Thursday, October 22, 2020

AfDB not doing enough for private sector

For a Botswana that pinning its hopes on the private sector as an engine of economic growth, it should come as grave concern that the African Development Bank (AfDB) is deemed to be paying insufficient attention to this sector, that its loans are not as generous and its grants for technical assistance and studies low.

Concern has also been voiced that the Bank’s statute specifies that it can work only with private sector entities registered in regional member countries, and all projects comply with this.

“However, registration does not mean that entities are majority African-owned or that their locus of decision-making is in Africa. Bank management therefore requested the survey to focus on whether it is seen to be providing adequate support to enterprises owned by Africans, and developing the African private sector,” says a client assessment report from the Bank.

With diamonds being mined out, the Botswana government envisages a greater private sector role in economic growth. For the remaining years of NDP 10, its strategy seeks to create a private-sector-enabling and supportive policy environment as well as to stimulate increased domestic and foreign private investment. Government will reduce the ratio of its total spending to GDP to ensure that it is feasible for the private sector to expand.

AfDB has a private sector department which ensures the Bank’s participation in private sector development of regional member countries by means of lending, equity participation, guarantee and technical assistance related to the financing of private sector projects and programmes, including small and medium-size enterprises and privatisation. This assistance is mainly in the sector of petrochemicals, mining, oil and gas, manufacturing, agribusiness, hospitality, health and education. Cooperation between the Bank and Botswana dates back to 1972 and as at October 2012, the Bank had financed 50 operations (41 loan projects, seven institutional support operations, and two studies) valued at approximately US $2.1 billion in the country.

However, in the Bank’s survey, around half (48 percent) of respondents feel that it does not give enough priority to African enterprises, and 59 percent feel not enough priority is given to nationally-owned enterprises. In both cases, 60-70 percent of existing AfDB clients are positive, while 65-75 percent of “potential” clients (largely African and nationally-owned) feel more needs to be done to give these groups priority. Among types of recipients, intermediaries are most positive, large enterprises are evenly split, and Micro, Small and Medium Enterprises (MSMEs), associations and investment promotion agencies overwhelmingly want to see more active efforts to develop the African and national private sector.

A majority (54 percent) of private sector respondents feel that the Bank does not give enough priority to enterprises owned by women. It was suggested that AfDB could do a lot more to prioritise support to enterprises owned by women. Of potential clients, 59 percent have never thought about applying, because they either perceive the Bank as working only with governments, or supporting only big business, or sectors such as mining, petroleum or infrastructure or they believe its application procedures and criteria would be too challenging or bureaucratic; and are unaware technical assistance was available to help with project proposals.

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