Private sector representatives and other participants at an ACET-hosted Compact with Africa (CwA) workshop held in Johannesburg, South Africa, have identified several factors that constrain investment in African countries.
The workshop titled “Leveraging the G20 Compact with Africa for Increased Investment: The Private Sector Perspective” was organised by the African Center for Economic Transformation (ACET) on the sidelines of the Africa Investment Forum held in Johannesburg.
It sought to highlight the views of the private sector on how the CwA Framework can best help them to concretise transactions and significantly increase private capital for strategic public and private investments in Africa, particularly in compact countries.
The emphasis of this technical workshop was on identifying what the private sector sees as the highest policy priorities to unlock future investments.
Mr. Solomon Asamoah, Chief Executive Officer of the Ghana Infrastructure Fund, highlighted three things that in his view, were key to attracting investments: consistency of policy, capacity at lower levels of government and strong domestic financial institutions. Addressing constraints in these areas will help to attract more investments.
Helen Mtsali, Chief Finance Officer of GE Healthcare Africa, also presented a PPP case where 98 radiology departments were successfully renovated across Kenya in 17 months through a Managed Equipment Services partnership. She stressed that the key in such cases, was to ensure that risk was shared such that all stakeholders had appropriate exposure. The Kenyan government’s participation was also important.
“With the participation of the Kenyan government in the scheme as a key signal, the stakeholders were able to raise a seven-year financing from banks as the government’s stake indicated a high level of commitment to the project’s success. GE Healthcare Africa hopes to replicate the model and the success in other countries,” she said.
Following the presentation of the two cases from Ghana and Kenya, participants were put into groups to discuss and identify the key constraints they face. Some of these were: wildly fluctuating exchange rates and controls on movement of forex, which increase the threshold for considering whether to invest, lack of basic infrastructure, the small size of African markets, which does not support substantial investments and diversification of portfolio.
“The more diversified an industrial base a country has or promotes, the more resistant the market is seen to be to both internal and external shocks. The positive perception of stability encourages investment,” participants maintained.
It was also noted that inconsistency in policy was also a major challenge. The frequent changes in policy and regulation or their application, which were typically tied to the political winds of the day and any changes in government from regime changes to ministerial reshuffles typically led to changed priorities and changed policies, creating uncertainty and thus making the private sector less likely to invest.
Ms. Sarah Alade, in her closing remarks, assured participants that the findings from the session would be shared with the G20 African Advisory Group at the April meeting and thanked the participants for their engagement and candor.
The G20 Compact with Africa (CwA) seeks to increase investment to Africa through a collaboration of 12 African governments, the G20 governments and three international organizations – the African Development Bank (AfDB), the International Monetary Fund, and the World Bank Group. ACET supports implementation of the CwA through peer learning events, analysis, investment promotion, advocacy and peer reviews.