NAIROBI, May 7, 2010—African economies can achieve faster growth and global integration if they increase the competitiveness of their private sector, according to new reports launched in Nairobi today.
Private sector competitiveness creates opportunities for African countries to increase productivity and gain market access, according to the reports, which were launched during a Senior Policy Seminar hosted by the African Economic Research Consortium (AERC), the World Bank and the Japan International Cooperation Agency (JICA) Research Institute.
The Seminar focuses on Africa’s competitiveness based on the findings of the Africa Competitiveness Report 2009, which is published jointly by the African Development Bank, the World Bank and the World Economic Forum. The other main themes are drawn from studies on special economic zones, industrial clusters and indigenous private sector development. The latter was completed jointly by the World Bank and JICA Research Institute in collaboration with AERC economists.
“Policy making needs to be informed by good empirical analysis. Without real understanding of the issues, policy making based on intuition is inherently risky,” said Hon. Prof. Ephraim Kamuntu, Uganda’s Minister of State for Planning.
The presenters observed that Africa has great potential to increase its competitiveness. Some African countries are almost as cost competitive as firms in Asia but a number of factors are critical for African countries to become more productive.
“It is important for Africa to seize opportunities to increase productivity and investments for more job creation and shared growth,” said Marilou Uy, Sector Director for Financial and Private Sector Development in the World Bank’s Africa Region.
In designing competitiveness policies African countries can benchmark themselves and identify the binding constraints to private sector development. Discussions centered on policy recommendations on how to address these issues.
“The challenge is going from analysis to implementation. We need to find ways to encourage policymakers to take on difficult reforms, including using regional platforms,” said Ali Mansoor, Financial Secretary, Government of Mauritius.
The performance of African economies is also linked to the productivity of indigenous small and micro-enterprises since they represent the great majority of Africa’s private sector. Participants explored mechanisms for countries to develop innovative, quality-based clusters of small enterprises to stimulate private sector development and build human capital in the indigenous private sector.
The development of micro and small enterprises is key to the development of a strong domestic indigenous private sector in Africa, an important potential driver for growth, job creation, and poverty reduction. Participants discussed how industrial clusters can play a facilitating role in linking informal micro and small enterprises with national and regional markets. Industrial clusters such as Jua Kali in Kenya are still at the survival stage.
"The engine of growth in Asia was not only the inflows of foreign direct investment. More importantly, it was the large number of domestic enterprises responding to the new business opportunities that contributed to inclusive growth and eventually poverty reduction," Keiichi Tsunekawa, JICA Research Institute’s Director, said during the seminar.
To turn survival into growth, development of managerial skills and knowledge among cluster-based entrepreneurs is critical. Sound spatial policy at the local level and fostering regional integration are equally significant for cluster growth.
“Growth that is not based on innovation and productivity improvement is tantamount to working hard but not working smart. A discussion of strategies and options to support the transformation of the industrial clusters from survival types to innovative types is therefore of utmost importance to African policy makers and other stakeholders,” said Olusanya Ajakaiye, AERC’s Director of Research.
The seminar also discussed special economic zones as instruments for export-led growth, diversification, and industrial upgrading. Most African countries are still in the early stages of developing zones programs, and while Mauritius is an often-cited African success story in using zones, in most other countries economic zones have not yet fulfilled their potential.
Preliminary findings of a forthcoming World Bank study on economic zones indicates that governments need to take a much more integrated approach to zones—in their strategic approach, infrastructure investment, and institutional design—to ensure their zones become effective tools for investment, employment, and growth.
“African countries should aim for a new results framework that includes greater share of Africa in world exports and job creation,” said Jas Bedi, Chairman of the African Cotton and Textile Industries Federation (ACTIF).
The participants included representatives of government, private sector and research think-tanks from Kenya, Cameroon, Ghana, Mauritius, Nigeria, Rwanda, South Africa, Tanzania, Uganda and Zambia, as well as from AERC, the African Development Bank, JICA and the World Bank.