AfDB President, Donald Kaberuka
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Africa’s
private sector accounted for more than 80 per cent of total production,
two-thirds of total investment, and three-fourths of total credit to the
economy between the periods 1996 to 2008, African Development Bank (AfDB) said
in its 2012 report.
The “African Development Report” published
last month, also said the private sector was also responsible for 90 per cent
of formal and informal employment. It also noted that the private sector in
most African countries plays critical role to helping the continent reach its
full economic and social potential.
Commenting
on the report, AfDB President, Donald Kaberuka, said the sector is now poised
to become the main engine of growth for the African continent, after being
constrained for decades by difficult political and economic conditions and
burdensome government policies.
However,
he maintain that the private sector is also a provider of essential goods and
services to the public and a key source of the revenues African countries need
to meet their development challenges.
The AfDB
said it has made private sector development one of the four priorities of its
Medium Term Strategy (MTS) for 2008-12, along with infrastructure, governance,
and higher education.
The Bank
has been promoting the development of the sector for more than four decades,
and is integrating private sector development across all its operations with
threefold objective, in order to generate a greater developmental impact.
“The
objectives are supporting regional member countries in improving business
enabling environments and strengthening their international competitiveness;
broadening participation and inclusion in the private sector and supporting
local enterprise development for spurring robust employment creation and
improving social well-being; and encouraging the embodiment of social and
environmental responsibility, sustainability, and good corporate citizenship in
private sector development,” the report said.
Though
the private sector helps to reduce poverty, the AfDB laments that reliable
statistics on private sector activities in African countries are scarce.
It added:
“Most of the activities are informal, carried out by micro, small and medium
enterprises. Laws and regulations critical for private sector development and
corporate governance were undermined by poor monitoring and enforcement.”
The Bank
suggested that the development of Africa’s infrastructure at the pace necessary
to unleash its economic potential requires a concerted effort to improve
planning, preparation, and procurement capacities in line ministries and
relevant sector units.
It also
requires the mobilization of financial resources; and adopt a regional approach
to infrastructure development, it added.
Challenges
The “African Development Report” also examines
the challenges facing the private sector’s development and underscore ways of
addressing them by taking country differences into account.
“Although the private sector in African
countries faces common challenges, the impact of these constraints varies
according to the stage of economic development,” it noted. “Fundamentally, the
constraints include insufficient transport networks and lack of access to power
and finance.”
It also
found challenges varying by type of firm, with large companies being more
concerned about corruption, skill shortages and labour regulations, while
export-oriented businesses place tax administration at the top of their list.
These
systemic factors are of less importance for small firms, which find the lack of
access to (and high cost of) finance, insufficient collateral, and the business
owner’s limited technical, management and accounting skills, to be more binding,
the AfDB explains.
It added
that the most severe challenge for microenterprises is access to finance, with
those in AfDB countries also constrained by business licensing procedures.
However,
the AfDB president said “The Bank is committed to addressing the constraints of
private sector development. “We believe
that private sector development is fundamental for creating inclusive growth
through employment creation,” Mr. Kaberuka said.
Written by Modou S. Joof
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