Memorandum submitted by AfricaRecruit
1. Overview
There is an increasing belief and acknowledgment
based on experience and observations that the private sector are
a very valuable resource and powerful force or tool for rebuilding
of Africa, what is fundamentally crucial in mobilizing the financial
flows or mechanism that supports the private sector.
A vibrant private sector seeks to economically
integrate its citizens from consumer's to investor thereby leading
to job /wealth creation, income opportunities and poverty alleviation.
The economic impact of the private sector on employment creation,
poverty alleviation, skill and technology transfer, access to
international markets can be quite significant if they are given
the needed encouragement and support by African and International
government's and the private sector. A framework that will attract
investment and create "attractive jobs" is critical
to Africa's development.
2. Constraints on the private
sector in Developing countries and how can they be addressed?
Banks or the formal financial system
for a number of reasons do not serve many of Africa's potentially
active sectors; financial access could provides opportunities,
allowing small and micro business as well as people to participate
more fully in economic activity. Research suggests access to finance
is important in poverty reduction and improving income inequalities.
Against this backdrop, access to a more elaborate financial market
should be seen as a critical aspect of development in Africa.
Challenges:
- Due to high level of literacy there
is limited capacity to develop a robust survey/feasibility which
will enable access to finance in cases where its is available
or accessible
- Managing immediate local family/community
survival needs
- Political issues
- Lack of clear investment laws and
the weakness of the legal system to enforce
- Property rights, judiciary and legislation
weak and ineffective
- Overregulation
- Lack of quality skills thereby limiting
the ability to build a quality work force
- Marketing of products
- Widening the delivery network
- Breaking into world and increasing
the value added
- Building and maintaining market
credibility
Weakness
- Lack of updated information required
for drawing up a business plan (market information gap)
- Lack of collaboration within government
resulting in poor public management
- Poor infrastructure such as transport,
electricity and water increasing the overhead cost with resulting
instability
- Lack of strategy which is based
on strategic alliance and linked to development and resources
- Lack of technology and qualified
and competent human resources
- Lack of political will to implement
government policies effectively
- Accessibility and slow processing
of disbursements, financial packages or grants from the funders
- Lack of support and monitoring of
applications for financial loans/grants by the government
- Very low uptake of banking services
in Africa may be only 25% of the population, compared with the
90% in the developed world
- The use of informal systems with
additional risks
- The absence of a reliable and integrated
credit information database
Opportunities
- Much stronger investment climate
and prioritising private enterprise as the primary engine of growth
- Removing constraints to accessing
finance
- Building an enterprise culture with
flexible supporting structures e.g. One stop shop business support
centre's
- Building capacity of the Investment
Promotion centres and setting up Non-Resident Secretariat within
the centre to capitalise on the Diaspora Investors
- To create a nation of competent
investors by unlocking untapped investment opportunities in a
accessible and non intimidating way
- Developing quality skills for the
labour market
- Developing the skills to upgrade
the confidence to take on the risk of equity/money market by encouraging
shareholder activism & other investments as viable vehicles
for savings, wealth creation and increased corporate accountability
- Countrywide presence of the private
sector particularly outside major metropolitan areas
- Closer working and collaboration
between the Developmental Partners, Private sector and African
governments thereby pooling resources and reducing risks
- Developing various fit for purposes
models
- Developing the framework for a vibrant
and transparent competitive market
3. What type of donor interventions
have strong leverage in changing the business climate (in partner
countries) towards PSD and pro-poor growth?
Areas of interventions
Increase the capacity of Africa to increase
its foreign direct investment flows in areas such as
i. Increasing the formal flows of
remittance by developing structures that facilitate, incentivise
and enable a reduction in cost of transfer e.g. Send Money Home
is one area. Other avenues to be explored are matching grants
and funds of recipients of remittances. This increase's the credibility
of many of the recipients and acts as a system to capture many
of the unbanked members of the population. An online survey on
remittances was conducted as part of the build up to Africa Diaspora
Investment Forum in September 2005; the event was attended by
over 20 private sector operators from Africa from areas such as
Capital Market, Tourism, telecommunications, ICT, Transportation,
Small-medium size business and real estate operators. One of the
main aims of the event was to explore how and what can be done
by the Diaspora and the International community to increase the
investment flows into Africa as well as understand the challenges
and solutions. 879 Diaspora completed the survey this can be viewed
online at www.africadiaspora.com
58% of the respondents remit on average $200 US dollars a month
for sustenance reasons of this 52% also remit for investment this
compares to 33% of the respondents that remit on average $300
US dollars a month for investment reasons alone. Over half of
the respondent's investment options pointed to family and friends
business and real estate as areas of investment with approximately
one fifth investing in the capital market. Other options included
telecommunication, franchising and private equity.
ii. Building the capacity of investment
promotion centres in and out of country ( embassies)
iii. Increasing the capacity of
countries to develop and maintain a favourable climate for investors
in areas such as:
- Technical and financial diagnostic
survey of enterprises
- Market surveys
- Complete feasibility studies
- Lobbying
- Partner search
- Project financial planning
- Assistance in project implementation,
including product marketing, staff & management training
iv. Support to key sectors e.g.
sector partnership meetings, mentorship, twinning and support
for the supply chain down to grass root level's
v. Increasing the capacity of regional
systems to encourage joint procurement in areas of critical needs
e.g. Health resources
vi. Facilitate integrated actions
inside and outside Africa
4. Case Study
Information Communication Technologies
(ICT) is a very effective and enabling tool that bridges the Investment
gap and dramatically cuts cost of doing business. It increases
the capacity of the business to market beyond their immediate
local environment. Telecommunications is an instrument of change
in bringing a different perspective to commerce. ICT is among
the fastest growing retail data markets in Africa in Nigeria it
has had a cumulative investment over $4 billion since 1999; positive
secondary effects on economy (over $1 billion in licensing revenue)
Over 5,000 direct and 400,000 indirect jobs created. ICT /Telecomm
provide up to date information on business and investment options,
update information on the financial market. The use of internet
banking to conduct business in Africa has reduced considerably
the time taken to concluded business and reduces the time and
cost by eliminating unnecessary overheads.
