AfricaGrowth Agenda

Uganda recently adopted an ambitious trade policy called Buy Uganda Build Uganda. The policy seeks to support and encourage domestic manufacturing and consumption in certain strategic sectors. However, the government faces critical capacity challenges. This article offers a few recommendations on how this policy could be effectively implemented.

Africa has recorded strong economic growth over the last three decades, predominately benefitting from the commodity super cycle. However, its dependency on commodities grew rapidly. Now, Africa is ready for economic transformation. Several key investment themes have emerged beyond the extractive sectors. The article explores three crucial themes that are imperative for the continent to achieve self-sustained and inclusive economic growth and development. These are infrastructure development, of which a substantial gap needs to be bridged. Secondly, industrialization, where Africa needs to transition to the value adding manufacturing sector. Finally, intra-Africa trade, where continental networks of trade and investment should be enhanced to foster integration. Though, responsibility of the development agenda should be equally shared amongst policy makers, governments and investors to reduce the silos and work collaboratively. Investors may face many challenges on the continent, though should equally implement investment strategies congruent of the risks involved.

This paper examines key issues relating to policies for promoting enterprise growth in Southern Africa. Initial results, using published data relating to South Africa, are reported briefly here, but the plan is to develop a Pan-African cross-country regression analysis as part of the ongoing ESRC/DfID ‘Inclusive Finance’ project led by Victor Murinde. The use of subsidies to promote start-ups and small firms believed to have high growth potential is increasingly being criticised. The failure rate of start-ups is generally very high and the focus should instead be to foster the sustainable development of MSMEs. Policy initiatives should encourage the development of venture capital and private equity funding, as well as internet-based debt and equity ‘crowd funding’ for MSMEs. Innovation through ‘co-creation’ with customers and end users should also be encouraged. A particularly interesting finding was a positive interaction between human capital and research and development (R&D); suggesting that investment in education and training might be more likely to enhance small firm growth than subsidising business start-ups and trying to identify and support potential growth firms.