Private sector is engine of Africa’s economy, employs 90% – Songwe

The importance of the private sector in Africa’s economic development has never been overlooked. It has been described as the engine of growth by some African leaders.

In her opening remarks at the Ministers meeting at the 52nd Session of the Conference of African Ministers of Finance, Planning and Economic Development, in Marrakech, Kingdom of Morocco Dr. Vera Songwe, the Executive Secretary of the Economic Commission for Africa (ECA) described the private sector as the “engine of Africa’s economy.”

“Another important dimension of the growth and poverty reduction debate is centred on the private sector and trade.  The private sector is the engine of Africa’s economy, and accounts for over 80 per cent of total production, two thirds of total investment, and three fourths of lending within the economy. The private sector also provides jobs for about 90 per cent of the employed working-age population,” she said.

However, she pointed out that jobs in the private sector are often informal and characterized by low productivity.

“Indeed, the informal sector accounts for 40 per cent of Africa’s economy and more than 60 per cent of employment. Permanent wage jobs in the private sector account, on average, for only 10 per cent of total employment,” she added.

On Africa’s economic growth, she said the continent is going through a period of subdued growth, but noted that growth prospects are beginning to improve.

“Growth in 2019 is expected to reach 3.4 per cent, up from 3.2 per cent in 2018 as a result, primarily, of strengthening global demand for African products, increasing oil production and rising oil prices, robust private consumption, and sustained infrastructure investment. Despite this positive trend, levels of growth vary significantly among the five African sub-regions,” she said.

According to Dr. Songwe, East Africa, which comprises a number of non-resource rich economies, is making the most significant progress: growth is projected to reach 6.2 per cent in 2019, which she attributes to rising government spending on infrastructure, and rapidly expanding construction, real estate and retail sectors.

Southern Africa, however, she said, despite its recent economic recovery, is expected to see growth of only 2.1 per cent this year.

“It is also noteworthy that, even though some of Africa’s largest economies, including Angola, Nigeria and South Africa are rebounding, thanks to rising private consumption, overall growth levels remain low. However, per capita growth rates in all subregions on the continent are insufficient to keep up with population growth rates,” she said.

She expressed concern that overall, growth levels on the continent remain below what is needed to achieve the Sustainable Development Goals, noting that to achieve those Goals, Africa needs to triple its 2018 growth rate of 3.2 per cent.

“This will require an increase in investments and productivity. Moreover, GDP per capita growth at 0.6 per cent in 2018 is too low to make a significant dent on poverty and inequality,” she said.

Pointing out Africa’s huge and rising financing gap that is impeding its efforts to foster development, she indicated that the infrastructure gap, which is a major constraint to improving productive capacity, is estimated to be between $130 billion and $170 billion annually, of which the continent raises approximately 50 per cent.

“More broadly, for Africa to achieve the Goals set forth in the 2030 Agenda, its incremental financing needs are estimated to range between $614 billion and $638 billion per year, while for the funds needed to implement the 2030 Agenda in low-income countries and lower middle-income countries total $1.2 trillion per year. This translates into an estimated 11 per cent of GDP between 2015 and 2030.

Notwithstanding this huge financing gap, African countries have the potential to increase government revenue by between 12 and 20 per cent of GDP by adopting appropriate fiscal policies; taxing hard-to-reach sectors such as agriculture, the informal sector and the digital economy; improving mobilization of non-tax revenue; leveraging the use of information technology and digitization to widen the tax base, reduce revenue collection costs and improve tax administration mechanisms; and strengthening policies that tackle base erosion and profit shifting, tax avoidance and tax evasion,” Dr. Songwe said.

By Emmanuel K. Dogbevi, in Marrakech, Morocco
Copyright ©2019 by Creative Imaginations Publicity
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