News / Africa

Greater Support Urged for Private Sector in Post-Conflict Africa

China and India seek partners at local level

Liberia's President Ellen Johnson Sirleaf declared the private sector
Liberia's President Ellen Johnson Sirleaf declared the private sector"s involvement is integral to Liberia"s rehabilitation

“A strong private sector is crucial to broad based economic growth, and this is especially true to post conflict African states such as Liberia, Ivory Coast and Sierra Leone as well as a host of others in Africa, ”says Hany Besada, a senior researcher and the head of the Development Corporation Program at the North-South Institute in Ottawa, Canada.

Through its research, the non-governmental institute supports, among others, global efforts to increase aid effectiveness, strengthen governance and accountability, and promote equitable trade and commercial relations.

According to Besada, “the relationship between the private sector and post conflict African states are good and are constantly improving.”

That was not always the case.

Hany Besada, senior researcher at the North-South Institute in Ottowa, Canada
Hany Besada, senior researcher at the North-South Institute in Ottowa, Canada

Rough start

Socialism was the choice of many African independence leaders, and with it, a preference for government-managed enterprises and a command economy over private-owned businesses and a minimum of government regulation.

In some countries, private enterprise was linked to cronyism, corruption and even civil war.  Over the past two decades, private sector actors have been involved in the illegal mining and transfer of blood diamonds in Sierra Leone, and in the illegal shipments of arms and soldiers in Ivory Coast and Liberia.

“This history,” Besada says,” still continues to hang over them, as governments and officials in the three countries at times are quick to point out the disastrous effects on the economies and the political stability given the private sector role and action during civil conflicts. “


New efforts in post-conflict states

But African economies have grown particularly over the past decade, in part due to foreign investment and to increased support for private sector expansion.

Development institutes like Besada’s and  the African Capacity Building Foundation (http://www.acbf-pact.org/)  encourage good governance, broad-based economic growth and capacity building for both the private sector and government.

Besada says that’s true of Liberia and other countries in West Africa.

Mpesa Kenya's first mobile banking service network
Mpesa Kenya's first mobile banking service network

“Shortly after the election of Johnson Sirleaf as President of Liberia,” says Besada, “she declared the private sector’s involvement would need to be integral to Liberia’s rehabilitation.”

He says her government inherited a budget of less than $ [US] 100 million in 2006 sharply down from the pre-coup national budget of  $ [US] 600 million in 1980.  Sirleaf was forced to raise capital and resources for reconstruction, including the revival of privately-owned businesses, especially in mining, agriculture, rubber production, and logging.

The story is similar in Sierra Leone,  which is rebuilding from decades of civil war.  The government there is working to attract foreign investment, in part with a program that aims to privatize many state owned enterprises and spur economic growth.

Besada says it’s the cornerstone of its strategy for national development which in time will reduce the role of government in the economy,  and encourage local businesses to create jobs.

In Cote d’Ivoire, there have been a number of changes to the country’s business regulations.  Goods and services that are manufactured and conducted in free trade zones are now exempt from all import and export duties.

South African President Jacob Zuma, right, walks with Chinese President Hu Jintao. China has helped promote skills transfer in Africa
South African President Jacob Zuma, right, walks with Chinese President Hu Jintao. China has helped promote skills transfer in Africa

Taxes in the zones are extremely low, with numerous rebates based on local employment and reinvestment. Foreign and local investors are now exempt from the national value added tax on electricity, water, and petroleum consumption.  They are also protected by law from nationalization, and they face no restrictions on ownership.
“These kinds of measures reflect post conflict African states’ eagerness to work with the private sector,” says Besada.

Take-off

In the past few years,  private entrepreneurship has helped other economies take off.

In Kenya,  according to Besada, “Mpesa,” the country’s first mobile banking service network,  directly led to the creation of over 7,000 enterprises and 12,000 jobs.  The subsequent increase in access to financial services is also likely to have generated many jobs indirectly.

In Namibia, Besada says, “Namdeb, the diamond operation based on a partnership between the government and De Beers, accounts for more than 10% of the country’s gross national product.

In Botswana, Besada says “private sector investment has helped transform the country from one of the poorest countries in Africa, to a middle income country.

Private sector investments in Botswana has helped transform the country from one of the poorest, to a middle income country.
Private sector investments in Botswana has helped transform the country from one of the poorest, to a middle income country.

He also points out that South Africa’s business involvement in the rest of the continent had a marked effect in terms of structure to the labor market, more specifically on wage levels and job creation.

In Mozambique, Besada says “the entry of South African companies into the job market has had a striking impact on wage structure.   The highest paid labor group in the country is the skilled workers at the Mozal smelter. Today, the lowest paid worker earns $4,000 there, which is 10 times the minimum wage. ”

Injecting needed capital

The domestic private sector needs lots of financial support to grow and flourish particularly in post conflict states.  Besada points out that foreign investments help inject needed capital in the local economy that are made available for local investments later on.  It’s a trickle effect, says Besada, that also helps promote skills transfer and increases productivity levels.

Two important investors in Africa are India and China.

India’s investments on the continent are largely driven by its private sector.  Besada says India is keen to move away from formal arrangements between governments and is focusing more on local partnerships through the exchange of managers and skilled laborers.

China, Besada says, has helped promote skills transfer in Africa, including in Egypt’s manufacturing sector and Zambia’s mining sector.

