African entrepreneurs are a key driving force for the continent’s emergence. Around 80 percent of Africans view entrepreneurship as a good career opportunity. Take African start-ups. They pioneer social innovations. Thanks to the fintech industry, for example, the diaspora can connect with their relatives and directly finance their health expenses, as in the case of Leea.
This company benefitted from Digital Africa, an initiative of the Agence Française de Développement (AFD) to help African start-ups through financing, coaching and business training. African entrepreneurs and customers show the way forward and accelerate the continent’s leapfrogging in terms of technology innovation in banking, health, agriculture, urban mobility, education, and more.
However, at a macro level, 80 percent of Africa’s labour force works in the informal sector. Unemployment is high, especially amongst the youth, who are three times more likely to be unemployed than adults. Development banks can play a role in addressing the macro policy, nurturing job-intensive growth across the continent and financing gaps. How?
First, we can help foster conditions for social cohesion, employment and peace. That is the motivation behind the Alliance for the Sahel, a coalition of partners in development involving France, Germany, the European Union, the World Bank, the United Nations Development Programme, and the African Development Bank, which President Macron and Chancellor Merkel announced on 13 July 2017. We feel the urgency of delivering better results rapidly in education, youth employment, agriculture, green energy and governance, based on the needs expressed by the G5 African countries.
The Sahel region offers vast untapped economic opportunities. The food industry, for example, as a resilient and productive economic sector accounts for 40 percent of the region’s GDP, with only 8 percent of food imported. The sector provides jobs across a complex value chain of crafts crossing national frontiers and creating solidarity between rural and urban populations.
Then, we can help strengthen the business environment to build trust. Private investment requires stable institutional frameworks and financial systems. Development does not come either from the public at large or from the private sector, but from ways that see the private sector flourish when public authorities play their role. Public administrations can nurture job-intensive, inclusive growth by designing, implementing and monitoring sound economic policies. Indeed, progress in public administration can have a positive impact on budgetary management and tax collection.
The efficient use of public resources can ultimately improve the effective delivery of public services in basic and secondary education, health, and business environment. This can contribute to accelerating the demographic dividend for the benefit of all Africans. We see a strong nexus amongst governance, public service delivery and policy dialogue, all of which are within AFD’s mandate.
Finally, we can help provide the adequate financing tools to catalyse more private capital and generate many more bankable projects. The reorientation of private capital towards financing major transitions – the energy, demographic, digital, ecological and citizens-based transitions – is a global challenge, explicit, for instance, in the Paris Agreement on Climate. In this respect, a development bank can make project preparation and credit enhancement instruments available to attract more private capital. Guarantees, like from ARIZ or the African Guarantee Fund, are interesting tools that can channel financing to small- and medium-enterprises by reinforcing trust, which implies patience and long-term support.
What does this specifically mean for AFD? We will invest in infrastructure as well as in vocational training. Therefore, AFD will increase its annual commitments to Africa by 2020 from €4 to 5 billion per year. And together with Proparco, our subsidiary devoted to financing the private sector in the South, we will double annual funding for the private sector in excess of €3 billion. These are concrete ways of supporting Africa’s entrepreneurs.
About the Authors
Rémy Rioux began as CEO of Agence Française de Développement (AFD) in 2016. He is senior advisor at the court of auditors and serves as an assistant head of international financial affairs and development, as well as director and French representative of BCEAO. Rioux specialises in international financial institutions, and work to has a rich history of working to support development in Africa.