African governments need to create a better business environment for the private sector so that companies can generate domestic revenue to help alleviate poverty and boost development, a cross-section of business leaders said at the Annual Meetings of the African Development Bank Group (AfDB) on 8June in Lisbon, Portugal.
Their programmes should include reforming their legal and regulatory framework to allow busineses to operate more efficiently, they said at a High Level Seminar on Private Sector Development and Domestic Resource Mobilization in Africa.
Even though Africa has enjoyed good economic growth over the last decade, the global economic crisis nevertheless demonstrated how African countries and external flows of funds are at the mercy of unforeseen shocks.
Several countries faced falls in export revenues, and suffered major uncertainty over future foreign investment and aid inflows. At the same time, high levels of debt remained a cause for considerable concern.
These events spurred fresh dialogue on domestic resource mobilization in Africa to help bridge the development-financing gap.
Global development success stories indicate that better mobilization of a country’s own resources and reduced dependence on aid and other foreign finance, is key to sustained, strong and shared growth.
Speaking at the forum, Mr Arnold Ekpe, the Director –General of Ecobank Groupunderlined the need for policy reform to create an enabling environment for private sector growth and increased domestic revenue.
“Financial and price stability is needed for investors to have confidence in investing in the country. There is a need to remove barriers to free movement of people, goods and services,” he said.
Mr Ekpe also highlighted accelerating regional integration agenda on the continent as critical to creating a bigger market that will attract investment.
“Resources are there but not evenly distributed,” he said, pointing out that regional integration would facilitate movement of resources to scarce areas.
The Director General also said financial institutions need to improve and simplity their services to be able to increase penetration of financial services that could in turn leading to mobilizing more domestic resources.
“The more you make the bank less of a mystery, reduce transaction costs and increase access to finance – it will boost savings because you will be able to access resources from the unbanked population,”
Mr Ekpe also observed that countries need to tap resources from their citizens in the Diaspora in the form of remittances.
Ms Nonkululeko Nyembeziheita, the Chief Executive Officer of South African based –ArcelorMittal underscored that in order to mobilize more domestic resources there is a need to develop robust financial sector that supports growth of the private sector to be the engine of economic growth.
“Africa’s financial sector is still in its infancy and collection of taxes is still inadequate,” she said.
Zimbabwe’s Finance Minister, Tendai Biti noted that countries need to continue pursuing both macro-economic and political stability to be able attract private investment.
He also mentioned that current poor state of infrastructure affects countries’ ability to attract private equity.
To boost domestic revenue, the Minister underscored that countries not only need to diversify their economies but also invest in addiy value to their exports.
Mr Noah Greenhill, the Senior Manager – Marketing and Business Development at the Johannesburg Stock Exchange, South Africa noted that African governments should create incentives for African companies to list on African capital markets. This he said would include not only aligning listing requirements for companies but also monitoring companies to ensure that they comply with the requirements.
The forum was organized by AfDB in line with its Private Sector Development (PSD) program that aims to assist African governments to improve the enabling environment for the private sector.
Given the importance of PSD as the engine for poverty-reducing economic growth, the Bank’s strategy articulates five focal priorities for its interventions: supporting private enterprises, strengthening financial systems, building competitive infrastructure, promoting trade, and improving the investment climate.
The Bank’s vision for private sector development is founded on a conceptual framework that links entrepreneurship, investment, and economic growth with the Bank’s ultimate goal of poverty alleviation.