Private Sector Development in Africa
It is now more evident than ever before that sustainable development can only take place within the context of a robust private sector equipped to drive growth. A healthy private sector and business-enabling environment helps attract investors, create employment, generate wealth and ultimately reduce poverty. As such, development aid is increasingly being channeled through initiatives that engage the private sector – challenge funds, impact investment, financial sector deepening and investment climate reform.
In Africa the focus is on addressing hurdles of inaccessible finance, non-inclusive market systems and red tape, usually through the ‘making markets work for the poor’ (M4P) approach and other strategies to ensure pro-poor growth.
Four key PSD projects
In our International Development Advisory Services, Africa brochure for 2013, we detail the Private Sector Development (PSD) work undertaken by our firm – we have extensive PSD experience throughout Africa, providing advice to governments and the private sector.
The Africa Enterprise Challenge Fund (AECF)
Our firm serves as programme manager for the US$ 200 million AECF, hosted by the Alliance for a Green Revolution in Africa (AGRA), and backed by some of the biggest names in development finance.
The AECF targets innovative business ideas that have the potential for development impact and systemic market change in agri-business, rural finance and renewable energy. The fund is designed to accelerate pro-poor growth in Africa, increasing employment, livelihood opportunities and incomes, and reducing poverty. Its purpose is to make agri-business, rural finance and other rural market systems work better for the poor.
Andre Dellevoet, AECF Executive Manager, AGRA had this to say about our involvement:
KPMG’s engagement with companies and other organisations across the continent has encouraged the private sector to innovate and invest in new financial and agri-business products, services and projects that will benefit large numbers of the rural poor. These investments will increase employment and income earning opportunities for some of the most disadvantaged individuals.”
Financial Sector Deepening Trust (FSDT) – Kenya
The FSDT was established in 2005 to support the development of financial markets in Kenya as a means to stimulate wealth creation and reduce poverty. Working in partnership with the financial services industry, the programme’s goal is to expand access to financial services among lower income households and smaller enterprises. It operates as an independent trust for which KPMG are the trustees. The concept underpinning FSDT’s work is the M4P approach, which has emerged over the last 10 years as an increasingly influential development paradigm.
Access to Finance Rwanda (AFR)
Lack of access to financial services is a major constraint to economic growth that can trap people in cycles of poverty. Better access to financial services can significantly increase the financial security of the poor by allowing them to better withstand economic shocks and take advantage of economic opportunities.
Building on our experience with the Financial Sector Deepening Trust in Kenya, KPMG assisted during the set up of AFR, a company limited by guarantee in January 2011. KPMG recruited staff and established operational systems, and now provides fiduciary oversight to the programme.
Using an M4P approach, AFR aims to increase access to financial services for poor rural and urban people, particularly women, and micro and medium enterprises, with the ultimate goal of improving the lives of 500,000 poor people in Rwanda.
Trade Mark East Africa (TMEA)
TMEA works to make East Africa a better place to do business, increasing trade, and reducing poverty. It aims to do this by increasing trade competitiveness across East Africa – by increasing the efficiency of transport corridors, improving the trade environment and improving value chain competitiveness.
TMEA’s role in the setting up of Office Burundais de Recettes (OBR) – the Revenue Authority in Burundi – is already bearing fruit. The country’s tax revenue has doubled since the creation of the OBR and Burundi has been named as one of the top 10 reforming countries in the world by Ease of Doing Business Organisation. The ability to collect substantial tax revenues is a first step toward enabling the government to fund national infrastructure development that can facilitate more competitive trade.
What is your perspective on PSD in Africa and the M4P approach?