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Promoting Private Investment in Transition Countries

The African Development Bank has identified private sector development as a top priority area to lift transition countries out of fragility. The private sector brings not only economic benefits including growth, higher incomes and employment, but also increases hope through more economic opportunity and provides examples for scaling up and replication. The private sector can thrive in the most challenging environments and it can act as a stabilizer and a means for exiting a fragile condition. 

Investing in transition countries presents not only the prospect of making a difference in Africa, but a real financial opportunity with potential for outsized returns, for those willing to engage in these markets and seize the first-mover advantage.

Countries in transition present great opportunities and potential for growth, yet they have challenges attracting investment.
In 2017, transition countries such as Djibouti, Eritrea, Sierra Leone, and Sudan were some of the fastest growing economies on the continent with a combined GDP of over USD 128 billion and GDP growth rates of above 4%. However, they continue to have challenges attracting investment – the Horn of Africa, Sahel, Mano River and Great Lakes regions received only 29% of FDI into Africa in 2015, despite having 43% of the continent’s population.
In 2017, 26% of FDI flows in Africa went to transition countries in these regions. There is a wide variety in levels of FDI per country:  for example, in 2017 the Republic of Congo had 5% of the FDI but just 0.5% of the population; whereas South Sudan had less than 0% of the FDI flow but 1% of the population.

Despite its potential, private sector investment in fragile contexts is often constrained by lack of financing, unfavorable business environments, weak institutions and informational asymmetries.

To respond to these challenges the African Development Bank has stepped up its efforts to encourage and facilitate private investments in fragile situations, by leveraging its wide suite of financing and risk management solutions, as well as advisory and technical assistance products.

 

Find out more about the AfDB’s work to promote private investment in transition countries in the Horn of Africa.