Opening up markets, promoting investment and supporting the emergence of true champions that can compete on the international stage: it is time to provide the private sector with the necessary means to play its full role in creating added-value. The sustainability of Africa’s long-term growth depends on it. A robust and vibrant private sector is vital for inclusive and sustained economic growth. This is CIAN's opinion! The CIAN, an association under the law of 1901, is a private French employers' organization that brings together industrial and service companies, large groups or SMEs, invested in Africa. Its member companies together generate nearly 80% of French economic activity in Africa. Thanks to an influential network and recognized African expertise, it provides them with support and pragmatic solutions in a buoyant but complex African market. The President, Etienne Giros following a meeting called by Michel Courcelles, coordinator between the CIAN and PICU.3, discussed with Mike Salawou, association and the members of PICU.3 division of the AfDB. The meeting was also attended by Patrick Sevaistre, President of the European Institutions Commission and Sandrine Sorieul, Director General of CIAN. Flash back on the discussion.
In Africa, the private sector has an immense potential to contribute directly to Agenda 2030 of the Sustainable Development Goals (SDGs) and the African Union Agenda 2063—the Africa We Want.
The main message conveyed by Etienne Giros, the President and by Mike Salawou was regarding a call for private sector projects and a seed fund to ensure that infrastructure financing in Africa is more balanced than in previous years, especially in 2018 when African governments were the largest source of infrastructure financing, with commitments of $37. 5bn (37% of total commitments), followed by China who committed $25.7bn (25%), ICA members ($20.2bn, 20%), the private sector ($11.8bn, 12%), and the others sources ($5.6bn, 6%).
Private sector development in Africa
On average, the private sector contributes more than 80 per cent of government revenues in low- and middle-income countries through company taxes, resource rents and income taxes on employees. It generates more than 90 per cent of employment in developing economies, including both formal and informal jobs.
Easy, affordable and reliable access to infrastructure (particu- larly energy) and finance are the two most cited obstacles affecting the operation of businesses in Africa. Access to elec- tricity is cited by 20.7 per cent of firms in Africa as the main obstacle, and finance by 19.6 per cent.
Transport
Transport is a catalyst for sustainable economic development and growth. Some 3.6 per cent of firms in Africa identified transport as the main obstacle to business. Poor road, rail and port infrastructure increase cost, transit times and breakage or spoilage. Road freight tariffs in Africa are two to four times higher per kilometre than those in the United States, and travel times along key export corridors two to three times higher than those in Asia (AfDB, 2018). According to the World Bank Enterprise Survey (2007–2018), 1.9 per cent of the value of products is lost to breakage or spoilage during shipping to domestic markets in Africa.
Increased connectivity would facilitate and grow domestic, regional and international trade, lower the cost of doing busi- ness and make African nations more competitive, both within the continent and globally.
Energy
About 590 million people in Africa lack access to electricity, and for those with access, the quality is generally poor and reliability unacceptably low compared with other regions of the world. More African firms identify it than any other factor as their major constraint
It is a greater obstacle for small firms in Africa than large ones. Some 79 per cent of firms in Africa experienced electricity outages between 2007 and 2018, and the average effective cost of electricity for manufacturing enter- prises in Africa is close to 20 cents per kilowatt-hour, about four times higher than industrial rates elsewhere in the world (AfDB, 2018).
The high cost and unreliability of electricity in Africa debil- itates private sector development in several ways. It affects manufacturing production, intensifies the cost of operating businesses, reduces government revenue, limits diversification among firms and forces them to focus on less energy-intensive activities. Poor energy quality can impose addi- tional costs due to idle workers, lost production or damaged equipment (AfBD, 2018). More reliable, affordable and efficient energy supplies enable firms to adopt new production techniques and technologies, raise productivity and facilitate the introduction of new economic activities (UNCTAD, 2017).
Energy demand in Africa is expected to increase dramatically due to population growth, a growing middle class, urbanization and climate change (ECA, 2020). The energy challenge can be overcome, since the continent has sufficient resources and limitless opportunities to develop clean or renewable energy. The gap between demand and supply is a chance for the private sector to invest in the energy sector, to power industrialization
Information and Communications technology
Information and communications technology (ICT) is a transformational driver of economic and social progress. The growth of mobile telephony across Africa has been a notable success story improving people’s lives in rural and urban areas. Although telecommunications costs in Africa have been falling sharply in recent years, they are still higher than in other developing regions. For instance, mobile and internet telephone charges in Africa are about four times higher than those in South Asia, and international call prices are more than twice as high (AfDB, 2018). It is estimated that 75 per cent of the population in Africa does not have internet access, and so does not have access to the knowledge, information and services that the internet can bring.
To make internet connectivity as widespread and affordable as mobile telephones will require substantial public and private sector investment. But to date the flows of private invest- ment into ICT in Africa have benefitted only a few countries where the required infrastructure is already well devel- oped. An enabling environment needs to be introduced and managed so that the private sector delivers services equitably to all Africa’s people, irrespective of age, gender, location or economic position. For example, uncompetitive pricing poli- cies of mobile telephone operators—such as charging more for calls to competitor networks—that make ICT in Africa rela- tively expensive could be eliminated.
Water
Water resources are essential in supporting all economic sectors—agriculture, manufacturing and services. Improved access to water and water-related services contributes to economic growth by increasing business productivity. It improves human health, productivity and dignity. But more than 300 million Africans do not have access to clean drinking water, and more than 700 million live without access to good sanitation.
The unavailability of clean water and sanitation results in approximately a 5 per cent loss of GDP in Africa annually, and people spend 40 billion hours a year of other- wise productive time just collecting water. The deficient water supply presents an opportunity for the private sector to upgrade and develop water and sanitation infrastructure and improve water system efficiency. But high capital inten- sity, large initial outlays, long pay-back periods, the immobility of assets and low rates of return generate high risks. The risks, combined with poor initial information and a weak investment environment, constrain private sector participation in water and sanitation infrastructure.
To conclude, Président Etienne Giros et Director Mike Salawou underscored the need to strenghten the relationship with Private sector in Africa. Indeed, even if the projects to be financed are less important, the advantage is that the realisation of these projects could offer innovative solutions with a strong impact for the well-being of the populations or the reduction of poverty.