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Results BriefsDecember 1, 2023

Mobilizing the Private Sector to Drive Development in Africa

Cameroon Nachtigal Hydropower Plant

The Nachtigal Hydropower Project is a 420MW hydropower plant on the Sanaga River that will contribute an additional 30 percent of installed generation capacity in Cameroon, along with significant climate co-benefits.

Photo credit: IFC


  • $1.4 billion provided for on-lending to 312,861 micro-, small-, and medium-sized enterprises (MSMEs) in Nigeria.
  • As of FY22 International Finance Corporation (IFC) clients had provided 2.9 million loans to MSMEs.
  • 14 projects supported by MIGA in FY23 with guarantees totaling $1.9 billion resulting in:

> 34,203 direct jobs in the region.
> 19,639 gigawatt hours (GWh) in expanded power generation.
> 56 million new subscribers to telecom services.

  • Between 2014 and 2023, over 19,000 jobs were created in industrial parks in Ethiopia, 66 percent of them for young women.
  • Since 2018, 3,612 new formal firms have been established in the Democratic Republic of Congo (DRC), 65 percent owned by women and 35 percent by young entrepreneurs, creating 9,360 jobs.

Tackling persistent poverty and fragility in Africa requires the efforts of multiple partners—national governments, development institutions, communities, civil society organizations, and business. The private sector is critically important to create jobs and improve the livelihoods of people throughout the continent. The World Bank leverages expertise and resources across the institution, including IFC and MIGA, to accelerate sustainable and inclusive economic growth in Sub-Saharan Africa by strengthening the region’s private sector. It harnesses a range of instruments, including public-private partnerships (PPPs), multi-donor facilities, and capital investment pipelines to drive development by tapping into the region’s local capital.


Declining Investment, Growing Unemployment

About 400 million people in Sub-Saharan Africa live in extreme poverty. The region also has more conflict-affected countries than any other. Unemployment is high, at 6.7 percent in 2022, and the population growth rate of 2.5 percent youth unemployment is likely to rise - threatening development outcomes and political stability. More and better private sector jobs are needed to improve the lives and livelihoods of people in the region. The engagement of the private sector - both foreign investment and domestic firms - in the development process is essential. But the private sector in Sub-Saharan Africa faces many challenges, most notably declining foreign direct investment (FDI); from 2015 to 2020 before the start of the COVID-19 pandemic, FDI declined by almost 50 percent. To enter these markets, private investors need better information on opportunities, and assurance that these present acceptable risks. Many countries in the region need help to attract and manage private capital.


Tackling the Root Causes of Poverty

The World Bank and other multilateral development banks (MDBs) cannot tackle the scale and complexity of these challenges alone. Accordingly, the World Bank leverages expertise and resources across its member institutions and facilities to mobilize the private sector in support of the development agenda. World Bank policy engagement, analytics, and financing help remove constraints to private sector job creation and investment and help ensure that entrepreneurs have access to the networks, financing, and business services needed to start up and grow successful businesses. In Sub-Saharan Africa, the World Bank has taken a Maximizing Finance for Development (MFD) approach, which entails working with governments to crowd in the private sector while optimizing the use of public resources. This has included support to governments in Ethiopia, Guinea Bissau, Kenya, Lesotho, Senegal, South Africa, and Tanzania, and for regional entities like the Economic Community of West African States (ECOWAS) in the adoption of public-private partnership (PPP) laws, regulations, and guidelines. This has led to the launch of several groundbreaking PPP projects and support for PPP programs by the World Bank, the International Finance Corporation (IFC), and the Multilateral Investment Guarantee Agency (MIGA) in sectors including transportation and digital infrastructure.

The Private Sector Window (PSW) is the International Development Association’s (IDA) first blended finance instrument to support private investments in IDA-only and IDA-eligible fragile and conflict-affected situations (FCS). The PSW mobilizes private investments in high-risk markets by transferring financial risks from IFC and MIGA operations to IDA, in support of sustainable development. The Nuru Solar Energy Mini-grids project in the Democratic Republic of Congo (DRC) has attracted almost $80 million in private sector support. It has financed the installation of the 1.3 megawatt (MW) Goma 1 solar mini-grid project, operational since 2020. The project is the largest solar mini-grid in in the country and one of the largest in Africa, with clients that include water pumping stations, telecom towers, gas stations and clustered milling stations, and it is expected that the facility will also power small and medium enterprises (SMEs) and households.

