HomeBusiness Digest‘Access to Finance Key to Africa’s Competitiveness’

‘Access to Finance Key to Africa’s Competitiveness’

AFRICAN businesses need increased access to financial resources to improve their competitiveness on the global markets, the Africa Competitiveness Report 2009 released on Wednesday said.

The report reflects research findings of three institutions –– the World Economic Forum, the African Development Bank and the World Bank.

“Limited access to financial services remains a major obstacle for African enterprises, but underdeveloped infrastructure, limited healthcare and educational services, and poor institutional frameworks also make African countries less competitive in the global marketplace,” reads the report in part.

The report points to a number of success stories in the region that highlight steps countries can take to improve their business environment.

The joint report was launched on Wednesday before the official opening of the World Economic Forum on Africa, in Cape Town, South Africa by President Jacob Zuma.

It is the second report on the region’s business environment.

Klaus Schwab, founder and executive chairman of the World Economic Forum, said: “This year’s Africa Competitiveness Report is the second comprehensive effort by our three organisations to place the continent in a broader international context and to shed light on the important aspects of development in the region, which are so critical, particularly at this time of global economic crisis.”

Vice-President of the Africa region at the World Bank in Washington, DC, Obiageli Katryn Ezekwesili, said investment in infrastructure with a regional focus would help cushion against the impact of the crisis and position Africa to take advantage of a rebound of the global economy.

“The countries that will reap the most benefit and limit the adverse impact of the crisis would be those that sustain reforms, strengthen governance, modernise local capital markets and make the investments needed to tap the immense resourcefulness and creativity of their people,” said Ezekwesili.

President of the African Development Bank, Donald Kaberuka, said: “The most critical issue for us (Africans) at this stage is how we strike the balance between short-term crisis response while remaining focused on the long-term issues key for sustaining Africa’s growth, such as the development of infrastructure, and a skilled labour force, as well as economic integration.”

The report highlights two short-term and three longer term policy themes for improving the competitiveness of African economies.

The two short-term themes are increasing access to finance through market-enabling policies and keeping market open to trade.

The report said protectionist forces were emerging in response to the global economic crisis; yet such measures would further reduce demand and restrict growth.

“Africa’s leaders must resist domestic political pressures to erect trade barriers that would make the region’s recovery even more difficult,” the report said.

The three longer term themes are –– infrastructure remain one of the top constraints to business in African, Inefficient basis education and healthcare systems constrain Africa’s productive potential and more examples of goods governance and strong and visionary leadership are needed.

“Energy and transportation are among the main bottlenecks to productivity growth and competitiveness in Africa. Investment in upgrading infrastructure would both place Africa on a higher growth trajectory as well as serve as a fiscal stimulus at a critical time,” the report said.

The report said unless educational and healthcare systems were upgraded in Africa, firms would continue to be constrained in their move up the value chain, and economic development will be hindered.

“Strong and transparent institutional environments have contributed to the success of Africa’s most competitive economies. Much has been done in recent years to improve these structures; yet in many parts of the region, institutions need to be more business-friendly to foster competitiveness,” said the report.

This was said to be particularly important in the current global economic crisis was threatening to cause reversals in governance reform.

A separate report by experts including former UN secretary–general Kofi Annan and  former Mozambican first lady Graca Machel said Africa would continue to need aid, but that it had enough potential and untapped resources to become a net food and energy exporter and to boost intercontinental trade.

“We need leadership visionary enough to say where we want to put our continent in 30, 40 or 50 years, and to take the steps necessary to keep our continent there,” said Machel. “We have the potential, we have the capacity.”

Africa achieved economic growth rates of 5,5% last year, above the global average, said Annan. The numbers of people living in poverty are leveling out, democracy and market reforms are entrenched in many countries, and great strides are being made against killer diseases such as AIDS and malaria.

“Some of this progress is unstoppable but much of it is fragile,” he said. Annan’s Progress Panel Report called for more investment in renewable energy, agriculture and communications.

Africa is the continent most vulnerable to the economic downturn because it does not have the economic and social levers to cushion the crisis. Annan warned the world not to turn its back on Africa despite its reputation as a basket case because of wars and corruption.

“We ignored Somalia and it is now come back to bite us with piracy and destruction to global trade.” he said.


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