5. Recommendations
Investments
and Business Options
- Removing constraints e.g. ensuring
political stability, improving access to banking and finance (including
lowering the cost of finance), managing credit risk through the
provision of appropriate mitigants, lowering information asymmetries
and boosting incentives for local populations, businesses and
banks
- African Angel Network and mentorship
initiatives encouraged. Entrepreneurs should be encouraged and
enabled to develop business plans in order to start their business
- Creation of "Knowledge for
sale centres" which is regulated to protect the intellectual
property rights of the vulnerable.
- Companies should be encouraged to
publicize their Venture Capital arm and collaborate with more
African oriented enterprises.
- Very attractive incentives for business
that support grassroots' start up that address areas of development
- Increased collaboration between
public and private sector in the consultative process of policy
formulation by creating effective government and corporate partnership
- Supporting the dynamic transition
from strategies to actual implementation of programmes for sustainable
development
- Compatibility - Knowledge on tariffs
and costs involved in taking goods to Africa.
- Promoting sustainable financing
mechanisms for long and short-term programmes and projects using
innovative strategies.
- Setting up capital market foundations
to educate the masses on stakeholder investment as a tool to invest
and hold organisations to account.
- Setting up Non-Resident Secretariat
within the Investment Promotion centres e.g. Non-Resident Ghanaians
Secretariat that coordinates all activities and serves as the
centre for all projects, programmes and issues involving Ghanaians
living abroad. The secretariat also builds, promotes and maintains
active communication with the Diaspora providing updated information
and advises in areas such as the re-entry back home (Customs,
Immigration), coordinating international networks of the Diaspora
and recommending members of the Diaspora for national awards and
recognition.
- Federal government bonds to enable
stock markets address the issue of debt instruments.
ICT
- Developing ICT strategies that are
in line with the UN Millennium Development goals
- Increasing the relevance of institutions,
policies and regulatory frameworks with stakeholders
-
- Increasing the capacity of business
in Africa to engage in e- business
- Careful consideration to encourage
Diaspora communities to set up African Diaspora Co-operative Banks
here in the UK
- Diaspora should mobilise themselves
in order to become powerful economic participants and partner
with regular banks.
- NEPAD should create the institution
to enable Diaspora to pool their financial resources together.
- Train the locals to become more
competent in e-commerce
- Using eBay to type/model to enable
a one to one micro financing on web. Must be verifiable to ensure
not a scam. Cutting off the many intermediaries impacting on the
amount of money that actually gets to the recipients.
Developing and Building Key Skills
and Competencies
- Moving from a theoretical to practical
based training to encourage entrepreneurship
- Improved strategic thinking to enhance
the synergy between skills and economic policy by linking skills
strategy with trade and industry providing opportunities for innovation
- Africa's ability to trade in the
global market place is linked to its capacity to use skills to
add value to domestic produce and ensure the products meet quality
standards for export more importantly move up the value chain
- less raw materials , more finished goods
- Development of Skills Development
Agency with stakeholders such as industry, private sector, government
and educational bodies to ensure that skills development is linked
to key sectors of growth and development and content relevant
e.g. South Africa Skills Development Agency as a model
Regulatory Frameworks
- Lean and effective regulatory environment
that protects the rights of individuals (crime, property rights)
and business by educating citizens on their rights and increasing
the capacity of the security and judiciary system to effectively
implement the law
- The creation of regulatory bodies
in country and networked to global regulators in many of the unregulated
areas e.g. Estate agents, surveyors to address the issue of property
rights and protection
- Tighter corporate governance with
monitoring mechanism
- Increasing the capacity of civil
society and the media
Infrastructure
- Cost-efficient and secure public
transport system
- System that negates the impact of
increased overheads e.g. harsh grants
Tourism
Policy
Most African destination countries have
evolved their tourism policies around conservation of wildlife,
employment creation and generation of foreign exchange. Noble
as they are, these parameters tend largely to ignore the local
communities who carry the burdens of conservation, which are manifested
by conflicts in land use.
The Diaspora is challenged to influence
the policy framework in countries of heritage to embrace the cultural
heritage and to reflect demand for domestic tourism. By so doing
the tourism policies of African destination countries will add
more value to the visitor satisfaction regardless of visitor origin.
Investment
African cultural heritage affords a
distinctive sector and opportunity for investment by the African
in Diaspora because of their inherent affinity with the countries
of heritage. Furthermore the capital outlay to invest in cultural
ventures is relatively modest yet with big spatial impact on the
ground.
In addition cultural circuits if well
developed and established would open doors and justification for
Small and Medium scale enterprise (SME) accommodation establishments.
Despite the flaws associated with "Time Share" it could
be a viable mechanism to promote and sell such accommodation to
the prospective Diaspora investor and tourist.
Investing in culture will help open
up hitherto marginal areas and improve the living standards of
many rural communities. The accent here is on the topical buzz
phrase "Think global act local". It may take the form
of partnership between local and Diaspora investors. This in itself
breeds the spirit of success at both supply and consumer levels
of the investment equation.
31st January 2006
| 