Since its inception, the IDA PSW has committed $495 million and $600 million to support IFC and MIGA investments in East Africa and West Africa respectively. In addition, the PSW has also committed $405 million to support IFC investment in Pan-Africa programmatic platforms. IFC’s Africa Trade Recovery initiative, which includes $1 billion in IFC financing for improving trade across Africa, is supported by IDA PSW through a pooled first loss guarantee of $225 million. A further $1.6 billion has been committed by PSW to support IFC investments in global programmatic platforms that support SME and MSME financing and trade financing, more than 50 percent of which will be invested in Africa.

The IFC has established a leading position promoting private sector investment in Africa. Over nearly six decades, IFC has invested more than $60 billion in African businesses and financial institutions, and its current portfolio exceeds $12 billion. In FY22, long-term investments in Africa totaled about $5.2 billion, including $2.6 billion mobilized from other investors. IFC clients provided nearly 2.9 million loans to micro-, small-, and medium-sized enterprises, totaling about $12.5 billion. These clients in turn provided much-needed services, including care for 9.5 million patients, and the generation and distribution of power to 7.9 million people.

In Africa, MIGA has been stepping up its efforts to facilitate a green, resilient, and inclusive recovery while advancing the development agenda. In FY23, MIGA supported 14 projects in the region across 11 countries and issued guarantees for $1.9 billion. This included several high-impact projects such as the Wakanda Telecom Project in Ethiopia, where MIGA provided a $1 billion guarantee for political risk insurance (PRI) cover against the equity investment in the first privately owned telecommunications network in the country. Other notable projects in the region included two non-honoring guarantees in Botswana and Senegal, a railway project in Gabon, a road project in Kenya, and PRI projects in DRC, Ethiopia, Gabon, Guinea, Kenya, Madagascar, Namibia, and South Africa.


In Cameroon, MIGA collaborated with IFC and IBRD on the Nachtigal Hydropower Plant with the aim to deliver power sufficient for 453,000 customers, while avoiding emissions of 41 million tons of carbon dioxide equivalent over the next 40 years.


Supporting Enterprise, Building Economies

The private sector has a critical role to play in the development of infrastructure—which in turn improves the enabling environment for business, creating a virtuous cycle. In Kenya, World Bank institutions have worked together under the MFD approach to provide $90 million since 2013 to kickstart PPP programs under the Infrastructure Finance/PPP Project (IFPPP). Efforts have resulted in a new PPP law, stronger government capacity to manage PPPs, and a solid pipeline of projects in roads, health, and water and sanitation to advance Kenya’s social and economic goals. IFPPP is expected to mobilize $1.25 billion in private capital, and as of April 2023 has already mobilized about $899 million. In addition to the work under IFPPP, the government of Kenya and IFC signed agreements for advisory services for PPPs in the water and housing sectors in 2022.

In Cameroon, MIGA collaborated with IFC and IBRD on the Nachtigal Hydropower Plant with the aim to deliver power sufficient for 453,000 customers, while avoiding emissions of 41 million tons of carbon dioxide equivalent over the next 40 years. MIGA provided $187.9 million in guarantees for up to 15 years against breach of contract to EDF International, the French power developer and operator, and to STOA, a French infrastructure investment vehicle active primarily in Africa. This guarantee complemented payment and loan guarantees from the IBRD, and investment, loan and risk management swaps by IFC. The Nachtigal Hydropower Project is a 420MW hydropower plant on the Sanaga River that will contribute an additional 30 percent of installed generation capacity in Cameroon, along with significant climate co-benefits. IFC’s investments and MIGA’s guarantees in the digital infrastructure sector in Africa are also helping to connect the unconnected and to create business opportunities.

