Strategies to attract the private sector
Weak infrastructure is widely accepted as a fundamental limitation to growth in Africa. Governments in the region are struggling to meet the basic needs of residents, including access to food, education, health and livelihoods, let alone invest in essential and reusable infrastructure that could provide long-term solutions to social problems.
Philanthropy alone will not lead to the sustainable infrastructure and employment needed to ensure the long-term health and financial security of individuals and the economic prosperity of all African nations. Yet the development community tends to focus on financing gaps, calling for increased official development assistance (ODA), increased public spending despite Africa’s growing fiscal deficit problem, and calling on the private sector to ‘collaborate’, ‘partner’ and ‘act’. up” – often euphemisms for donations. Instead, we should focus on the operational, legal and business barriers to deploying sustainable infrastructure, and how we can invest more wisely to overcome these challenges. We need sustainable business models that enable service delivery and create jobs at scale.
By design, private sector solutions must be commercially sustainable so that they can be delivered at scale and over the long term. We would be best served as a global community to attract, encourage and de-risk private sector engagement in the infrastructure challenge by channeling existing ODA, private philanthropy and government resources towards creating an enabling environment. conducive to the private sector to innovate, supply, and employ.
Philanthropy alone will not lead to the sustainable infrastructure and employment needed to ensure the long-term health and financial security of individuals and the economic prosperity of all African nations.
One such example, where I have experience, is digital infrastructure. Digital infrastructure is not only a means of delivering aid and other essential services, but it also enables trade and, therefore, the means of economic growth. Digital inclusion, particularly in the wake of the COVID-19 pandemic, has proven critical to closing the gaps in physical infrastructure that leave the most rural and marginalized communities behind.
Developing and managing secure digital solutions requires in-depth knowledge on issues such as data privacy and security, interoperability standards, franchise management, biometric tokenization, device security, and more. This knowledge resides in private sector companies that invest billions to continuously innovate, prevent fraud, and prevent bad actors from gaining access to personal data.
However, four fundamental challenges to private sector engagement in fragile contexts persist:
- Too much reliance on inferior and expensive products: Too often, multilateral institutions, governments and donors spend billions on technologies, including internally developed systems, that do not meet the highest standards of privacy and data security, putting personal data at risk. millions of users. These are usually well-intentioned but misguided efforts to promote local innovation, or because public sector institutions think they are saving money by developing in-house. For example, UN agencies have internally built data platforms that collect sensitive data, such as religion, use beneficiary data without informed consent, and may not meet the highest safety standards. Yet private sector companies already have secure and interoperable digital infrastructures with data privacy by design that can be quickly deployed in fragile and offline contexts. The UN could leverage private sector innovation, which has the potential to be faster, cheaper, more scalable and more secure than solutions developed in the public sector alone. What if private sector capabilities were harnessed as they exist and funding redirected to encourage and reduce the risk of private sector innovation to fill the gaps?
- There are too few last mile entities serving rural communities: Companies like mine have established data secure means for banks, AgTechs, healthcare providers, etc., to deliver services to rural communities. However, we struggle to find entities with extensive agent networks to service and provide last mile cash management capabilities. Agent networks are essential to enable rural trade and they provide high-value jobs. What if donors and NGOs redirect funds towards building last-mile capability that local and global businesses can tap into?
- Sustainable business models are missing: Today, Requests for Proposals (RFPs) are the primary business tool for governments, NGOs and UN agencies to contract with the private sector. Yet tendering is a brutal and ill-conceived tool in digital domains where agencies don’t know what they need, and multilateral institutions often prevent the necessary up-front discussions with vendors to avoid any appearance of irregularity. Moreover, qualification processes are often market by market with a potential market of only a few thousand beneficiaries. This state of affairs prevents most large-scale players from responding, as the opportunities are not commercially viable and local players often do not have the capacity to respond to complex tenders that are not written in the local language. What if private sector experts worked together with governments and development actors to develop a best-in-class solution architecture that private sector actors would be paid to execute at a lower overall cost?
- The regulatory landscape for digital transactions in emerging markets is nascent, murky and complex: Operating in these environments is unappealing to private sector companies that must navigate limited but rapidly changing policies on data security and privacy, Know-Your-Customer (KYC) laws, and more. Additionally, many governments are adopting regulations on the ground in ill-conceived attempts at data security, even though replicating systems in small markets adds significant cost to an already weak/no-profit business model. Worse still, many supranational humanitarian and development actors actively collect and store sensitive data on laptops and other means vulnerable to attack. What if governments partnered with the private sector to craft regulations that create an enabling environment for innovation and deployment, while ensuring individual protections? (For a discussion of the future of data privacy in Africa, see the perspective of Lesly Goh and Buhle Goslar.)
Helping communities across Africa access the essential services they need would benefit the world. So much more can be done with existing aid flows to build sustainable infrastructure and create jobs, if private investment is encouraged. We need to create an efficient and effective model for deploying the private sector resources we currently have – and in the digital age, that must start with building a more efficient digital infrastructure that can leverage industry capabilities. private.
The Brookings Africa Growth Initiative receives support from the Mastercard Foundation.
Brookings is committed to quality, independence and impact in all of its work. The activities supported by its donors reflect this commitment and the analysis and recommendations are solely determined by the authors.