Newsbrief, TerraViva United Nations

African Markets Growing, But Still Face Obstacles

UNITED NATIONS, Nov 9 2015 (IPS) - Africa’s private sector is rapidly growing and is contributing to economic growth and development, according to global business leaders who attended the recent Frontier 100 Forum of the Initiative for Global Development (IGD).

The exclusive, high-profile forum under the theme of “African Business in the World-Class Space,” addressed opportunities, challenges, and strategies for a successful African market.

“Today, Africa’s private sector is poised to become a major force for growth on the continent,” said IGD President and former US Executive Director of the African Development Bank (AfDB) Dr. Mima Nedelcovych.

African-rooted businesses create more than 80 percent of jobs in their countries, he added.

According to AfDB, the majority of businesses in Africa are micro and small enterprises (MSEs) and are the main sources of employment and income for the poor. For instance, in Nigeria, MSEs account for 95 percent and 70 percent of employment in the formal manufacturing and industrial sectors, respectively.

As a whole, African economic growth has markedly improved since the 2008 financial crisis, with gross domestic product (GDP) growth currently at 5 percent. West Africa, despite its struggle with the Ebola epidemic, has particularly experienced high economic growth of 6.0 percent.

Such development has been due to the expansion of export markets and intra-regional trade as well as an increase in foreign direct investments. The World Bank estimates indicate that 6 out of 13 of the fastest growing economies are in Africa.

Business leaders pointed to innovative and accessible financial services as a key feature to increased and inclusive growth, while African business leaders also looked to the use of local knowledge and insights to promote African economic development.

Though economic growth is important, the private sector participants also highlighted their role in community development. Deputy Director of the Niger Delta Partnership Initiative Foundation Heather Kulp urged businesses to utilize regional knowledge by building partnerships and to address the root causes of social issues with local solutions.

“How do we create systems where both business and communities benefit?,” asked Kulp.

However, breaking into the global marketplace has not been easy for African companies, the world’s business leaders acknowledged. Corruption continues to be a particular obstacle that companies face.

According to the African Union (AU), 148 billion dollars, or 25 percent of the continent’s GDP, is lost each year to corruption. This impedes economic growth as it significantly increases business costs.

Corruption is especially prevalent in resource-rich countries. For instance, in Nigeria, the largest economy in Africa, 300 billion dollars in oil revenues have disappeared since the 1960s. Meanwhile, the country lacks critical infrastructure such as roads and has a poverty rate of 60 percent.

“Corruption happens in darkness. Shining a light on it can help end the problem,” stated AfDB Vice President of Infrastructure, Private Sector and Regional Integration Solomon Asamoah in a keynote address.

The lack of infrastructure has been another major challenge, noted participants such as Chief Strategic for Dangote Group Abdu Mukhtar. He stated that his company regularly has difficulty in transporting goods by road throughout the continent.

Misperceptions and biased narratives, for which several participants blame media and aid organizations, have also hindered business expansion within the continent.

Co-Founder and Executive Chairman of AllAfrica Global Media Inc Amadou Mahtar Ba stated the need for business leaders to contribute to changing Africa’s narrative. On the other hand, Senior Advisor of the World Bank’s MENA Vice Presidency Demba Ba said that Africa’s narrative should be embraced—the good and the bad.

“Africa is a land of several pieces, not all of it is perfect,” Ba remarked.

AfDB’s Asamoah called for African governments to strengthen business environments including actions to implement consistent policies, increase capacity and incentives for the government workforce, renovate airports, and increase transparency in decision-making to end corruption.

The Sustainable Development Goals (SDGs) promote sustainable and inclusive economic growth with targets to increase access to financial services, develop resilient infrastructure, encourage trade especially from less developed countries, and promote effective public-private partnerships. It emphasizes the role of both public and private sectors in achieving the SDGs.

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