One of the goals of private capital mobilization in Sub-Saharan Africa is support for SMEs, which face particular challenges in accessing credit to finance growth. Launched in 2014, the Development Finance Project for Nigeria improved the availability of and access to finance for MSMEs through eligible financial intermediaries, with the support of a new wholesale development finance institution (DFI). The project provided tailored technical assistance to the participating financial institutions, and supported the establishment of financial consumer protection measures, enhancing responsible finance and affordability. It provided $445 million to the new DFI for lines of credit to PFIs for on-lending to eligible enterprises and sub-projects and established a $35 million credit guarantee facility. By closure in 2023, the project had succeeded in leveraging its line of credit and partial credit guarantee (PCG) facility to increase access to finance for MSMEs. As at project closure, the LoC facility has disbursed $1.4 billion to PFIs for on-lending to 312,861 MSMEs, and the PCG facility had supported over 28,000 MSMEs, with guaranteed loans of $302 million. The DRC SME Development and Growth Project, supported the establishment of 3,612 new formal firms, 63 percent of them owned by women and 35 percent by young entrepreneurs, creating 9,360 jobs.

In a region where the population is growing at a significant rate, and unemployment thus poses a crucial challenge, job creation is one of the World Bank’s priorities for Sub-Saharan Africa. With the support of the World Bank, the government of Senegal is reviving tourism as a priority sector to drive economic growth and contribute to job creation, especially for youth, women, and less skilled workers. One initiative is the Senegal Tourism and Enterprise Development Project, a 5-year, $74 million project financed by IDA. Around the coastal town of Saly, which had suffered a loss of tourism as a result of severe beach erosion due to climate change, the project helped reclaim 325,000 square meters of beach, equivalent to over 45 soccer fields, and more than 12 times the initial target. Beach protection and restoration work was extended to include two fishing villages, enabling fishermen to once again dock their boats at their villages. The project also built structures for fish drying and sale, equipment storage, and cold storage facilities for fresh fish. Since the restoration of the beaches, businesses have recently made investments in tourism totaling $350 million, with knock-on effects on other businesses benefiting from increased tourism and job creation, including restaurants, shops, travel and tour operators, taxis, and banks. The economic revival has resulted in the preservation of an estimated 15,000 jobs directly and indirectly linked to tourism.

The Youth Employment and Skills Development Project (PEJEDEC) in Côte d'Ivoire is helping workers to pursue new opportunities to access jobs, and supporting the acquisition of job-relevant skills by people. The project also connects educational institutions with the private sector to ensure that students are acquiring the skills needed for jobs. It aims to equip a large cohort of youth with the skills needed to drive Côte d’Ivoire’s digital transformation. Under PEJEDEC, 65,000 young Ivorians, 43 percent of them women, have found employment through labor-intensive work, or taken part in internship, apprenticeship or entrepreneurship programs. With PEJEDEC’s third phase, which runs through 2026, a total of 102,000 young people are expected to benefit from interventions to enhance their employability.

In Mozambique, the Integrated Growth Poles Project established a Catalytic Fund for Innovation and Demonstration, fostering inclusive business models under which small farmers, typically organized in associations, enter partnerships with agrobusiness companies to access new or existing markets. The Fund co-financed established agribusiness that linked with smallholder farmers, while offering the farmers the technical assistance they needed to gain access to stable markets and accelerate growth. In the Beira and Nacala Corridors, the Fund targeted high-potential value chains of such as oilseed and cotton, soybeans, maize and poultry, beef, fisheries, fruits, and vegetables.

In DRC, the $100 million SME Development and Growth “PADMPME” Project and the follow-on $300 million Empowering Women Entrepreneurs and Upgrading MSMEs for Economic Transformation and Jobs “TRANSFORME” Project have helped mobilize private capital to enhance growth of new and existing MSMEs, especially women-owned businesses, and promote formal job creation by the private sector. In five years, the $20 million partial guarantee fund established under the project has catalyzed $26.5 million (57 percent of total investment) from the private sector and funded 18 subprojects that benefited 21,203 farmers, of whom 33 percent were women. This successful model was duplicated in later projects (Southern Africa Trade and Connectivity Project; Economic Linkages for Diversification; Access to Finance & Economic Opportunities Project), which placed an even stronger emphasis on training and certifications to complement matching grants, and prioritizing SMEs investing in green competitiveness and the economic empowerment of women.

