Africa’s recovery agenda – inclusive, just and sustainable
Through private sector contribution and private-public sector collaboration, both investors and investees in Africa’s growth can realise significant returns that are socially inclusive, environmentally sustainable and economically viable
The 2021 Africa Responsible Business Forum, which took place over two days (13-14 April), focused on the role of business in advancing the continent’s growth and recovery agenda. Topics for discussion included financing Africa’s sustainable recovery from COVID-19, the importance of gender parity in the workplace, creating shared value and leveraging the African Continental Free Trade Area (AfCFTA) for sustainable development. This article features highlights of the first day’s roundtable discussion, namely: Is Sustainable Recovery a pipe dream or a reality? Private Sector Responsibility in Financing Africa’s Sustainable Recovery. The discussion focused on the role of business in leading Africa’s sustainable recovery, as well as the responsibility of other key stakeholders, like the government and policymakers, in creating an enabling environment to support and incentivise private sector investments in key development sectors. If you weren’t able to attend the forum, below are links to the on-demand video playback.
Africa faces turbulent times ahead as the COVID-19 pandemic continues to impact the global economy, reversing much of the progress achieved across the continent in recent years in education, health equality and poverty eradication.
Managing the resulting economic fallout is by far one of the most important development challenges we will witness in our lifetime, but even more critical is the vital role of business in driving Africa’s recovery and growth from the ruins of the current pandemic.
This was also the focus of the 2021 Africa Responsible Business (ARB) Forum, which was co-hosted in April by the Lagos Business School and the Shared Value Africa Initiative (SVAI). The forum unpacked fundamental issues such as responsible business, sustainable development, gender equality, intra-regional trade, shared value, and more.
“Companies can make the world a better, cleaner and safer place and minimise the negative impact of business activities by acting responsibly. However, doing business as usual will no longer suffice. There needs to be a paradigm shift towards a more sustainable recovery,” states Prof Chris Ogbechie, Convener of the ARB Forum and Dean of the Lagos Business School.
He adds that increasing state and public support for implementation of the SDGs is adding additional pressure on companies to demonstrate material ways in which they are contributing to the targets. “Companies are being asked to go beyond the requirements of regulatory compliance and adjust their operating models to meaningfully address global challenges, including those related to poverty, inequality, climate change, environmental degradation, prosperity, peace, justice and more.”
Although a sizable investment opportunity lies in funding sustainable development, significant volumes of private capital will be required to support the post-COVID recovery, close Africa’s financing gap and accelerate progress towards the SDGs.
The investment required to bridge this funding gap, which stands at over US$ 500 billion per year until 2030, cannot be provided by governments and NGOs alone. As Africa’s public sector tackles mounting capital deficits, wherein 20 of 55-African countries are either in or at high risk for debt distress, the private sector must intervene.
The historical under-investment in sustainability is why we saw the need for the massive global stimulus on the back of COVID, according to Shameela Ebrahim, Chief Sustainability Officer at the Johannesburg Stock Exchange (JSE).
“The challenge now is to ensure that we are directing that money to more sustainable outcomes. We must not perpetuate the mistakes of the past, which essentially saw us spending huge amounts of money to deal with deficits that should not have existed in the first place.”
Geoffrey Odundo, CEO at the Nairobi Securities Exchange (NSE) concurs: “We have set up a dedicated division at the exchange that drives sustainability with key interventions. We recognise that to do good business, you must also make sure that your environment and the community around you are benefiting – true to the principles of shared value. Equally important is that all our listed companies embrace good practices, strengthening around corporate governance and ensuring that there is a very good interaction with the community, as well as environmental aspects aligned to international standards.”
“We need to fundamentally rethink capitalism,” notes Shameela Ebrahim (JSE). “We must rethink how we use the markets as an opportunity to reallocate money to where it is needed most.”
For example, it is essential for the public sector to establish an enabling regulatory environment for the private sector to invest in the SDGs and introduce smart public incentives to fasten the realignment of private finance towards sustainable development.
The private sector also needs to foster change in company behaviours to transition to inclusive and sustainable markets. Innovative financing models, such as blended finance, could be used as key vehicles to incentivise and catalyse private sector contribution to bridge the funding gap.
The pandemic has searingly demonstrated that business, government, society and the environment are crucially interdependent. A collaborative approach is not just the right thing to do, but also the smart way to tackle poverty, unemployment, climate change, inequality and other development challenges of Africa.
“If companies are to retain their social license to operate, they need to rebuild their strategies around collaborative partnerships focused on positive social and environmental outcomes,” adds Prof Chris Ogbechie.
A case in point is the collaboration between Nigeria’s NGX Regulation Limited and the Global Reporting Initiative, according to NGX CEO Tinuade Awe. “We have engaged in capacity building to ensure that there is better delineation of sustainability issues in company reporting. In other words, it is not only important for companies themselves to focus on sustainability, but also to have sustainability-linked reporting tools available to investors to aid their investment decision-making.”
Shameela Ebrahim (JSE) concurs: “During the peak of the crisis, we saw government reaching out a lot more to private sector for support. In hindsight though, if we are to make good off the crisis, this needs to be a focused partnership effort between the private sector, the public sector, NGOs, and civil society. We need to partner more and better than in the past, if we are to successfully drive Africa’s recovery and growth.”
Ultimately, sustainable development can only be achieved once countries establish close collaboration and strong partnerships between the public and private sectors.
Another great example of targeted collaboration is the formation of the Kenya Pension Infrastructure Forum, which aggregates the large schemes to look at project financing in support of government requirements. Instead of operating as standalone pension schemes, they are now looking at how to aggregate resources and support sustainable projects.
At a national level, the Kenyan government is equally committed to driving a sustainable agenda with dedicated policies towards supporting that. For example, the Kenyan Green Bond Program has been formed to identify multi-sectoral green opportunities and financing. It is a multifaceted initiative that brings together players from every sector.
The challenge now is to ensure that growth across-the-board is more inclusive, using all that has transpired as a post-COVID springboard to build back better.
Firstly, we need to move away from defining sustainability using only environmental and social norms, to encompassing the broader sustainability of our economies, which exist within a rapidly changing global context. Secondly, government has a key role to play in terms of stronger regulation, enabling frameworks and appropriate incentives and, lastly, business exists within an ecosystem with finite limits and companies need to fundamentally rethink their business models.
Adds Geoffrey Odundo (NSE): “A long-term recovery will be about inter Africa trade and taking advantage of the African Continental Free Trade Area (AfCFTA) and all the regional agreements? We have to trade more with each other, and that is going to help us build our industry, use our comparative advantages, and help make Africa better insulated from global shocks. It is our responsibility, together, to protect and strengthen Africa and to avoid the next Black Swan event catching us by surprise.”
“With just nine years left to achieve the SDGs, the global community – including government, companies and multilateral agencies – must act individually and collectively to create innovative solutions that deliver sustainable prosperity for all,” concludes Prof Chris Ogbechie.