Covid-19 is causing countries in Africa and other parts of the developing world to face multiple overlapping crises: the pandemic itself, a wider health crisis, a food security crisis and an economic crisis that is further exacerbated by low commodity prices and a decline in global travel and trade as well as financial flows. Covid-19 has reinforced the need for both short-term investment in critical sectors that may underpin economic and political security in many African economies as well as long-term investment in sectors which may be more permanently disrupted by the changing global order.
The public sector’s role in creating an enabling environment to unlock investment is heightened. Yet governments cannot do it alone. Securing the right type of investment at a sufficiently large scale requires the support of development investors and commercial investors with business models that invest in local value addition. Development investors and international development partners should work together with governments on their national economic recovery responses, their development planning processes and their plans to develop key sectors such as agriculture, manufacturing and technology solutions. This paper argues that to scale up private investment in a way that can support Africa’s economic recovery from Covid-19 and deliver economic transformation, these three players (government, development partners and development investors) need to align their approaches and synchronise their efforts better.
It suggests three ways to do this:
1) Governments, development partners and development investors should adopt a more targeted analytical framework to identify which sectors and subsectors to prioritise for development.
2) Development finance institutions and development investors should proactively prioritise investment in firms within these sectors, even if returns may be lower than in other areas.
3) Support for both private-sector and public-sector investment facilitation should be substantially increased, especially in light of Covid-19, as a key feature of economic recovery plans.