Improving Lives Through Industrial Development in Ethiopia

In Ethiopia, the government has identified industrialization as the key pathway to transform the economy, provide jobs, reduce poverty, and transition to lower-middle-income status by 2025. Approved in 2014, the Competitiveness & Job Creation Project has supported foundational systems for Ethiopia’s industrialization efforts by creating the enabling environment to attract investment for serviced industrial parks.

The project, which closed in May 2023, achieved significant results. Over $117 million in private capital was mobilized for project activities, and over 19,000 jobs were created, 66 percent of them for young women. Over $192 million in total sales were generated from two industrial parks, Kilinto and Bole Lemi I and II. Thirty-one local SMEs have established linkages with FDI firms in the parks through a matching grant and technical assistance for investment, and customs, tax, and logistics procedures were simplified and streamlined. The project supported community development initiatives, including schools, childcare, basic infrastructure, and livelihood support. Additionally, the project leveraged an IFC investment in the malting company Soufflet Malt Ethiopia, leading to the establishment of a greenfield malting plant and a supply chain involving around 70,000 smallholder farmers.

Yodit is a young worker who has benefited from on-the-job training in a factory in Bole Lemi-I. “I feel so proud of myself because I didn’t expect to gain such knowledge via the training,” she says. “It opened choices to multiple sections like sewing, ironing, packaging and office jobs and to be exposed to new things in my life.” She has succeeded in managing her time to continue her college program, and is on track to graduate with a degree in accounting.


Jointly Creating a Climate for Investment

The Facility for Investment Climate Advisory Services (FIAS) supports projects and programs that aim to develop dynamic and resilient economies that promote economic inclusion through investment, innovation, job-creation, and higher productivity. FIAS is a collaboration between 16 development partners—donor countries and philanthropic organizations—and the World Bank. FIAS funding supports advisory, lending, and investment projects managed by the IFC, which oversees the client-facing projects implemented by IFC Advisory Services and FIAS-supported global knowledge projects implemented by IFC and World Bank teams. FIAS has a particular focus on developing the investment environment in Sub-Saharan Africa (SSA); from 2017 to 2021 47 percent of client- facing project implementation was spent in SSA with 41 percent of investment climate reforms supported by FIAS in the region.


A Platform for Increased Private Sector Investment

The World Bank launched the Private Sector Investment Lab in June 2023, with a mandate to develop, and rapidly scale, solutions that address barriers to private sector investment in emerging markets. The Lab’s work will include an emphasis on scaling transition finance, with an initial sectoral focus on renewable energy and energy infrastructure. The Lab is made up of senior leaders from private finance and business who bring to the table considerable experience financing, investing, and doing business in emerging markets and developing economies.

Also in 2023, the World Bank is launching B-READY, a flagship instrument to measure the business and investment climates in 180 economies. Together with Country Private Sector Diagnostics (CPSDs), a joint IFC-World Bank product, B-READY will provide valuable data, analytics, and recommendations for governments to more effectively support private sector growth. The World Bank has also introduced a focus in its operations on the resilience of the private sector in the context of climate change, through the Country Climate and Development Reports (CCDRs) and the World Bank/International Monetary Fund Financial Sector Assessment Program (FSAP). Informed by tools like these, it is stepping up support for the development of the “circular economy” and for adoption of cleaner technologies by private sector firms.

Finally, the World Bank’s Evolution Roadmap identifies the importance of the One World Bank approach in mobilizing private capital for development. It calls for countries to maximize their development resources by drawing on private financing and sustainable private sector solutions, while reserving scarce public financing for those areas where private sector engagement is not optimal or available, and for the World Bank institutions to align diagnostics, instruments, and incentives to support this goal.