From 14-15 March 2016, the African Center for Economic Transformation (ACET), in partnership with the Government of Rwanda, will convene the first African Transformation Forum (ATF) in Kigali, Rwanda.

The first objective of the ATF is to facilitate knowledge sharing and peer learning across global and African luminaries from the public and private sectors. These participants will contribute their rich insights, and uncover challenges and solutions for galvanizing economic transformation in Africa. The discussions will fall into two categories: i) the coordinated development and implementation of national development plans; and ii) catalysing transformation within critical sectors, notably: extractives; light manufacturing; agriculture; skills development; entrepreneurship; financial inclusion; infrastructure; and regional integration.

The second objective of the ATF is to launch the Coalition for Transformation in Africa, a new leadership network organized in chapters, each addressing a specific thematic area. These chapters and the policy makers, business leaders and development partners who will constitute their membership will examine and develop implementable solutions for development. ACET will serve as the Secretariat for the Coalition, building consensus, coordinating activities and assisting the membership in securing funding to support their agreed initiatives. The chapters will also report their progress at subsequent African Transformation Forums.

The SET team has collaborated with ACET on background papers to inform discussion sessions on three areas, as outlined below:

Public and Private Sector Collaboration for Economic Transformation

The goal of economic transformation raises the stakes for policy-making in Africa. Achieving a pattern of economic growth where productivity, export competitiveness and employment are continuously increased is not just a matter of agreeing a higher level of ambition. It calls for an active search for solutions to numerous specific problems currently blocking or delaying needed investments. Underlying each of those particular challenges, moreover, is a deeper and more general issue: how to establish a strategic relationship between government and private sector actors that makes it possible to address these problems without repeating the errors that derailed transformational ventures in the past.

Reviewing global experience, the roles of state and private enterprises, of large and small firms and of formal or informal business associations have been very different among countries. The successful models have in common, however, that they have been able to satisfy a small number of basic requirements that appear universally relevant. This finding seems to be reinforced, in both positive and negative ways, by Africa’s so far limited success in constructing more transformation-friendly state-business relations. The basic requirements seem to include:

• constructing a consensus among key actors that establishes economic transformation as a nation-building project, with shared commitments extending well beyond a single electoral term

• giving at least one public agency sufficient autonomy, budgetary control and political authorisation to override interdepartmental coordination problems and engage in a practical way with credible private sector organisations

• creating institutional arrangements that can coordinate a sufficient set of powerful public and private actors so as to ensure (1) an appropriate level of technically justified public support to promising sectors or firms; and (2) that this support is conditioned on mutually enforceable performance standards

• enabling discovery of approaches that work for transformation in the particular country context by means of explicit experimentation, good feedback and timely correction

Key issues to be considered are:

• Which types of public agency are most suited to providing authoritative policy coordination and to leading engagement with the private sector? How can they be empowered to perform effectively?

• What kinds of private sector organisations are likely to prove the most credible strategic partners of governments seeking to support transformation?

• How do we ensure that annual budgets align with the transformation strategy and are implemented effectively? What works best to obtain value-for-money in government investments? What should be the roles of the ministry of finance, the ministry of planning and the coordinating agency, where the three are not the same?

• Are there feasible mechanisms for ensuring that discretionary support to promising sectors or firms is consistent with transformation objectives and governed by enforceable performance standards, so as to achieve results and avoid patronage and corruption? What should they look like?

• What forms of state-business consultation are most likely to deliver fast feedback on the way policies and programmes are working, allowing timely correction of errors and joint discovery of paths of transformation that work?

Promoting Manufacturing in Africa

Industrialisation, particularly the expansion and increased sophistication of manufacturing production and exports, and also the expansion of manufacturing employment, remains an essential part of Africa’s economic transformation. Unfortunately, manufacturing as a share of gross domestic product has declined over the past few decades in most African countries, even though in absolute terms it is growing.

