Business and governments review investment climate progress at UN meeting

To coincide with this week’s UN High Level Meeting on Africa’s Development Needs, the UN Office for Partnerships and Business Action for Africa joined forces to organise a meeting to gauge progress on improving Africa’s investment climate.

A favourable investment climate is vital for economic development and African policy-makers recognise that obstacles to both domestic and international investment are seriously impeding Africa’s development.

This event, chaired by Bert Koenders, Minister for Development Cooperation of the Netherlands, served as an opportunity for heads of African governments and business leaders to explore and discuss how the business and investment climate can be improved through effective public-private cooperation frameworks.

Amir Dossal, Executive Director, UN Office for Partnerships, noted that encouraging regional growth is threatened by rising food and oil prices and instability in financial markets. At a time of global economic insecurity, Africa needed a healthy and robust private sector to help maintain productive economies and to generate greater levels of investment, trade and job creation.

Bert Koenders, Minister for Development Cooperation of the Netherlands, when framing the discussion, pointed out that business needs predictability, stability and an efficient regulatory and legal infrastructure to thrive, in addition to more regionally integrated trade infrastructure.

Comments from speakers focused around five themes:

I) Business has an important potential role to play in tackling poverty and accelerating progress towards the MDGs

Jeffrey Sturchio, Chair of Business Action for Africa noted that it is increasingly recognised that the most powerful contribution that the private sector can make to development is to do business responsibly and successfully through core business activities: through products and services, and the opportunities created for employees, suppliers, distributors, and local communities. A tangible illustration of this point is provided by data that shows Foreign Direct Investment to developing countries reaching a record $536 bn in 2007, 20% up on 2006 – compared to total Foreign Assistance by donors declining by 8.4 % to $103 bn in the same year.

II) Getting the investment and business climate right is key priority
In addition to creating strong and transparent governance standards, the need to streamline complex business regulation, accelerate regional trade integration and improve physical infrastructure were also identified as key drivers for development by Louis Michel, European Commissioner for Development and Humanitarian Aid.

A number of success stories were cited by Omari Issa, Chief Executive of the ICF, demonstrating that progress is being made. For example, as a result of work undertaken by ICF to improve efficiency and reduce the cost of doing business, it is now possible to register a business in Rwanda in 48 hrs – it had previously taken considerably longer. In addition, to make it easier to access finance in Rwanda, Burkina Faso and Sierra Leone, ICF is working to introduce land registration procedures to enable owners to use their land as collateral. ICF has also established programmes to help improve the efficiency of business legal procedures in Zambia and Tanzania, to improve customs administration in East Africa and Senegal, and also to help tackle counterfeiting and piracy.

III) Investors are responding to concerted reforms and innovative problem solving approaches

During the session, examples of successful partnership based projects and the growing attractiveness of the region for investors included Seacom, a venture that involves the laying of a new fibre optic cable that will deliver significant increases in broadband internet capacity to the region (up to 50% increased capacity). Bruce Wrobel of Sithe Global Power pointed to the fact that the project took only 12 months to go from concept to finance, with a further 18 months to implementation, with cable laying starting in June 2009.

Another example of a successful partnership based approach is the manufacturing of mosquito nets in Tanzania, provided by Hiromasa Yoneura, President and CEO of Sumitomo Chemicals. As a result of bringing together government support, local entrepreneurial flair and innovative cutting-edge technology, 10 million nets / year are currently being manufactured, which has also created jobs for 3,200 local people. The project will expand to 19 million nets / year by the end of 2008.

IV) Small scale business and agriculture key priorities
It was noted that the private sector in Africa is largely made up of small scale businesses, largely operating in the agricultural sector. Amos Namanga Ngoni, President of the Alliance for a Green Revolution in Africa, identified increasing agricultural productivity as key to poverty reduction and ensuring food security. Currently, despite the fact that 70% of the population is in the agricultural sector, only 4% of government budgets and 4% of Official Development Assistance is channeled in to supporting agriculture. There is a need for governments and the private sector to collaborate to encourage greater investment in improving agricultural productivity, through greater access to fertilizers and pesticides, in addition to providing more inclusive financial services to help farmers mitigate against the risk of uncertain weather patterns and access financing.

V) Partnerships offer the best way to make progress
It was noted that given the scale of the challenges, the need for collective action through public private partnership approaches was critical. The growing number and variety of partnerships – in areas as diverse as governance reform, water sustainability, agricultural productivity and human development and healthcare - demonstrate that it is increasingly possible to deliver successful economic and development outcomes.