Africa's upshot: How the AfDB and the private sector can mobilize growth

Businesses and investors are bullish on Africa. With so much room for development the problems that have long held the continent back from growth and prosperity are increasingly being seen as ripe business opportunities. It is resource-rich and endowed with a demographic dividend — approximately half of its one billion people are under the age of 20. Currently a handful of the world’s 10 fastest growing economies all hail from Africa. This prompts the question “if you have a global strategy as a business, can you really afford to not have an Africa strategy?” which Solomon Asamoah, African Development Bank’s vice president of infrastructure, private sector and regional integration, raised at a recent investor summit. Devex interviewed Asamoah at the Frontier 100 Forum hosted by the Initiative for Global Development, to understand the main connection points between private industry and the bank’s development goals. Here are the highlights: What are three key focus areas that you are currently prioritizing to spur development? First is the power sector. We have all focused on grid solutions and will continue to — on building more power plants, making sure transmission lines work and that distributions systems are effective for collecting payments for power that is produced. But if you really want to make inroads in connecting people you have to look at off-grid solutions. Because of technological advances, solar connectivity is a huge area that we can focus on to connect people with basic energy in rural areas. For a single panel that you can now set up in 20 minutes you can produce a couple of lightbulbs or enough power to charge a cellphone and a small fridge. If you start moving that to rural areas it will make a huge impact on the continent. There is an equally important subcomponent of that which is clean cooking solutions. More people — mostly women and children — die from inhaling charcoal and wood fumes when cooking than from HIV, malaria and tuberculosis combined. This is an area that hasn’t had as much focus and attention so we want to make sure clean cooking solutions are also part of the equation. Another area which is extremely important is agribusiness or agriculture. We haven’t looked at agriculture as a business enough. We’ve looked at it more as a social need. More than 80 percent of Africans are employed in this sector. We need to mechanize it and move it forward. That means finding new means of financing and new ways to bring skills in. That will link the rural areas with urban areas and slow down the current migration from countryside to cities. It will also help young people to start getting involved in this sector and use new techniques and technologies such as seed development, more active use of fertilizer or advanced irrigation systems. Once you have power and agriculture then we move on to the third link which is basic infrastructure. That means roads to transfer goods to market and improving ports and airports. Now you’re talking about a continent that can really take advantage of its inherent strengths. How would you rate so far the role of private business in advancing these areas? It’s fair to say that the role of the private sector is growing. Africa has been a region heavily dominated by the public sector. But there’s a universal recognition by governments themselves that they can’t deliver the solutions alone. They need to allow the private sector to invest in these spaces. And it’s more than a verbal agreement. Governments are now putting in place policies that will attract the private sector. So I think there’s going to be a combination of private sector players. You have interests from the large global players such as General Electric in the power sector. You have many renewable solar companies looking at Africa. But what we need to do is make sure local people and local businesses are involved in the solutions so that it’s sustainable. If we’re going to roll out solar panels to rural areas that’s a huge opportunity for African businesses to get involved in distributing, monitoring, manufacturing and replacing the batteries. What they need is access to financing and institutions such as the African Development Bank can play a huge role in helping to structure financing arrangements. So large international companies are looking at Africa, but Africa is a continent full of smallholder farmers across the countryside. So the issue becomes whether we can develop schemes that involve them and link them to the latest technologies and distributions systems to cultivate the land and sell their products at a reasonable price. I think we are now seeing more and more stronger African companies playing an equal role in providing these solutions. These are a mixture of diaspora Africans coming back, but also local Africans who understand the needs of the local markets. What are some of those important policies that support the private sector that foreign investors should be aware of? Governments have accepted that the private sector needs to make a healthy return. So they’re allowing the private sector to charge commercial tariffs or commercial prices for their products. This is a huge step forward from the past when they didn’t want commercial prices to be charged. Second, governments have to commit to pay certain ties for a long period of time. You are seeing governments write into legal agreements their commitments to certain solutions so the private sector can be comforted with fixed and final terms of a transaction. The most important thing that governments are now doing is creating a space for the private sector to operate without interference. In many countries you have special export zones where the rules are more amenable to allow private sector investment and involvement. But we always try to advise governments to have a clear, consistent and transparent policy. Rules of the game and regulations should be consistent and evenly applied. And then the private sector will figure out what it wants to do within that certainty that you provide. To read additional content on resilient infrastructure, go to Focus On: Resilient Infrastructure in partnership with Bechtel.