Public and Private Sector Collaboration for Economic Transformation

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Yaw Ansu, David Booth, Tim Kelsall and Dirk Willem te Velde, March 2016

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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?

This paper was produced in collaboration with the African Center for Economic Transformation (ACET), as a background paper for the African Transformation Forum (ATF) in Kigali, Rwanda on 14-15 March 2016.

Photo credit: Simon Davis, Department for International Development

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