How the Private Sector Can Create Jobs and Drive Development in Western & Central Africa

Factory workers package products in Accra, Ghana. Credit: Nyani Quarmyne (Panos)/IFCOpinion by Abebe Adugna (washington dc)Friday, August 16, 2024Inter Press Service

WASHINGTON DC, Aug 16 (IPS) - Every year in Western and Central Africa, 6 million young people enter the labor force, while only about half a million new jobs are created. This enormous jobs deficit means that most entrants into the workforce work in the informal sector, with insecure income, low quality employment, and very little hope of escaping poverty.

The repercussions of this unemployment epidemic are profound: a breakdown in the social contract, social and political unrest, wasted human potential and increased poverty.

What is holding back Western and Central Africa from the kind of dynamic job creation seen in other developing regions?

Highly commodity-dependent economies that rely on export revenue but do not create jobs. Low levels of trade due to high trade barriers. Onerous presence of state-owned enterprises that crowd out the private sector. And declining foreign investment, which prevents the countries in the region from reaping the benefits of technology transfer, access to global markets, and job creation.

The Catalyst: Private Sector Development

Addressing the unemployment challenge is no easy task. But developing and nurturing a vibrant private sector has to be at the core. The private sector is an engine of economic growth, innovation, and job creation. And the tax revenues generated from thriving businesses enable governments to invest in essential public services such as healthcare, education, and infrastructure, further improving the overall quality of life for citizens.

Yet the private sector has been repressed in many countries in Western and Central Africa and its role in generating jobs is falling woefully short.

So, what can be done?

To unleash the private sector's power to invest, generate jobs, catalyze a green transition and drive economic transformation, this is what needs to change:

Improving the business enabling environment to enable private investment and promote market competition. For example, the World Bank is supporting countries such as Ghana, Liberia, Togo, Senegal, Cote d'Ivoire, Burkina Faso, and Sierra Leone to simplify and shorten the process of starting and closing a business, reform laws and regulations related to foreign direct investment (FDI), speed up the resolution of commercial disputes, and bring security and clarity to land and property titles. And the bedrock of many of these reforms is the digitization of government-to-business services.Enabling market access, investment and trade: More predictable trade and investment policies aligned with the African Continental Free Trade Area (AfCFTA) would improve the conditions for domestic production of higher valued goods, economic diversification and regional integration. The pact connects 1.3 billion people across 55 countries with a combined gross domestic product (GDP) of $3.4 trillion. Yet the potential is not being realized due to a lack of progress in the implementation of the AfCFTA in West and Central Africa as yet.

For example, countries of the Economic and Monetary Community of Central Africa (CEMAC) have very low levels of intra-regional trade, with widespread global and sectoral trade barriers that elevate costs and diminish export potential. Governments could and should adopt policies that facilitate market entry, increase competition, and at tract private investors, and avoid excessive state involvement in productive sectors.

All of these actions will help enable and mobilize private capital, expand market networks, reduce trade transaction costs and uncertainty, strengthen compliance, and enable digital trade. The World Bank supports implementation of the AfCFTA through Trade Facilitation West Africa (TFWA), which is a $25 million technical assistance program over 6 years. This includes support for 6 trade corridors between sea ports and landlocked countries in the region, covering 9 countries.

Improving sector and firm performance

Building a stronger private sector requires policy actions at the sector and firm levels to improve competitiveness and performance. Firm-level interventions should include incubator/accelerator programs, expanding access to finance for micro, small and medium enterprises (MSMEs) and start-ups, and supporting technology adoption.

In the Republic of Congo, under our Support to Enterprise Development and Competitiveness Project, this set of firm level interventions has led to nearly all SMEs who received support to become formal, registered businesses. And our Senegal Jobs and Economic Transformation has already created or protected more than 21,000 jobs and provided support to over 4,000 firms, of which more than half are women-owned businesses.

Sectoral-level interventions hold even more promise in economies with high potential sectors such as in manufacturing (automotives, textiles and garments), tourism, wood, and construction.

• Climate smart is business smart: Countries in Western and Central Africa have an abundance of natural assets that could help create jobs, increase exports and build climate resilience for local and global communities. Wood, eco-tourism, fisheries, critical minerals are all examples where job creation and the preservation of natural assets can be reinforcing.

In Sierra Leone, the Economic Diversification Project is not only creating local, formal sector jobs through tourism sites, but incentivizing local communities to protect beaches from erosion, slow down deforestation, and protect chimpanzees from poaching. Although this agenda goes beyond job creation, it is also about businesses themselves being the solution to climate resilience.

New decarbonization technologies for manufacturing, sustainable sourcing of local materials, renewable energy for production is critical and they require financing. That is why in Burkina Faso and Ghana, we are piloting a ‘green window' in an existing credit guarantee program to increase commercial credit for green investments. This is also helping raise awareness among SMEs about green solutions to strengthen resilience and adapt production to a changing climate.

Governments in Western and Central Africa can no longer rely on a narrow band of extractives and exports to keep their economies strong. To create the jobs needed, the private sector must be allowed to flourish, creating a virtuous cycle of job creation, competition, productivity, and exports. There simply is no other option.

Abebe Adugna, the Regional Director for Prosperity in the Western and Central Africa region at the IMF, was the former Practice Manager for the Macroeconomics, Trade, and Investment global practice in Africa, specifically in the East Africa region.

IPS UN Bureau

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