BY ABEBE WOLDEGIORGIS
The private sector in Africa is given very little space in the economy. The public sector is in this regard still dominant. Big and medium size industries are owned by the government and such situation makes the industries less competent because when they face adversity, they will be subsidized.
The private industries are run by both local and foreign investors. Private investors complain that in most countries enabling environment is not created sufficiently. Accessing finance services from banks can be said insignificant.
The none availability of durable infrastructure such as well constructed roads, rail ways, power interruption, the fluctuating demand of their products in local market, security risk and others are the major impediments which curtail the growth of the private sector.
The sector needs the support of local governments and multilateral institutions such as the United Nations, the World Bank and the International Monetary Fund. In addition, stimulating the sector through garnering support from bilateral relations and international none governmental organizations is essential.
Proparco is a subsidiary of French Development Agency and key player in the development sector which has been dedicated to financing the private sector for over 45 years. It has been operating in an extraordinarily complex international environment, especially since 2022.
Faced with the climate crisis and growing inequalities, the African private sector is trying to helping to resolve some of these long-term challenges. Based on this conviction, Proparco intends to step up its support for African entrepreneurs by further adapting its approach to the real needs of the economy and to invest in new markets.
The subsidiary agency will focus 50% of its activity on the African Countries by 2025. The African private sector, in particular SEs and micro-businesses are now more than ever the main engine of growth and innovation on the Continent. SMEs account for 90% of formal businesses and account for about 60% of informal jobs.
Yet, the African private sector has interest for financing only 20% of SMEs on the continent. Proparco, a subsidiary of the French Development Agency (AFD), will capitalize on its historical expertise on the continent to support African businesses in the coming years.
Investments will be allocated both to the financing of infrastructure, whose proper functioning is essential for the deployment of African businesses, and for supporting SMEs, micro-businesses and high-impact startups. The idea is to ensure continuity by providing entrepreneurs with the means to develop their activities.
Climate change, income inequality, food insecurity imposed heavy Burdon on the lower income segment of the society. Therefore, overcoming the challenges is an assignment given to the current generation. To mitigate the problem unleashing the potential of the private sector is vital.
In the African continent, the private sector is a breeding ground for initiatives, innovation and sustainable wealth. Supporting the real needs of the economy will provide the African private sector with the means to solve the continent’s most important challenges, while creating local, permanent employment and adding value.
Proparco’s approach is focused on some of the major challenges facing Africa: building a sustainable and resilient economy, protecting the planet from global warming and fighting inequalities. It also strives to enabling population to uplift their living standard, to reduce territorial, gender or socioeconomic inequalities.
It will mobilize all its sectoral expertise from financing SMEs to strengthening physical infrastructure and local financial system. Mitigating economic challenge posed by crisis in Ukraine will be a priority agenda. Strengthening local production and processing capacity for vulnerable African companies affected by the crisis.
To maximize the impact of the strategic initiatives, the subsidiary company is refining its analysis and monitoring process. Impacts will be identified and analyzed at all stages of the relationship with Proparco’s partners; from the beginning of project appraisal through a sustainable development rating, through project implementation and providing more extensive and longer-term technical support up to the final evaluation through the analysis and monitoring of results (both estimated and actual).
The support of partners will not be limited to the final and quantitative results of the project but will also include projects’ capacity to evolve and enhance sustainability over the long term; strengthening efforts to meet the needs of the entrepreneurs more effectively and to support them over the long term. Through this new strategy, Proparco has chosen to explore new markets.
More specifically, it will encourage investors to bet on innovation, especially in enterprises and projects operating in fragile environments or emerging sectors, based on the conviction that the emergence of new ecosystems and financing instruments will be one of the keys to successfully supporting the private sector.
Françoise Lombard, Proparco’s Chief Executive Officer, declared during the launch of this new strategy two years ago: “Proparco’s new strategy is underpinned by a strong conviction: good entrepreneurial projects which are helping to solve the continent’s most pressing problems deserve to be supported, regardless of the economic environment and in line with the Paris Agreement.
The subsidiary agency determined to go where other investors have not yet gone, by moving closer to the field to be as close as possible to our partners’ needs, to deploy resources effectively. We are therefore making a big call towards enabling growth in new markets and taking more risk to help more innovative projects to bear fruit.”
To support this ambition, Proparco will benefit from additional resources from the French Government and the European Union, which will increase its funding and nonfinancial support. Two flagship initiatives that illustrate the new strategy Choose Africa, initiated by the French Agency for Development (AFD) and its subsidiary Proparco, has committed Euro 3.5 billion between 2018 and 2022 and supported more than 40,000 businesses and hundreds of thousands of microbusinesses across the continent.
Thanks to this initiative, nearly 8,700 businesses have benefited from dedicated technical support. Proparco will contribute to strengthening the initiative as part of a second Choose Africa program. Digital Africa, Proparco subsidiary, provides support and financial backing for African start-ups requiring seed funding. Its programs Talent 4 Startups Bridge, Fuzé, etc.
complement Proparco and the AFD Group’s support to African businesses at every stage of their development, namely the seed investment stage (Digital Africa), venture capital stage (Digital Africa and Proparco), financing and support for public (AFD) and private financial institutions, a range of guarantees for financial institutions and private equity for SMEs in the growth and maturity phase.
Since 2017, Proparco has been supporting GOMYCODE, a Tunisian startup whose mission is to bridge the gap between the existing educational infrastructure in Africa and the digital skills required in the job market. The company is now present in seven countries in North Africa and West Africa and welcomes 1,000 new students every month.
Since 2022, Proparco has also been supporting Anka, a company specializing in software solutions that enable African SMEs to market their products on the internet and internationally. The company now employs 40 people.
African Development (AFD group) has been working for over 45 years alongside the private sector to help build a fairer and more sustainable world. With an international network of 23 local offices, Proparco helps its partners to build sustainable solutions to environmental and social challenges in Africa, the Middle East, Asia and Latin America. It is believed that the role of private sector in transforming Africa’s economy is immense but to move forward encouraging the sector through tackling its impediments is essential.
THE ETHIOPIAN HERALD WEDNESDAY 12 APRIL 2023
