Africa private sector development

The challenge facing the Africa Bureau is complex, ranging from promoting a general business environment favorable to large firms and financial institutions to developing microbusiness support for small farmers, women in development, and tradespeople. This document describes the Bureau's experiences supporting private sector development and the lessons -- some general, some very specific -- it has learned. These lessons are arranged under the following headings: economic reform; government-donor relationships; the investment environment; reform through trade; networking and organizations; privatization; finance, debt swaps, and venture investing; and microenterprise development. Following are a few of the lessons. (1) Reform without pain does not work; partial reforms may be more damaging than none at all. (2) The success of assistance must be more important to the local participants than to the donors. (3) Reforms often founder due to informal barriers to business (corruption, uncertainty). (4) The major constraints to trade growth are government policies and regulations, bureaucratic inefficiency and corruption, transport problems, and banking -- not supply and demand. Traders are the backbone of African entrepreneurship, and liberal trade policy is the key to structural adjustment and the creation of an enabling environment. (5) Lack of sophisticated business networks is a key constraint; the African entrepreneur works in isolation. (6) Privatization is primarily a political decision and the handling of opposition central to its success. (7) Most of Africa lacks the prime conditions that usually attract and maintain capital: a sufficient rate of return and predictability. (8) As a response to government suppression of entrepreneurism, small enterprises have been forced to adopt a no-growth strategy to avoid unwanted intervention from the state.