Africa’s population will overtake those of China and India combined by 2060, as it is expected to reach 2.7 billion. - Press Photo
CAIRO – 20 June 2018: The 10th African Union (AU) Private Sector Forum, held in Cairo from May 9-11, sent a key message to the private and public sector players: Deepening regional and continental integration is key to realizing the aspirations of the African Union for a prosperous, globally competitive Africa. Following up with the forum, Egypt Today looks at the key recommendations, the best routes for Africa’s economic transformation and key challenges facing the continent.
Since the start of the millennium, Africa has witnessed its growth rate increasing to just over 5 percent between 2001 and 2014, up from 2 percent in the 1980s and 1990s. Increasing domestic and global demand, public investment on infrastructure, rising prices and a tighter trading partnership between Africa and China (influenced by China’s extreme interest in Africa, as many economic experts have described it), have led to Africa’s economic environment and institutions to pick up at an accelerated pace. The continent is also still posting good performance in terms of attractiveness for foreign direct investments (FDI) inflows, according to the African Union.
Still, the economy is not without its shortcomings.
The AU Private Sector Forum comes at a time of declining commodity prices, especially in oil and metal, both of which are of pivotal importance to African countries’ economies, and the sharpening of global competitiveness.
Africa’s population will overtake those of China and India combined by 2060, as it is expected to reach 2.7 billion. This presents a great opportunity for investors to capitalize on a market characterized by a growing middle class of consumers of manufactured goods, set to reach 1.1 billion in 2016, an increase from 355 million in 2010. The population of those living in poverty is set to decrease, with the portion of the population living on less that $1.25 per day expected to decline to 33.3 percent in 2016 from 2010’s 44 percent. The signing of the Continental Free Trade Area (CFTA) by African Member States has led to an increasing interest in infrastructure investment, which is both directly and indirectly correlated with faster development, and is set to create attractive economic zones within Africa. Although intra-African cross-border investments have increased over the past decade, they still only account for 19 percent of total investments to Africa, and 12 percent of Africa’s total foreign investment, compared to 33 percent in Asia, according to Amany Asfour, Chairperson of the COMESA Business Council and World President of the International Federation of Business and Professional Women (BPW).
“Africa needs investment. We need to work on ways to transform simple ideas to projects and to reality. Investment is the route for African economic transformation,” explains Director of Economic Affairs at the African Union Commission René N’Guettia Kouassi. On the challenges facing Africa, Kouassi explains that the biggest challenge facing Africa’s economic development is infrastructure. “We have the challenge of infrastructure; we cannot invest when there is no infrastructure. Infrastructure is one of the conditions for having investment; whether roads, telecommunications or whatever. Africa needs to have infrastructure of all kinds. We also need to have an abundance of low-cost electricity. Africa needs to be more competitive in terms of producing quality goods at a low cost to ensure that our products are attractive; this is how to increase African attractiveness.”
However, infrastructure is not the only problem facing Africa. Of the annual $93 billion that the World Banks estimates needs to be invested in Africa to close the infrastructure gap, only about half is financed, explains Asfour. Confirming this, the Africa Infrastructure Country Diagnostics (AICD) estimates that only about $45 billion are spent annually, leaving a gap of about $48 billion. However, not everyone seems to think that Africa has a financing problem. On the vicious cycle of needing money to make money that many claim exists in Africa, Kouassi explains, “There is money in Africa—there is a lot of money—but we need to find ways to collect funding for the causes that we want to fund. There is a need to raise the fiscal revenue in Africa and mobilize this money into bettering Africa. We need to promote good governance policy, both political and economic; if we do not have it, no foreign direct investment will come to us.”
In line with the infrastructure issue, there also seems to be a connectivity issue caused by lack of solid and sufficient infrastructure, leaving countries unable to carry out business to their full potential. In previous statements, Sherif Al-Gabaly, Head of the Federation of Egyptian Industries, said, “Egypt is the strongest industrial country in Africa.” As per Al-Gabaly, Egypt has great potential and the capacity to fulfil the import needs of African countries. However, there are two issues that stand in the way of African development; connectivity and industrial integration between countries. There needs to be a better connectivity system between African countries, as well as within the countries. Al-Gabaly gave the example of the highway being built from Egypt to South Africa, suggesting that more projects like this needs to be carried out. He added that COMESA Business Council should help ensuring the industrial integration between countries.
The bottom line remains for Harrison that Africa has a problem of poverty and underdevelopment, despite having significant natural resources and a young population; an overarching message that was discussed throughout the forum. “The continent continues to be characterized by all the features of underdevelopment, including a low level of human development, industrialisation, manufacturing and productivity as well as dependence on the primary sector. Africa’s private sector, on the other hand, is specifically characterized by small size and informality, weak linkages, low level of competitiveness and lack of innovation; however, it’s important to note that not all is groom,” says the Commissioner. It is time to invest in human capital and the population, is his key message.
The AU’s vision, “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena,” can only be realized with the full participation of all stakeholders and with people becoming key players in the equation.
10th African Union (AU) Private Sector Forum
The 10th African Union (AU) Private Sector Forum, held in Cairo from May 9-11, sent a key message to the private and public sector players: Deepening regional and continental integration is key to realizing the aspirations of the African Union for a prosperous, globally competitive Africa.
With the theme ‘Made in Africa: Towards realizing Africa's Structural Transformation for the achievement of Agenda 2063,’ the forum was attended by some 200 delegates from numerous African countries. The different discussions focused on the best ways to reduce poverty through investment and job creation, developed policies for recommendations and deliberated the important role that the private sector will play in Africa’s transformation during upcoming years as well as its ability to achieve sustainable development.
“The forum is a key instrument of interface and partnership between the African Union policy makers and the private sector,” African Union’s Commissioner of Economic Affairs Victor Harrison tells Egypt Today. Through the discussion of ideas, advocacy, sharing market information and skills, capitalizing on expertise and connecting businesses to policymakers, the forum acts as a vehicle to empower the African private sector, he elaborates.
During the forum, plenary sessions, start-up pitching sessions and business sharing sessions were held, allowing entrepreneurs to demonstrate their technologies and explore possible partners within Africa. “The important role of the private sector in growth, development, and in poverty reduction no longer needs to be proved,” says Harrison. A strong link has been consistently argued for through a multitude of academic and on-the-ground research, all of which suggest that the development of the private sector, job creation, economic growth and poverty reduction, all key objectives of the African Union, are connected and intertwined.