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Creating business ‘key to Africa’s sustainable development’

Involving low-income communities in markets and businesses across Africa is essential for economic growth. (Image source: Clurr/Flickr)

Creating business and market opportunities for Africa’s poor is key to advancing sustainable development in the region, according to a new United Nations Development Programme (UNDP) report

The report was launched by Donald Kaberuka, president of African Development Bank and Gerd Trogemann, manager of UNDP Regional Service Centre, in Johannesburg on the sidelines of the World Economic Forum for Africa.

Prepared by UNDP’s African Facility for Inclusive Markets, the report — Realising Africa’s Wealth - Building Inclusive Businesses for Shared Prosperity — examines the approaches and conditions required to bring economic growth closer to low-income communities in Africa, focusing on how businesses can more readily include them as consumers, entrepreneurs and employees.

Involving low-income communities in markets and businesses across Africa is essential for economic growth to translate into sustainable development, according to the report, which was released recently.

It describes the status of inclusive business in sub-Saharan Africa and the environment needed to support the enterprises and entrepreneurs. The study identifies promising opportunities in enabling enterprises and entrepreneurs to build more and stronger inclusive businesses and calls for more efforts to support inclusive businesses with incentives and investment schemes as well as knowledge sharing about market information and implementation.

By working together to increase information, incentives, implementation support and investments required to make businesses more inclusive, the report makes the case that policy-makers, business owners and development practitioners in Africa will be in a position to make dramatic advances across the Millennium Development Goals (MDGs).

Babacar Cissé, deputy director of UNDP’s Regional Bureau for Africa, said, “Africa has seen some strong economic growth over the past decade. Nonetheless, rapid economic progress has not brought prosperity to all, and inclusive business represents a promising approach by bringing the benefits of economic growth directly to the poor by including them in value chains.

“We need young entrepreneurs and innovators as drivers of inclusive businesses. We need organisations that are willing to take the roles of catalysts, supporters and funders of inclusive businesses.”

Market information, policies and legal frameworks that reduce transaction costs, financing and logistical assistance are key to ensuring businesses that are inclusive of the poor can succeed, the UNDP report states.

It added that facilitating business and market creation not only generates income, but also basic goods, services and choices, with important implications for each of the MDGs, the eight internationally-agreed targets which aim to reduce poverty by 2015.

The report also illustrates the impact that businesses and markets have had on the lives of the poor.

In Burkina Faso, the French organic cosmetics company L’Occitane invested in the capacities of local women’s cooperatives, helping 15,000 employees to produce and export quality shea butter, and generate US$1.2mn in profits.

In Tanzania, a factory operated by local company A to Z, together with Japanese chemical company Sumitomo, produced 30 million long-lasting, insecticide-treated mosquito nets, and employed 7,500 people.

In Kenya, Equity Bank and K-Rep Bank funded the country’s national agricultural commodities exchange, which has successfully helped increase the income of thousands of small-scale farmers.

James Mwangi, chief executive officer of Equity Bank in Kenya, said, “Businesses are key to achieving these advances, but we certainly need more capacity-building entities, such as civil society organisations, governments, developing partners and research institutions, with demonstrated abilities to assist businesses in building inclusive models.”

The report calls for the development of new inclusive business ecosystem-building initiatives, at national and regional levels, with the support of finance mechanisms to provide resources for coordination, information and funding.

It also seeks the creation of centres of excellence to undertake research, document successful approached and share knowledge.

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