Private Sector Development in Africa – Perceptions and Realities

Can the private sector really be a driver creating opportunities for people to escape poverty and improve their lives? In theory, private sector development should be the ultimate driver of socio-economic development through job creation and its contribution to economic growth. In practice, several factors such as perceptions of Africa, insufficient policy frameworks and dependence on international aid have resulted in limited private sector impact to date.

After working in Africa for a while, one easily forgets that many outsiders still have a very “Live Aid” image of Africa. They do not know it as a region with one of the highest growth rates and a rising, well-educated middle class, but rather think of it as a place of war, famine and corruption. This persistent perception, despite recent progress and achievement, also disempowers Africans, engendering a sense of ‘passive victim’ rather than ‘accomplished entrepreneur’.

Investors who take the time to understand the continent and its opportunities tend to be well rewarded. The British firm Tullow is probably one of the most striking examples. Not too long ago, it was still a smallish outlet but its investment and belief in the African continent has already triggered the fundamental transformation of two economies and thereby the success of its own operations. The investment Tullow made in oil exploration in Ghana and Uganda has led to significant discoveries that have spelt a new and lucrative future for both countries.

Apart from the abundant natural resources found in most of her countries, Africa is also touted as the potential food basket of the world. Agriculture accounts for more than 50% of GDP and up to 90% of employment across much of the continent, but productivity remains low. And while there has been much talk about transforming the sector, the reliance on subsistence and small-holder farming has proven more than a stumbling block to developing diversified economies with higher levels of income, than an opportunity in itself.

For private sector development to work, African countries and its development partners need to create policies for commercially viable markets while promoting their country’s image and competitive advantage. An example of this is Kenya; after the arrival of a new high-speed internet cable, recognized the opportunity for Business Process Outsourcing (BPO) through the pairing of enhanced connectivity and its relatively large base of well-educated workers.

Ultimately, the promotion of value-add industries and the development of the required policy frameworks and infrastructure will allow the private sector in Africa to make significant progress in its development and contribution to job creation and poverty alleviation. The classic example of trying to sell chocolate as a finished product instead of selling cocoa as a raw material has lost none of its appeal.