Q&A: Israel's development finance strategist on plans to invest in Africa

ABIDJAN, Ivory Coast — Israel has focused its sights on Africa as a new frontier for its emerging development efforts. Last month, representatives from the Israeli Ministry of Economy and Industry visited the Ivory Coast and Ghana to meet local officials and survey possible avenues for development support.

A small country roughly the size of New Jersey with an estimated 8.3 million inhabitants and $300 billion annual gross domestic product, Israel has humble roots and its own experience with development. As a World Bank recipient until the 1970s, Israel has evolved from a developing country into a nation with a leading high-tech industry. More than 300 international firms, including giants such as Microsoft, IBM, Apple, Cisco and Hewlett-Packard have high-tech research centers in the country.

The country’s development program, to date, remains a branch of the Ministry of Economy and Industry, with selected officials laying the foundations of the strategy. They are targeting specific sectors and countries. As a development donor with a limited financial capacity, Israel will be looking to partner with development finance institutions to roll out programs and in-country services.  

Devex spoke with Zafrir Asaf, director of financial institutions and emerging markets at the Ministry of Economy and Industry, to learn more about Israel’s plans on becoming a development donor in Africa and the challenges involved in this effort. The conversation has been edited for length and clarity.

What role does Israel look to play in the development space?

Our development strategy has a few basic assumptions. One assumption is that we would never be a major donor because we are a small country and we don’t have the capabilities of donating hundreds of millions, or billions, of dollars.

Another assumption is that we need to build the understanding on the Israeli side. At the moment, there are very few civil servants who actually deal with it. Nobody is against it, but very few understand what we mean by a development strategy, ways to finance it and what we can actually achieve. So we’re building the support from bottom up.

A third element is being very, very focused, or as focused as we can be. In the African context, we say Africa, but we practically mean a few countries of interest, which include South Africa, and the neighboring smaller countries, like Botswana and Namibia. On the eastern side, it would be Kenya, Ethiopia, Uganda, maybe Rwanda. Western side: Nigeria, Ghana and Ivory Coast. The thing is to focus and try to make more development with less resources and find, through development interactions, a common ground, which can be sustainable and ongoing and would also be an enabler for private economic activity.

What are the specific focus areas where Israel can make an impact in Africa’s development?

Israel can make an impact on several fronts, which correspond with our strengths.

Interestingly enough, the foundations of the Israeli high-tech industry, or government support for high-tech industry, were established with a World Bank loan back in the [19]70s. It’s an interesting fact. The World Bank lent to the Israeli Ministry of Industry to launch and to support the newly born high-tech community, and that led to different programs that created the startup nation. So the development finance ecosystems [can] take much of the credit of Israel’s emergence as a high-tech hub.

Now we think we are very well-positioned to lead the way of development partners in the areas of water security and water management, agriculture and food security, IT, financial IT, as well as cybersecurity — which wasn’t really a development issue until a year or two ago. Israel is definitely at the forefront of cybersecurity, creating cyber resilience, regulating cyber so we can definitely take the lead on both the technological aspect, as well as the technical and administrative aspects.

Since Israel is not prepared to be a large development donor, how has the ministry selected these sectors in relation to the financial resources available?

As a small donor, we are constantly in dialogue with the development institutions. We offer our technological strength and we take into consideration their major interests. [We] closely look at what we’re good at, but at the same time responding to clear and defined needs of a financial institution and a recipient country. This is one of the key factors of our strategy.

It’s not enough to look at what we’re good at. We need to look at that in the prism or perspective of what is actually needed.

As the country’s development finance strategist, what are some of the challenges you face in your role?

There are challenges facing outward and there are internal or domestic challenges.

When it comes to external challenges, one is definitely the fact that we are a small donor, because the system is not tailored to small donors. More often than not, when you approach a development finance institution or a fund and you say you are willing to contribute $1 million or $2 million, it is very hard to find an appropriate mechanism. The system is geared toward much larger donors.

It’s understandable given the cost-benefit issues and the procedures required to facilitate a loan. However, if we look into the future, the world is changing and there is a need of the whole ecosystem to look at and identify the virtues of small donors that are not necessarily financial. Some of those riches can be technological, can be innovation, or a country well-known for its great business models or quick adaptation, or culture that has the ability to create partnerships, for example.

Another challenge is introducing innovation. Most development institutions and funds and foundations are required to present clear outcomes, and they are risk averse. They are scared to take risks, and that, in itself, is creating a barrier to innovation. You can always go back to the traditional solutions that have been tried and achieve this or that level of success. It’s very human to go with what you know best when you need to deliver.

I think stakeholders need to look at ways to integrate innovation — either in technological innovation, or in business model, or in the way processes are done — to accommodate new partners and maybe achieve better results.

But for this, humanitarian organizations are not the key player. When people are dying, I’m not sure this is the right time to introduce a new solution that has never been tried. I’m not saying that innovation needs to be everywhere, anywhere, at any time. But there is a lot of development work done that can encourage trying something new, whether in preparation and processes, as well as implementation.

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