Blog | Vlaďka Jelínková

Calls for private sector in Africa

„European Union development policy needs to modernise its aid. We need to focus on private sector activity, regional integration and international trade,“ confirms José Manuel Durão Barroso, President of the European Commission.


Also the Green Paper on EU development policy stresses out the important role of the private sector. “No country has grown out of poverty by relying on foreign direct investment alone,” says Jyrki Koskelo, official of International Finance Corporation.  



However there also many problems that companies who want to invest in Africa have to face. High level of corruption is one of the most known. According to Nigerian President Olusegun Obasanjo, corruption costs Africa about 150 billion dollars every year, which is about 25% of African national income. Other problems are discontinuity in politics and lack of assessment and evaluation reports on the African market, states Giorgia Giovanetti, one of the authors of European Report on Development.


Thomas Duve, director of KfW Entwicklungsbank lists also many practical obstacles: weak legislation, no access to financial institutions (for instance in Mozambique up to 78% of people are excluded from any financial institutions, in Rwanda 52%, Uganda 62% of population), missing infrastructure, drinking water and energy capacity.

“Everything has to shut down at five o’clock, because the whole African continent has the same electricity capacity as Spain. And the electricity capacity of Sub-Saharan Africa without JAR equals only the capacity of Serbia,” says Duve who had lived in several African countries.

“We pay so much for electricity! This really limits our enterprise,” says Grace Mueni Nyaa, a director of a Kyome Fresh Company Limited, a fruit and vegetables exporter that annually sells products for more than 1,6million Euro.


Grace also criticizes that when Europe conducts a research on suitable plants for Africa, it carries it out in cold countries like Denmark, instead of bringing the research in real field conditions of Africa. “Many plants brought over from Europe couldn’t stand our harsh conditions and they succumbed to heat or diseases.”


One thing that all investors and local businessmen see as the key problem of private sector development in Africa is a problem of financing medium scale projects. Small enterprises can get a loan from microfinance institutions, big ones from conventional banks, but middle scale enterprises are too big for micro financing and too risky for banks. “Nevertheless small and medium enterprises are the motor of development,” says Grace.

Duve agrees with her: “We call this problem ‘a missing middle’. We are aware of it and really need to work together on solving it. Our objective should be to help the microfinance institutions grow bigger and big banks to get downscale.”