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EduPulse Magazine

Empowering Africa's education through technology

Creation of More Public-Private Partnerships Is Key to Africa’s Economic Growth

For a nation’s or continent’s economy to thrive, the different sectors within it should be in harmony, all working toward its economic growth.

We use several metrics to measure a country’s economic growth. One is its gross domestic product (GDP), and the other is its standard of living. Often, the two go hand in hand and reflect the state of a country’s economy. Developed nations have high GDP rates, with the G7 (Group of Seven: Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) accounting for 30.7 percent of the world’s GDP in 2021. Countries in the G7 have high standards of living, excellent infrastructure, exceptional standards of education, better healthcare and more labour-friendly policies.

Africa’s economy has tremendous potential for economic growth. One way of realising this potential is by fostering more partnerships between the private and public sectors of the economy.

Governments are the primary drivers of their countries’ economic-growth rates. However, their resources are limited, as they also have other roles to play in their social sectors, such as improving the daily lives of their citizens and enhancing their countries’ long-term economic standings. Because of the many roles it has to play, a government might not have the capacity, in terms of finances and capital, to build the infrastructure needed for economic growth.

An African Development Bank (AfDB) estimate suggests that the continent’s infrastructure needs amount to $130–170 billion annually. For this reason, governments need to partly outsource this activity to specialists who can do the job more efficiently. This is where public-private partnerships (PPPs) come in. A close look at governments across Africa shows most have turned to both governmental and private-sector foreign entities for infrastructure-development support, trade partnerships, capacity building and credit.

PPPs (in addition to the traditional concession-related structures) are key to ensuring economic growth and preventing economic stagnation—even during difficult financial periods that result from disasters and pandemics, such as the most recent COVID-19 pandemic, which affected all sectors of the economy. Banks play a major role in PPPs and help finance projects that contribute to the economic well-being of the African continent.

For instance, in 2021, African Export-Import Bank (Afreximbank) and Standard Chartered announced an agreement for Standard Chartered to provide $200 million of not-for-profit funding to Afreximbank’s initiative to finance the acquisition of COVID-19 vaccines for African nations. The partnership enabled 55 countries across Africa to gain access to COVID-19 vaccines. This played a big part in ensuring that African governments could manage the health, financial and economic impacts of the pandemic in a better way.

One major benefit of PPPs is increasing the flow of foreign direct investments (FDIs) into Africa. For instance, British International Investment (BII) directs 60 percent of its investments into Africa. More investors are looking to invest in Africa due to the large potential it holds for growth. PPPs present a great opportunity for private investors to participate in economic development. PPP-led financing is often deployed for sustainable projects that benefit not only investors but also the communities that will be positively affected by PPP projects in a country. We are also engaged across our key markets in SSA (Sub-Saharan Africa), supporting critical infrastructure PPP projects, including ports and toll roads.

With recent attention focused on better fiscal-risk management, a government can look at PPPs to grow the local private sector through joint ventures with large international firms to enhance their funding sources and better manage the government’s overall spending and fiscal risks. Through the PPP route, local firms can gain subcontracting opportunities in areas such as civil and electrical works, facilities management, security and maintenance services. This will, therefore, create jobs for Africans and also expand local enterprises’ access to markets and provide knowledge transfer.

A challenge facing trade and investment in Africa is the potential for ongoing currency depreciation, making it more difficult to attract foreign-currency funding to finance local projects. To combat this issue, Standard Chartered, in partnership with BII, aims to provide more project financing in local currencies. As part of our strategy, we are keen to increase the amount of local-currency financing and hedge the local-currency risk through our catalyst portfolio, in which we are mandated to take a flexible approach to risk management in exchange for creating social and environmental impacts. We’ve used this strategy to make local-currency loans to home solar businesses in Kenya and Uganda, and we anticipate more local-currency loans over the coming years.

As they are part of the private sector, we also aim to use PPPs to increase private-sector participation in increasing skills within communities that will enable locals to run their enterprises professionally and successfully and eventually export their competencies by bidding for overseas projects and/or joint ventures.

One key takeaway is accomplishing this through incubation, mentorship and seed funding of enterprises in diverse sectors that leverage technology to offer their services. An example of this approach is the Women in Technology Incubator programme, which we run in partnership with iLab Africa. The programme was created to support women in entrepreneurship and technology. This year, we have awarded five women-led startups $10,000 each in the culmination of the fifth cohort of the incubation programme.

The programme combines world-class startup support with local and international experience to provide Africa’s most competitive and attractive startup incubation programme focused on immersive learning, mentorship and growing Africa’s next iconic startups prepared to tackle the continent’s most relevant challenges and opportunities. State-owned firms participating in such projects alongside PPPs backing them will put a country on a path to economic prosperity and a secure future. PPPs also supplement the public sector’s limited capacity to address economic-development demands.

To conclude, PPPs can produce significant economic benefits in technology, education, healthcare and many other sectors to support a country’s economic progress while opening up new funding sources, thus reducing the financing burdens on the government sector. Amidst the current obstacles, the public and private sectors must work together to foster economic growth.

By Sunil Kaushal, CEO, Standard Chartered Africa and Middle East (AME)

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