The Private Sector: Key to Meeting Millennium Development Goals

Published on 2nd January 2007

The 2005 Midterm review of progress towards the Millennium Development Goals  agreed by the international community at the 2000 Millennium Summit - shows that if current trends continue, Africa is most unlikely to meet the targets. There is considerable scope for the private sector to play a critical role in contributing to the achievement of the MDGs in Africa, especially the poverty, education and health MDGs.

Poverty

According to the 2006 World Bank Global Economic Prospects, over 300 million people in sub-Saharan Africa live in extreme income poverty of less than $1 US per day. This represents, according to the UN 2006 Millennium Development Goals Report, 44% of the population of the region. Extreme income poverty is accompanied by poverty in other areas – health, education, and nutrition.

Ideas on how the private sector can contribute to achieving MDG1 abound. C. K. Prahalad’s book “The Fortune at the Bottom of the Pyramid” and Fairbanks and Lindsay’s book “Plowing the Sea” which both argue that the best way that businesses can contribute to poverty eradication is by improving business practices and strategies provide a good basis.

The private sector can do more to create jobs and reduce poverty. The lack of employment creation accompanying Africa’s recent good growth performance has been a major concern for the region. For example, Chad and Equatorial Guinea have grown at impressive rates because of FDI flows into oil and gas but the proportion of their people living in poverty remains high. This is the point made in the 2006 UNCTAD Investment Report, that Africa is not attracting quality FDI. The private sector can expand the benefits of growth through their procurement practices; pricing policies; corporate citizenship; on-time and full payment of taxes to enable governments invest in other social sectors such as education and health; and through business philanthropy.

Education and health

While Africa is making good progress on education, health MDGs present the most challenge. On education, the current enrolment rate of slightly more than 53 percent presents a challenge. Among those who do enroll, drop-out rates are high. Public resources to fund schools, train teachers, build new classrooms and expand existing ones are inadequate. Infrastructure is poor. It is gratifying to observe that in many parts of the continent private provision of education at all levels is rising. In Kenya, Gambia, and Egypt – to name a few - the private sector is said to account for more than 40 percent of primary school enrolments. The sector’s contribution to secondary education is also increasing. But it is in the area of higher education that the private sector is making the most impact. Higher education has always been a public sector preserve in Africa. However, as a result of recent reforms countries such as Ethiopia, Mozambique, and Nigeria have seen significant growth in private provision of higher education. By contributing to the production doctors, nurses, and business leaders, the private sector is contributing to capacity building. By expanding access to higher education, the sector is contributing to poverty reduction since income is an increasing function of education. Finally, by expanding access to education to the girl-child, the sector is contributing to the attainment of the gender MDG.

The HIV/AIDS pandemic as well as the high burden of other diseases make the attainment of health MDGs very difficult. Financial resources as well as R&D and capacity requirements are enormous. Private provision of healthcare is rising. In countries such as Zambia and Kenya, private provision accounts for more than a quarter of total care provided. But a lot more can still be done. The private sector can help bridge the financing gap and by providing essential services to the poor, assist African countries achieve the health MDGs.

Regional Infrastructure Services

There has emerged a broad agreement that the expansion of regional public goods, especially infrastructure, would significantly contribute to Africa’s progress towards the targets of the MDG. It would expand markets; improve market access; and integrate national and regional markets. Our report “Assessing Regional Integration in Africa I” identified the lack of regional infrastructure as a major barrier to African integration. Sachs and Gallop identify the bridging of the infrastructure gap as critical to Africa’s development since most African countries are landlocked. Indeed Sachs in his Brookings paper “Escaping Africa’s Poverty Trap” identified increased investment in infrastructure as an important pathway out of African poverty, as does the report of the UK Commission for Africa “Our Common Interest.” So central is the issue of regional infrastructure development that NEPAD is paying it, some argue, the most attention.

The consensus for action on infrastructure exists for a number of reasons. Africa has a large number of landlocked countries whose access to world markets can only be facilitated through improvements in regional road, rail, and river transport systems. Given the poor resource picture of most African countries, future expansion of infrastructure services cannot proceed while depending solely on the Exchequer. The large infrastructure gaps - in power, roads, ports, telecommunications, water and sanitation, to name a few - invite private sector participation (in various forms – public-private partnerships, outright private ownership etc). Private provision will help mobilize additional resources and also increase economic efficiency in the supply of these services. But the state can help by undertaking banking sector reforms to consolidate and deepen the financial sector and encourage banks to increase their lending to small and micro-enterprises.

The explosion of global capital markets and the associated expansion of flows to emerging market economies provide added opportunities for the private sector to mobilize substantial additional external capital both through equity and debt-to-finance for new infrastructure development.

Private sector interest in provision and financing of infrastructure in Africa is rising. Several experienced international developers are interested in taking up infrastructure development in Africa provided the regulatory and policy conditions are right, but this is largely on national basis.


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