Øster, J., and P. Nyamakanga. 2012. Engaging Local Business Organizations as a Powerful Tool for Succesful Public-Private Dialogue. GREAT Insights, Volume 1, Issue 8. October 2012. Maastricht: ECDPM
The creation of enabling environments for the private sector is perhaps the most important factor towards the ensuring of inclusive and sustainable economic growth in developing countries. Local business organizations should be used as the logical leverage for this purpose as they hold the possibility to independently represent their members and thus the entire private sector at large.
In western countries business member organizations are often some of the most powerful lobby organizations and are able to influence decision makers towards the creation of evermore enabling environments for the private sector. Such environments ultimately benefit society at large through economic growth and job-creation.
It is no secret that doing business in most developing countries, and in particular African economies, can be a troublesome affair. It is, however, a rather well kept secret that a series of relatively simple reforms would significantly contribute to the creation of more enabling environments for small and large business alike. Such environments would, in turn, lead to more a sustainable and inclusive growth path of African societies.
Organizing the private sector voice…
The key to making political decision-makers aware of these necessary reforms lies with a stronger and better organized voice of the private sector itself. It is the private sector that knows best what it needs and it is the private sector that has a responsibility to use that knowledge to improve its own operating environment for the benefit of all society.
Most companies, and especially SMEs, are not sufficiently equipped for engaging in public-private dialogue and policy advocacy. They are in need of strong and representative business organizations that can speak on their behalf. The problem, however, is that while most developing countries have business organizations, many of these lack the necessary human and financial resources as well as a sufficiently large membership base in order to effectively represent the private sector of their respective countries. Furthermore, several business organizations retain unhealthy ties with governments, thus disenabling them to be the independent voice of their members that they are supposed to.
Hence, in order to insure the creation of truly enabling environments for the private sector, which in turn leads to inclusive growth and development, there is a need to significantly strengthen the capacity of business organizations in developing countries and emerging markets throughout the world, and particularly in Africa where GDP growth is now reaching ever new heights, but is often detached from benefitting the larger populations.
…for inclusive representativeness…
Between 2001 and 2010, six of the ten fastest growing economies of the world were in Sub-Saharan Africa. In the period 2011-2015, the IMF expects that seven African countries will appear on this list and that the average African country will outperform their average Asian counterpart. Overall, Sub-Saharan Africa’s economy is expected to grow by almost 6% in 2012 and George Soros recently described the continent as “one of the few bright spots on the gloomy global economic horizon”.
Economic growth does not automatically spread evenly – particularly not in contexts of weak governance as is the case in many African countries. A means of ensuring a more inclusive growth is to empower business organizations to speak on behalf of all their members, including SMEs that make up the largest potential of growth and job creation in most economies – particularly in Africa.
Inclusive growth in Africa does not come from those multinationals that seek only to extract or speculate in resources, but from the creation of value through real products and services, be it from local or foreign companies of all sizes. From the one-man (or woman) entrepreneur to the largest of conglomerates, companies that create value for society also create inclusive growth. But these companies require a regulatory environment that caters for their needs in order to enable them to do what they do best – create value that leads to inclusive growth.
…and better governance
While an individual company might thrive in a non-transparent and poor governance environment due to corruption and nepotism, the private sector as a whole can only thrive in an environment that favors a free and open market. As illustrated through the theoretical clarity of such a classical prisoner’s dilemma, the practical role of a business member organization in an African context is, at a fundamental level, to act as a guardian on behalf of the private sector as a whole and fight for a freer and more open environment for all its members. Also for this reason, it is crucial that business member organizations are wholly anchored in the private sector and their members and in no way dependent upon governments.
The creation of a truly enabling environment for the private sector can only be achieved through effective public-private dialogue between strong and representative business member organizations and political decision makers who listen and can be held accountable. Such an environment will lead the way for a growth that is both more sustainable and more inclusive. With current growth rates in many African economies are at the very top of the global leader board, both the need and momentum for supporting business member organizations in Africa is now.
Jakob Øster is Consultant at the Confederation of Danish Industries. Paida Nyamakanga is Corporate Communication Executive at Kenya Association of Manufacturers.
This article was published in Great Insights Volume 1, Issue 8 (October 2012)