virtually impossible to collect on bad debt. A terrific paper is here: http://www.nber.org/papers/w16001

#15

To raise a nation to a level where there are less and less people living below the poverty line, empowering those who are less educated/less skilled and and especially in the rural areas in Africa is very important. One of the things I rarely read about is these kinds of success stories that are linked with DFID, yet I am aware there are many projects that DFID is involved in, either directly or through funding some organisations. I am keen to see more of their presence at village/grassroot level, not so much in towns or cities. Is this happening? When people can relate to someone who has moved from apoverty levels to self-sustainance, this encourages others to either replicate or try out ideas that would work for them where they are.Can we see more of these kinds of stories?

#16

I agree with Richard's point - the success of business in Africa depends not only on the businesses and entrepreneurs themselves but an enabling environment and ecosystem of supporting actors that surround them.

In a report launched in May by UNDP's African Facility for Inclusive Markets (AFIM), "Realizing Africa's Wealth: Building Inclusive Businesses for Shared Prosperity," Endeva and Reciprocity have identified four main interesting points for intervention: information, investment, incentives and implementation support.

We also highlight the importance of coordinated action and building of the inclusive business 'ecosystem' - the report finds that local support institutions are largely absent, and building them will make it considerably easier for inclusive businesses to flourish. We can see how well this coordinated effort has worked in the cases of Lighting Africa and FSD (Financial Sector Deepening) Kenya. There has been a large interest in follow-up action to this report, including an announcement by the AUC Commissioner to develop an African Inclusive Markets Excellence Centre (AIMEC) jointly with UNDP AFIM. At the first launch event in Capetown, over 50 CEOs stayed beyond the planned event time to discuss next steps. It's exciting to see interest and it's in everyone's interest to keep this momentum going!

The report if anyone is interested is available here: http://www.undp.org/content/undp/en/home/librarypage/poverty-reduct...

More info on the report/project is on the Endeva website: http://www.endeva.org/building/current_projects/inclusive_business_...

Looking forward to the rest of the live discussion and keeping the dialogue going!

Alyssa Rivera
Endeva

#17

Q2: What have we learned about how best to engage the private sector in Africa’s development?

#18

Thank you for referring to Paul and his comments Michel. One of the positive developments in recent years has been a move away from debates in 2005 that were still very much focused in the public sector and international development with "Africa" being used as the single construct.

We're in a far healthier place today with private companies engaging in debates, individual countries that are better connected and taking greater control of their own destiny and success stories based around creating jobs.

The recommendations put forward by the High-Level Panel are ambitious and we at Unilever hope that members of the United Nations embrace them enthusiastically and the concept of a new global partnership - which is what we stress in our Unilever Sustainable Living Plan - as the challenges in Africa and elsewhere are too great for any one organisation and we must all work together to find solutions.

#19

Dear Kathy, you are right, education is a critical factor. In our programme Emerge in Chile we offer the opportunity to entrepreneurs to apply for support which includes a scholarship in a renowned business school. The very interesting factor is that many apply for support of the scheme thinking they will get subsidised loans. Once they get into the business school many opt to save and invest their own capital given that is cheaper to do so. Once their business start to grow too quickly they start analysing debt as an option. All this is very sophisticated and many entrepreneurs in the Emerge programme acknowledge that without the business school course they would not have been able to make those business decisions.

#20

Thanks for sharing this, Dougie. If participants are interested in learning more about business perspectives on the Post-2015 Development Agenda visit our Post-2015 knowledge Zone at http://post2015.businessfightspoverty.org/ - it includes this great article by Paul Polman.