However, Beijing has been the focus of criticism. African governments criticize China for supplying its own manpower in African projects,  rather than using local workers.  Some says it also drives African retailers out of business with cheaply made goods imported from China.

Indian Prime Minister Manmohan Singh. India's investments in Africa are largely driven by its private sector.
Indian Prime Minister Manmohan Singh. India's investments in Africa are largely driven by its private sector.

Beijing has begun to react to some of these criticisms.  Over the past few years, Beijing has pumped millions of dollars into African industries geared to serve markets in the EU and the United States.

Using the provisions of the EU’s Cotonou Agreement and the US African Growth and Opportunity Act,  Chinese investors have established joint ventures with local investors to produce goods for exports at concessional rates.

The Chinese are especially involved in agriculture, agro-business, textiles, and light manufacturing.  In the process, says Besada, they are helping to build local capacity, boost technology transfers, and raise the export levels of dozens of Africa economies.

Besada says traders from Asia, and the Middle East have been in coastal Africa for decades, though they have at times been driven from the continent.   Some African leaders accused them of not sharing skills, or wealth, with the African business community.

As a result, today, Lebanese traders in West Africa are partnership more with local investors while Indian investors in East Africa are using more local workers as part of their work forces while wages levels are increasing.


You May Like

Video Indiana Controversy Points to Divergent Notions of Religious Freedom

Arkansas, North Carolina have approved similar laws that gay-marriage opponents say help maintain their beliefs in face of changing culture More

UNICEF Denies North Korean Measles Outbreak

Agency dismisses Russian media report after government, WHO assurances More

Turkey Seen Taking Harder Stance Against Militant Kurds

Stance comes as President Recep Tayyip Erdogan is being seen as moving closer to generals More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Indiana Controversy Highlights Divergent Meanings of Religious Freedomi
X
Jerome Socolovsky
April 01, 2015 1:41 AM
Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Indiana Controversy Highlights Divergent Meanings of Religious Freedom

Indiana’s state government has triggered a nationwide controversy by approving a law that critics say is aimed at allowing discrimination against gays and lesbians. The controversy stems from divergent notions of religious freedom in America. VOA's Jerome Socolovsky reports.
Video

Video Nigerians Welcome Buhari's Return to Power

Crowds of jubilant Nigerians nationwide have celebrated the return to power of former military ruler Muhammadu Buhari. The retired army general won this year's presidential election with more than 2 million votes more than incumbent President Goodluck Jonathan. Buhari's supporters hope he can strengthen the country's economy and security once he takes office in late May. Zlatica Hoke has this story.
Video

Video Report: State of Black America a 'Tale of Two Nations'

The National Urban League has described this year's "State of Black America" report as a "tale of two nations." The group's annual report, released earlier this month (March), found that under an equality index African Americans had only 72% parity compared to whites in areas such as education, economics, health, social justice and civic engagement. It’s a gap that educators and students at Brooklyn’s Medgar Evers College are looking to close. VOA's Daniela Schrier reports from the school.
Video

Video Film Tells Story of Musicians in Mali Threatened by Jihadists

At this year's annual South by Southwest film and music festival in Austin, Texas, some musicians from Mali were on hand to promote a film about how their lives were upturned by jihadists who destroyed ancient treasures in the city of Timbuktu and prohibited anyone from playing music under threat of death. As VOA’s Greg Flakus reports from Austin, some are afraid to return to their hometowns even though the jihadists are no longer in control there.
Video

Video Gamma Ray Observatory to Open Soon in Mexico

American and Mexican scientists have completed construction of the world's largest gamma ray observatory, situated high in central Mexico’s Sierra Negra Mountain. The observatory's huge array of water-based detectors will soon start discovering secrets about black holes and supernovas. VOA’s George Putic reports.
Video

Video Ebola Vaccine Trials Underway in West Africa

Ebola has claimed the lives of more than 10,000 people in West Africa. Since last summer, researchers have rushed to get anti-Ebola vaccines into clinical trials. While it's too early to say that any of the potential vaccines work, some scientists say they are seeing strong results from some of the studies. VOA's Carol Pearson reports.
Video

Video Philippines Wants Tourists Spending Money at New Casinos

Tourism is a multi-billion dollar industry in the Philippines. Close to five million foreign visitors traveled there last year, perhaps lured by the country’s tropical beaches. But Jason Strother reports from Manila that the country hopes to entice more travelers to stay indoors and spend money inside new casinos.
Video

Video Civilian Casualties Push Men to Join Rebels in Ukraine

The continued fighting in eastern Ukraine and the shelling of civilian neighborhoods seem to be pushing more men to join the separatist fighters. Many of the new recruits are residents of Ukraine made bitter by new grievances, as well as old. VOA's Patrick Wells reports.
Video

Video Islamic State Prisoners Talk of Curiosity, God, Regret

Islamic State fighter, a prisoner of Kurdish YPG forces, asked his family asking for forgiveness: "I destroyed myself and I destroyed them along with me." The Syrian youth was one of two detainees who spoke to VOA’s Kurdish Service about the path they chose; their names have been changed and identifying details obscured. VOA's Zana Omer reports.
Video

Video Germanwings Findings Raise Issue of Psychological Testing for Pilots

More is being discovered about the co-pilot in the crash of Germanwings Flight 9525 in the French Alps. Investigators say he was hiding a medical condition, raising questions about the mental qualifications of pilots. VOA's Carolyn Presutti reports.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.

VOA Blogs

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More