The recent crisis created by COVID-19 has dramatically changed the macroeconomic settings in which the private sector now operates in Africa and the world at large. It has highly affected the levels of public and private debt, reduced financial stability and increased credit and investment risk and uncertainty, among other challenges. Thus, African policymakers have to carefully reassess the macroeconomic conditions affecting Private Sector development and urgently undertake necessary reforms that boost the role of Private sector as an engine of inclusive economic growth and sustainable development.
The multilateral trading system overseen by the World Trade Organisation (WTO) has helped to spur economic development for both developing and developed economies by creating a more predictable, fair and transparent trading system that encourages investment and industrialization. Nevertheless, in recent times, this progress has been slowed by crises such as that triggered by the COVID-19 pandemic. This new economic related crisis has caused major disruptions to trade. In its October 2020 forecast, the WTO predicted that the volume of world merchandise trade would decline by 9.2 per cent in 2020, followed by a 7.2 per cent rise in 2021. In its October 2020 World Economic Outlook, the International Monetary Fund (IMF) forecast negative growth of -4.4 per cent for the world in 2020, with a rebound to 5.2 per cent in 2021.
The current marketplace for big public contracts is dominated by foreign companies with a greater share attributed to approximately 10,000 thousand Chinese companies’ operating in Africa and multiplicity of European Multinational Companies operating in Africa and most of them funded under the Official Development Assistance (ODA) cover with a negative incidence on African private sector. Furthermore, failure to strengthen the competitiveness of African private sector to effectively participate in big public contract processes will further aggravate Africa’s participation in World trade.
Strengthening the technical capacity and the financial viability of domestic companies will require that AU countries invest additional capital expenditure on training highly qualified engineers, private sector managers and to create a special guarantee fund to ease access to commercial loans for domestic companies to effectively participate in big public contract tender processes in Africa. To date, according the Global Fortune 500 hundred report of 2020 mostly dominated by American and Chinese companies, no African private company was mentioned as global champion.
Overhauling the African public contract sector within the context of COVID 19, to ensure a 50 per cent participation of domestic companies to have at least 50 percent of Public Procurement to African Private Sector including SMEs ,Women and Youth will fast track the creation of African companies within the construction, the pharmaceutical industries, the information technology, energy, agriculture and Agribusiness, mining and Mineral Development domains and Industrialization as a whole as a core for Africa’s Economic transformation. There is also a great importance to strengthen the capacity of the African Private Sector to have a “Made in Africa” Products that are competitive, Value added, standardized, of quality and to promote “Made in Africa” products among African Private Sector to increase Intra Africa Trade and Operationalize the AfCFTA.
On a whole, there is still great need to strengthen the African private sector’s capacity to respond to disrupted markets. The COVID-19 crisis has presented challenges to businesses to reconsider their products, services and business models in light of market disruptions. To do this, the African Private Sector requires a conducive business environment and a supportive entrepreneurial and innovation ecosystem. One that promotes productivity and better working conditions for business growth and sustainability. Governments should prioritize reforms and other support measures that promote growth and innovation of African Private Sector in order to help pull the countries out of the economic and social crisis created by the pandemic. This includes reforms that promote greater economic resilience to external shocks.
In light of the prevailing circumstances, the African Union in close collaboration with Member states and the Voice of the Private Sector of Africa- the African Business Council, and all the Stakeholders and Development Partners will continue to facilitate the engagement of all policy actors in recovery policy planning and implementation.
