THE prevailing global economic state presents many hurdles for economic growth in many African countries, which could ignite fresh waves of conflicts like in Sudan.
With prospects of a global economic recession still lingering, the war in Ukraine, climate change, the Sahel Region conflicts, debt crisis, and post-election conflicts in Africa, many countries face a bump road ahead.
Consequently, it is a reality that sustainable economic transitions in Africa cannot be achieved by governments alone.
The private sector, as a critical economic stakeholder has a role to play given that many African countries have eroded their ability to attract or access fresh capital. As such, this leaves the private sector as the only viable option for economic development and growth.
The private sector is a critical cog in economic development in any country. The sector has been credited for 90% of employment, with the informal sector accounting for 40% of Africa’s economy, 59% of GDP, and support 40% of rural lives (Africa Development, 2011).
The past decade has seen the private sector making significant contributions in infrastructure development, service delivery, mining, manufacturing, education, and poverty alleviation.
It is evident that the private sector can address development challenges (International Finance Corporation, 2011). Consequently, many African countries face poverty, economic fragility, collapsing health systems, skills flight, youth disillusionment, conflicts, and climate change induced hardships, which governments cannot address alone with the pressure for economic development.
Private Sector Economic Growth is an economic model that allows the private sector and investors to utilise their value chain to contribute to socio-economic development.
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For example, creation of employment, provide service delivery, invest in infrastructure projects that benefits the society at large, while honouring their statutory obligations.
The common model for private sector role in economic development has been the Public Private Partnership (PPP), which could be accompanied by tax incentives.
However, this model tends to be affected by mistrust and bribery demands from public officials in many countries before projects approvals.
A viable model tends to be characterised by direct private sector investment, setting up of new companies and operations in a country.
It will be an illusion to believe that economic development and growth in many African countries, including Zimbabwe will be achieved by governments alone.
The country faces a number of obstacles that include political-economic sanctions, corruption, indebtedness, skills flight, service delivery challenges, strained infrastructure, high unemployment, policy challenges, currency stability, and inflation to name a few.
Such country economic profile strangles opportunities for private sector participation and attracting fresh international capital for economic growth.
However, hope still remains for the private sector to play a role in economic development in Zimbabwe. If the government could provide conducive business environment, consistent and competitive policies, trust, stable monetary systems and sustainable investment policy.
Over the past few years, they has been increased private sector role in infrastructure projects like the Beitbridge-Harare Road, Robert Gabriel Mugabe International Airport expansion, Dinson Iron and Steel Plant in Mvuma, lithium, platinum, and gold mine projects.
Such projects should provide impetus for reviving and strengthening an enabling business environment that brings investor confidence on the country’s ability to drive private sector investment.
The private sector can play a critical role in service delivery and investment in cities, towns and growth points in Zimbabwe.
Evidence from leading African economies like South Africa, Kenya, Nigeria, Mauritius, Seychelles, Morocco, Egypt, Rwanda, Botswana, Namibia and others show that the private sector has been at the core of economic development.
However, governments have been instrumental in providing an enabling business environment.
The private sector has been at the driving front of fostering Sustainable Development Goals (SDGs) implementation.
However, many countries could draw lessons from South Korea, Singapore, Malaysia, Japan, US, UK, Sweden, Norway, Denmark, France, Australia, and Germany where the private sector has been the driving force of economic growth.
In Africa, the role of the private sector has been stifled by government fears of losing economic control. Consequently, it is a better trade-off to avert unemployment, conflicts, poverty, and public catastrophes.
According to the Asia Development Bank (ADB) (2000), the private sector is core to poverty reduction, economic growth, and competitiveness.
To date, cases can be cited of Vietnam, Thailand, Philippines, Malaysia, Indonesia, and Singapore, whose economic growth has been fostered by the private sector.
The private sector can be a catalyst for sustainable economic growth provided the government creates enabling conditions for private companies to generate business opportunities and create employment.
In India, the private sector has been instrumental in the rise of companies like Mahindra, Tata, and Varun (Pepsi Zimbabwe), which have been expanding globally.
While international companies are instrumental, governments need to be strategic to ensure local beneficiation, domestic sourcing of raw material under fair trade arrangements, inclusion of Small-to-Medium entities (SME) in supply chains, employing the youth, and buying from women-led-businesses.
It is with great interest that the Global Reporting Initiative (GRI) Standards 2021 provides a sustainable economic model for the private sector to contribute to economic development.
In Zimbabwe, these standards are included in the Public Entities Corporate Governance Act [10:31] (Section 315-322), and SI.134 of 2019 Securities and Exchange (Zimbabwe Stock Exchange Listing Requirements) Rules (Section 399-404).
However, the government needs to enhance the standard as an economic model, private sector strategy, and investment policy.
The GRI Standards have been instrumental in the economic competitiveness of Kenya, Nigeria, Ghana, Morocco, Mauritius, Egypt, and South Africa etc.
The standards de-risk business and economic operations tend to be considered by international sustainable investors. Other countries that heavily apply the GRI Standards for economic development, include Japan, India, China, Singapore, Brazil, Australia, Denmark, The Netherlands, and France etc.
Countries like Singapore, India, Denmark, Japan and others have moved to make the standards mandatory for sustainable economic development.
The standards have been credited for supporting exporting companies to build sustainable practices for qualifying into high value international markets.
Cases of private sector role in economic development in Africa can be cited in Cameroon where the International Finance Corporation (IFC) mobilised US$472 million to date for private sector projects. From an analysis, private sector financing has become a preferable lending model by International Financial Institutions (IFI) like World Bank, IFC, International Monetary Fund (IMF), and Africa Development Bank (AfDB) than lending to highly indebted governments in Africa.
The model has been the driver of Impact Finance, which comes to the private sector with conditions for employment creation, environmental protection, youth employment, and community development.
As such, Zimbabwe needs to develop a private sector led economic development strategy.
It will be a myth to believe that government alone will grow the economy without the private sector. Government needs to revisit the new Companies and Other Business Entities Act [24:31] and include a section on Corporate Sustainability, which will mandate all private companies to consider their economic contributions, environmental, and social sustainability impacts and opportunities for the broader national economy.
This will make the Companies and Other Business Entities Act [24:31] consistent to the Public Entities Corporate Governance Act [10:31], and SI.134 of 2019.
In addition, compliment the upcoming International Sustainability Standards Board (ISSB)’s Sustainability Disclosure Standards of the IFRS Foundation, which Zimbabwe took a decision for an early adoption effective January 1 2024 following the pronouncement by the Minister of Finance and Economic Development (2022). It is no choice that the private sector has to be at the forefront of economic development in Zimbabwe for the greater good of the society.
In conclusion, the government has a great responsibility for developing a Private Sector Development Strategy (PSDS) designed to attract sustainable private sector investment for sustainable economic development and growth in Zimbabwe with incentives.
The private sector is the only viable option for economic growth given the current constraints faced by the government. However, there will be need for a clear structured and formalised private sector model, which integrates SMEs into supply chains of large companies through fair trade systems.
Lastly, Sustainable Investment Policy, and Corporate Governance Practices will be key for an investable private sector, which can attract fresh international capital. Zimbabwe has the greatest economic opportunities for private sector investment particularly in agriculture, mining, energy, infrastructure, manufacturing, and services sector.
- Ndamba is the chief executive of the Institute for Sustainability Africa, an independent think tank and research institute “advancing sustainability initiatives for Africa”. These weekly New Perspectives articles, published in the Zimbabwe Independent, are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Pvt) Ltd, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — [email protected] or mobile: +263 772 382 852.
