While the rapid development and looming transformation of the African economy has been widely anticipated, the process is not advancing at the rapid pace we would have hoped for. Why has the expected boom not taken place yet and what could the EU, and particularly the private sector, do to help accelerate Africa’s transformation?
Africa is a vibrant continent with a young, growing population and a burgeoning middle class. The continent is increasingly capturing the attention of business, whose interests go beyond the extractive or agricultural sectors traditionally perceived as the main areas of foreign companies’ activities in Africa. Investments are taking place in infrastructure, energy, manufacturing and services.
The presence of foreign investors - with European ones featuring prominently - can contribute to Africa’s economic growth and development. When European companies invest in Africa, they bring expertise that is translated into upgraded skills.
They work with local suppliers, which are mostly small- and medium-sized companies, helping them become more competitive and export-oriented and opening up possibilities to participate in global value chains.
Yet the picture is not always rosy. Africa is a vast and highly diverse continent that continues to face a number of challenges. While some countries are taking a more stable path to growth and development, others still face systemic problems, such as corruption, governance, the rule of law and even armed conflict. This reality needs to be factored in when designing EU trade and development policies.
In this context, BusinessEurope supports a more prominent role for the private sector in the policy-making process. We are actively promoting a multi-stakeholder approach to development policies following the adoption of the EU’s ‘Agenda for Change’ in 2011 and through trade policy instruments, including the Economic Partnership Agreements between the EU and African, Caribbean and Pacific countries and the EU Generalised System of Preferences.
European business is willing to play its role, but investment decisions today take a number of factors into account. High growth rates are not necessarily enough to attract investors. When the overall environment is such that the risk is too high, it may deter investors. Furthermore, investment locations are competing among themselves and investors are becoming increasingly demanding. In other words, solutions cannot be left to politicians and cannot be exclusively in the hands of business either. A joint effort is required.
A good example is the way that the EU wants to promote investment in Africa, primarily though the development of the EU’s External Investment Plan. European companies are ready to support a plan that can promote innovative and sustainable investment from different sectors.
There are diverse realities across Africa; we should be flexible in fixing investment objectives that take this into account. It is also important that we put in place a framework that is efficient and maximises the positive impact of investment.
To help African economies to upgrade and diversify, we should open up the External Investment Plan to projects in education and employment - to bridge the skills gap and provide decent jobs; energy infrastructure - to increase the capacity of the grid and ensure sustainable energy supply throughout Africa; digital infrastructure - to expand internet penetration and enable access to information and services; the private sector in Africa - to support the formalisation and institutionalisation of the economy; and, of course, in civil society - to empower the voice of workers, consumers and businesses and create the necessary checks and balances to increase accountability and good governance.
The EU, at the institutional and corporate level, has valuable experience in these areas and can certainly help. The 5th African Union-European Union summit, as well as the 6th EU-Africa Business Forum, both taking place in Abidjan, present excellent opportunities to deepen discussions on these important issues and develop an ambitious plan to enhance cooperation and develop high value-added projects.
A commitment is needed at the highest political and business level to developing a real Africa-EU strategy for the benefit of both partners. The message from the European business community is clear; we cannot afford to lose any more time.