Although African countries face difficult challenges in breaking into world manufacturing markets, new developments work in their favour. These include rising wages in China and a rebalancing in Asia away from export-led towards domestic and regional consumption-led growth; Africa’s growing regional markets; falling transport costs; greater access to abundant natural resources; improved firm productivity and access to global value chains; and better general economic policy environments. But governments should not stand aloof; to seize these new opportunities they will have to formulate and implement coherent industrial development strategies. The key elements of such strategies must include:

• continued improvements in the basics, including sound macroeconomic management, stronger general investment climate and support for the private sector and development of public infrastructure and relevant skills

• an export push, including regional trade and integration

• agglomeration through building and running efficient special economic zones (SEZs) and industrial parks

• active foreign direct investment (FDI) promotion and building linkages with local firms

• supporting productivity enhancement of local small and medium enterprises (SMEs) and their access to technology and long-term finance to help them venture into production of new or technologically more sophisticated products

• improved coherence and implementation coordination within government and

• strengthened consultation and collaboration between government and the private sector

Key issues

Separate panels at the African Transformation Forum were dedicated to several of the elements of the strategy above (e.g. panels on public infrastructure, skills development, regional trade and integration, public–private consultation mechanisms). For this panel, the key issues participants may wish to consider are as follows:

• How do countries raise their focus and commitment to manufacturing and develop a coherent strategy to promote it? In what visible forms should this be expressed?

• What key measures can countries take to improve their FDI promotion efforts and link the FDI firms to domestic suppliers?

• How can the performance of SEZs and industrial parks be improved? Should the private sector’s role in developing and managing SEZs and industrial parks be increased? How can public–private collaboration be increased in this area?

• How best can the state support access of local SMEs to technology?

How do we increase access of SMEs to long-term finance? In particular, how can development banks (and similar institutions) be made more market- and performance-oriented? What are the changes needed in their governance? What is the scope for public-private sector collaboration in improving SME access to long-term finance for manufacturing?

Trade Facilitation and Economic Transformation in Africa

Trade facilitation can stimulate economic transformation in Africa by raising exports, supporting export diversification, reallocating resources to more productive activities, improving access to cheaper and better-quality imported inputs and enabling participation in value chains. Many African regions have begun to formulate regional approaches to trade facilitation, and there are important examples of particular approaches working well. The introduction of one-stop border posts (OSBPs) at Chirundu (on the Zambia-Zimbabwe border) and at the Busia border crossing between Kenya and Uganda have reduced the time and costs involved in moving goods across borders. The OSBP at Busia has also made it easier for small traders to cross the border, giving them access to a wider market and improving their livelihoods. Similar improvements in border crossing times have been recorded along the Trans Kalahari, Maputo Development and Northern Corridors.

Outside of these examples, however, the implementation of trade facilitation agreements has generally been problematic. It remains a challenge to translate the good intentions expressed in Africa’s regional trade agreements into concrete actions towards trade facilitation.

Key issues to be considered are:

• What more can be done to harmonise regional trade facilitation instruments in cases where countries have overlapping membership in more than one regional economic community?

• What are the remaining constraints (political and other) to the elimination of NTBs hampering cross-border trade flows in Africa? How can these be addressed?

• What can be done to ensure effective implementation of mutually agreed protocols, programmes or schemes aimed at promoting intra-regional trade in Africa?

• Do governments provide enough space for engagement with the private sector on issues related to trade facilitation?

• Why are African countries not jumping to ratify the World Trade Organization Trade Facilitation Agreement? Is it a governance problem? Or is it because of a lack of policy coherence?

In addition, the paper raises issues related to specific regions:

SADC

• How can SADC countries improve coordination in the management of regional transit systems?
• What should be done to address concerns about the potentially adverse effects of trade facilitation on local employment, revenues and the livelihoods of the most vulnerable?

EAC

• How can cross-country coordination in the operationalisation of trade facilitation be improved in a way that takes into account the varying levels of commitment to regional integration across EAC member states?

ECOWAS

• How can ECOWAS countries mitigate internal constraints hampering them from being more effective partners in regional development and integration processes?
• How can ECOWAS countries enhance the role of the private sector in regional integration in order to promote economic transformation?

ECCAS

• What are the remaining bottlenecks hampering implementation of the free trade area in the ECCAS region? How can they be addressed?