Experts: Africa's growth depends on bankable projects, not capital

Whenever African economies are discussed, aid and loans feature prominently.

It is one of the main income lines that governments on the continent continue to use to gather capital for development purposes. 

Yet, according to Gillian Rogers, Kenya’s principal country officer for the International Finance Corporation (IFC), a World Bank Group affiliate, the continent does not have a capital problem. 

“Across Africa, capital exists globally and domestically. There are pension funds, insurance pools, institutional capital, and sovereign wealth funds,” she says.

“Unfortunately, a lot of that capital is either sitting on the sidelines or is being focused on initiatives that are not driving job creation. 

“We know that the constraint is not money; it is how we really move that money towards bankable projects. How do we use that money to reduce risk, to help develop better projects and have it flow in local currency?” 

This is one of the challenges facing African economies that will be discussed in the upcoming Africa CEO Forum slated for May 14-15, in Kigali, Rwanda. 

The forum is under the theme ‘Scale or fail: Why Africa Must Embrace Shared Ownership’. It is in this forum that African executives drawn from different industries, including manufacturing, finance, and agriculture, meet and interact with not only their counterparts but also government officials. 

Towards the end of the forum, roadshows are being held in several selected African countries, including Nairobi. Others are Cairo, Egypt, Johannesburg, South Africa, and Lagos, Nigeria. 

During the Nairobi roadshow edition last week, Rogers explained that the capital flow challenge cannot be solved by a single transaction but by overhauling the whole ecosystem. 

But this overhaul should go beyond just availing capital. There should be systems and structures that ensure this money flows into the right industries. These are industries with the most impact on the economy, such as agriculture. 

“Jobs are not an automatic outcome of capital,” said Jesman Chonzi, IFC regional industry manager. “They are a result of investment flowing into sectors that are productive, resilient and investable.” 

She outlined food systems and agribusiness as one of such sectors. 

“This is where the job challenge is most visible,” she said. “Agri-business accounts for 18 per cent of sub-Saharan Africa’s gross domestic product (GDP) and close to half of total employment. Yet productivity increases and resilience remains constrained.” 

She noted that smallholder farmers produce most of the continent’s food, but many of them remain disconnected from markets, finance, logistics, and technology.  “The issue is not effort. It is that systems have not just worked to scale,” she stated, adding that interventions in the sector have also been fragmented. 

It is the reason the World Bank developed the Agri-Connect platform, which helps to move capacity, policy reforms and skills into the agri-food value chain at scale. This is so that farming can move from subsistence to surplus. 

“And automatically jobs will follow,” said Chonzi. 

However, she noted, job creation initiatives must also be accompanied by skills development, insisting that young people need to meet their employers’ needs in order to spur production.  “The skills gap not only limits the ability of businesses to expand but also stops us from creating African giants,” said Chonzi. 

One of the challenges that African economies face today with capital access, as noted by Africa CEO Forum director Adrian Fielding, is the current geo-economic environment. 

“We cannot ignore that we are in a geo-economic era where trade is weaponised, capital is strategic, and corporations are tools of national power,” he said.  These changes have led to fragmented markets. However, Africa seems to be still thriving amidst these challenges. “Yet the continent is still exposed, as it is importing value instead of producing it,” said Fielding. 

To tackle these challenges, noted Mary-Anne Musangi, Haco Industries managing director, African economies should endeavour to do business with each other.  She pointed out that most times, the continent is viewed as an afterthought whenever global issues are discussed. 

She says even when revenues from multinationals are analysed, Africa’s contribution is so small that the continent’s economies become a less significant matter. 

“We should not be afraid of the guy next door because they speak French or Portuguese. If the Chinese can learn English or Kiswahili and come build our roads in Kenya, why can’t we learn French and also do business with West Africa?” posed Musangi.