More than aid money, Africa needs enterprise

To reduce poverty and create jobs, Africa must become economically competitive.

By Jakaya Kikwete and Anders Fogh Rasmussen

Jakaya Kikwete is president of Tanzania and chairman of the African Union. Anders Fogh Rasmussen is prime minister of Denmark. Both are members of the Africa Commission.

from the February 9, 2009 edition of the Christian Science Monitor

Dar es Salaam, Tanzania; and Copenhagen, Denmark - African countries are still a long way from achieving the full benefits of globalization, despite solid economic growth.

In recent years, African economies on the whole have grown at an average of more than 6 percent per year. But a look below the surface reveals that much of the growth has come from higher commodity prices. The trouble for Africa's economies is that prices are now falling. And growth based on commodities alone is not enough to create jobs and reduce poverty.

A new approach to development is therefore needed. We must have a renewed international emphasis on improving the competitiveness of the African private sector. Pouring aid money into the continent is not sustainable or helpful in itself. Africa and its partners should focus on reducing the costs of doing business by combating corruption, adding more and better post-primary education and skills training based on private sector demand, providing access to investment capital, better energy supply as well as basic infrastructure.

These may look like steep demands, but together we have created the Africa Commission to identify concrete initiatives that can facilitate this type of change. The commission brings together major stakeholders at the highest level: governments, researchers, civil society, the private sector, and international partners. We are committed to finding new ways to bring Africa up to speed and make it competitive with the rest of the world.

But where do we start?

Africa's numerous small- and medium- sized enterprises (SMEs) offer the best opportunities for growth and employment. They are the backbone of prosperous economies. A good place to begin is to address the constraints that SMEs face in accessing finance for investment. Banks are often unwilling to provide investment loans as they perceive risks to be too high. By developing an initiative for the financial markets in Africa we can enable banks to supply growth-oriented SMEs with longer-term finance.

Another area for intervention is energy. Access to energy is too often unreliable and expensive. This reduces Africa's competitiveness with negative consequences for growth and employment. Technologies for sustainable small-scale energy production and distribution are available today in areas such as wind, hydro, biomass, solar energy, and biofuel. So working on an initiative that can help scale up market-based clean energy production in Africa and take advantage of those technologies is a possible and effective step forward. An initiative could foster access to finance as well as advisory services, skills training, and support a good regulatory environment for small-scale energy production.

Then there is the matter of youth and employment. Young entrepreneurs in Africa face particular challenges, even when they are skilled and have innovative ideas. Opportunity for young entrepreneurs is key to Africa's future. We're planning a youth initiative to help young entrepreneurs start up and develop businesses and allow them to create jobs. An initiative could provide a new and innovative environment for young entrepreneurs, targeted risk capital, skills training, and advisory services.

By establishing the Africa Commission we have created a platform for finding effective means of improving job opportunities for young Africans. We share a common goal of building societies where all young people have a prosperous future. We want to put employment of youth at the top of the international agenda.

In the coming months we will concentrate our efforts on transforming these principles into concrete actions. We will work closely with our partners and the private sector to harness the required commitments to be able to launch the initiatives after the commission's final meeting in May 2009.

Our aim is to assist Africa's aspirations to achieve the full benefits of globalization through a change of mind-set. Most important, we must shift our focus toward enterprise-led development in Africa: Aid in itself will not ensure sustainable development. Improving Africa's competitiveness will.

Jakaya Kikwete is president of Tanzania and chairman of the African Union. Anders Fogh Rasmussen is prime minister of Denmark. Both are members of the Africa Commission.