By Abdelmonem Fawzi
Africa should create immense social, economic and political opportunities, with adequate regulations.
We need to avoid becoming just a pawn on the global map. To do this, we will have to proactively step up technological innovation and respond to challenges, while shaping the global discourse on internet and data governance.
This is why we should recognize the private sector as a key engine of Africa’s economic development.
Yet, the most simple and fundamental question remains unanswered: how large is the African private sector?
National account data shows that the private sector accounts for about 2/3 of total investments in the continent, 4/5 of total consumption and 3/4 of total credit.
Labour market data reinforces the idea of a large private sector, which provides about 90% of total employment opportunities.
However, most of this labour is informal and characterized by low productivity: permanent wage jobs in the private sector account on average for only 10% of total employment (a share similar to that provided by public administration and state owned enterprises).
The problem is that we find evidence of negative private sector earning premiums, suggesting that market distortions abound.
These are likely to prevent the efficient allocation of human resources and reduce the overall productivity of African economies.
This is why the African Union recognizes the fact that when designing, implementing and monitoring economic recovery policies, it is important for the voice of the private sector actors to be heard.
This will require putting in place new innovative approaches that harness the potential of new technologies and digital platforms to enhance public-private sector dialogue and engage all essential market actors, when identifying reform priorities.
Nonetheless, the private sector is recognized as an indispensable stakeholder in the African Continental Free Trade Agreement (AfCFTA), especially given its ability to catalyse sustainable economic development and job creation.
Director of Regional Integration and Trade at the Economic Commission for Africa (ECA), Stephen Karingi, said Africa’s private sector accounts for 80% of total production, two-thirds of investment, and three-quarters of credit, and employs 90% of the working-age population in Africa.
Speaking during the opening of the three-day Africa Prosperity Dialogues held recently in Ghana, he called on trade and industry leaders to own and drive the implementation of the AfCFTA by supporting their governments, but also by holding them to account.
ECA estimates that by 2045 intra-African, trade in the agri-food, industry, and services sectors will increase by nearly 35%, compared to a situation without the AfCFTA.
But governments must implement the Agreement fully and effectively for such impressive projections to come true. The private sector must also seize the opportunities of a large single market created by the AfCFTA.
The role of the private sector was also echoed by the chairperson of the African Prosperity Network, Gabby Otchere-Darko, who encouraged the private sectorfulfilthe promises of the AfCTAagenda.
The event was officially opened by Ghana’s Vice-President, MahamuduBawumia, who pointed out that Africans have whatever it takes to transform their continent into a global powerhouse of the future.
“The AfCFTA has set the stage for Africa’s industrialization,” he said.
United Nations Assistant Secretary-General and Director of the UNDP’s Regional Bureau for Africa, AhunnaEziakonwa, said Africans would industrialize and create, rather than export their continent’s jobs, through the AfCTA.
“An Africa that produces its people’s needs is not just the Africa we want, it is the Africa we need,” she said.
Karinginoted, however, that the African private sector, 90% of which is made of small and medium enterprises, faces challenges in conducting cross-border trade, due to non-tariff barriers, such as complex customs procedures, lack of access to finance, high costs of transportation and logistics, and the lack of access to information, among others.
He cited inadequate infrastructure connectivity, rudimentary productive capacity, and risky or expensive payment systems as some of the barriers to trade.
“The cost of doing business across African borders remains high, leading to the regrettable situation where African products are uncompetitive in African markets,” Karingi said.
Africa’s weak productive capacity and consequent excessive reliance on imports for essential products expose the continent to external shocks, such as Covid-19 and the Russia-Ukraine war.
“When Covid-19 struck, African countries were confronted with a lack of access to basic medical supplies because Africa imports over 90% of its supplies,” Karingi said. “When the Russia-Ukraine crisis dawned, several African countries faced a crisis of food security because wheat and corn exports from Russia and Ukraine were suspended.”
The AfCFTA is expected to integrate and consolidate Africa into a single $2.7 trillion market by eliminating many of the barriers to trade present across the continent.
It provides the platform for Africa to diversify its economy and achieve resilience to natural and manmade shocks, including climate change.
It remains to be said that a healthy business climate across Africa under the AfCFTA would cause and spur job creation, economic empowerment, and development.
But, given the nature of politics and politicians in Africa, the AfCFTA is bound to fail if the private sector and stakeholders fail to drive the agenda under a complimentary companion guided instruments, such as the Private Sector Bill of Rights for an enabling business environment in Africa.
The sacrificial choice for the private sector is the Bill of Rights. We must rally, support, and finance the Bill of Rights for business to thrive.
Progress can be achieved through political investment on the topic and by diversifying political and development partners and seeking partnerships with private sector actors both at national and continental levels.
This should be pursued without losing autonomy, being overly reliant on one partner.
