Mohan Kaul of the Commonwealth Business Council explains how business can get involved with Africa.
Africa is likely to dominate discussions at July’s meeting of G8 countries under the chairmanship of the UK. Improving the environment for business will be among the main topics, as will be reducing debt, increasing aid levels and the setting up of an international finance facility.
The G8 countries will also receive the report from UK prime minister Tony Blair’s Commission for Africa, which is likely to be completed by April. The increased participation of the private sector in the economic development of Africa will form part of its recommendations.
The commission has set up a business contact group that includes representatives of major international companies doing business in Africa. They are working closely with the commission to make recommendations in relation to investment promotion; infrastructure; small business development; transparency and corruption; capacity-building; trade; customs; HIV/Aids; and other issues. The Commonwealth Business Council is part of the group and is facilitating consultations for the commission with businesses across Africa.
Economic growth
To reduce poverty and reach the Millennium Development Goals, Africa needs economic growth of 7% or more for the next 10 years. For this difficult goal to be achieved, governments must establish an environment that is conducive to domestic and international business investment, that facilitates trade and that will enable the generation of wealth and job opportunities.
A major problem is the tendency to see Africa not as 52 different markets, but as a single entity – with a very negative business image. Major communication efforts need to be made to address this perception, but improvement in the actual conditions of doing business is the most important way to change perceptions in the long term.
African governments’ main challenge will be to bridge the gap between policy and practice. To succeed, it will be necessary to give the private sector a louder voice, through increased dialogue between representatives of the local business community, government and international institutions. There needs to be less emphasis on government-donor relationships and more on government-private sector dialogue. This requires a change of mind-set by donors and governments – which prefer to work with each other and tend to undervalue the private sector – as well as greater recognition from national governments for the pivotal role of government-business partnerships to improve the investment climate and tackle perception issues.
The donors should re-evaluate the way in which they interact with the private sector, and ensure they facilitate the development of stronger government-business partnership at national level. A three-way dialogue (government, business, donors) should try to establish guidelines for future co-operation.
Renaissance vehicle
An investment climate facility (ICF) for Africa is being proposed “to make Africa a better place to do business”. The ICF is a critical vehicle to help Africa achieve its vision of a renaissance, with the continent seen as a place of growth and opportunity, ready to take its rightful position as a global player and partner. This facility will be a private sector facility in support of, and supported by, the New Partnership for Africa’s Development. It is proposed that the ICF be established as an independent trust with financial resources of $60m. The facility will be financed by an initial contribution of $10m from major private sector investors, followed by additional resources of $50m from bilateral and multilateral donor agencies.
The ICF will support a range of activities across Africa to promote a better investment climate, and will support countries implementing the recommendations of the African Peer Review process. It is designed to respond practically, quickly and effectively to governments and the private sector in Africa to reduce perceived and actual barriers to domestic and international investment. It is hoped that the ICF and other practical initiatives will bring about some of these important changes and ensure greater participation of business in Africa’s economic regeneration.
Mohan Kaul is director-general of the Commonwealth Business Council
