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The case for the private sector in Africa

While Africa offers significant opportunities for business, business also offers significant opportunities for Africa, argues a recent report, titled The New Africa: Emerging Opportunities for Business and Africa, published by Business Action for Africa and Ernst & Young.

The two most effective ways out of poverty is either starting one’s own business or landing a job in an existing company, says Sylvia Solf, programme manager of the World Bank’s Doing Business project, in an interview published in the report.

She adds that a dynamic private sector is critical to boosting economic growth and creating employment opportunities for the poor.

The report says that the biggest and most sustainable contribution that private companies can make to Africa’s development is by “doing good business: creating jobs and economic opportunities, together with new goods and services”.

It is estimated that foreign direct investment has created 1.7 million jobs throughout the continent between 2003 and 2010.

The report states that large companies’ value added to the economies where they operate, including their contribution to tax revenues, is often much more significant than aid. “In general, the impact that companies can have through their core business operations far exceeds the impact they can have through their traditional philanthropic corporate social responsibility programmes.”

Larger firms also create opportunities for various smaller businesses along the value chain.

There has, however, been an increasing interest in developing business models that are both profitable and have an enhanced development impact.

Graham Mackay, CEO of brewer SABMiller, says that Africa’s robust growth in recent years has largely been fuelled by the private sector. “This growth has not been driven by foreign aid, nor by reforming governments, nor (solely) by revenues generated from oil and other natural resources – it is business that has been the primary contributor to the continent’s development.”

Mackay explains that the continent could grow even faster if governments were more committed to creating the right conditions for business to flourish. He identified three areas where governments could do more. These include improving hard infrastructure such as roads and power supply; enhancing so-called ‘soft infrastructure’ that includes good governance, the rule of law and sound property rights; and finally by making headway with regional trade agreements.

During a speech at the recent Diageo Africa Business Reporting awards ceremony in London, Baroness Northover of the United Kingdom’s Department for International Development also stressed the importance of private sector investment in Africa. “The private sector in Africa is . . . the engine for growth, and through that it is surely the engine of development.” She added that the west has developed through the private sector and that this is currently also happening in Asia and Latin America.


  • Smitty31709

    The governements there are so poor that they can’t over regulate like here in the USA or in Europe. Africa is primed for huge growth, if the governments don’t get in the way.

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