Weak infrastructure is widely accepted to be a fundamental constraint to Africa’s growth. Governments in the region struggle to meet the basic needs of their populations, including access to food, education, health and livelihoods, much less invest in critical reusable infrastructure that could provide long-term solutions to social problems.
Philanthropy alone will not lead to the sustainable infrastructure and jobs needed to ensure the long-term health and economic security of individuals and the economic prosperity of all African countries. However, the development community tends to focus on funding shortages, calling for more Official Development Assistance (ODA) and increased government spending, and asking the private sector to “cooperate”, “partner” and “strengthen” (often a euphemism for donations), despite Africa’s growing budget deficit problem. Instead, we need to focus on the operational, legal and commercial barriers to implementing sustainable infrastructure and how to make smarter investments to overcome those challenges. We need sustainable commercial models that enable service delivery and provide jobs at scale.
By design, private sector solutions must be commercially sustainable for delivery at scale and over the long term. We can do a better job as a global community to invite, encourage, and de-risk private sector involvement in infrastructure challenges by directing existing ODA, private philanthropy, and government resources toward creating environments in which the private sector can innovate, deliver, and employ.
Philanthropy alone will not lead to the sustainable infrastructure and jobs needed to ensure the long-term health and economic security of individuals and the economic prosperity of all African countries.
An example that I have experience with is digital infrastructure. Digital infrastructure is not only a means of delivering aid and other critical services, but also an enabler of commerce and thus economic growth. Digital inclusion has proven critical to bridging the physical infrastructure gaps that leave the most rural and marginalized communities behind, especially in the wake of the COVID-19 pandemic.
Developing and managing secure digital solutions requires extensive knowledge of issues such as data privacy and security, interoperability standards, franchise management, biometric tokenization, and device security. This knowledge resides in private companies that invest billions of dollars in continuous innovation, fraud prevention, and preventing bad actors from accessing personal data.
However, four fundamental challenges remain for private sector engagement in fragile contexts:
Too much reliance on substandard and expensive products. Multilateral agencies, governments, and donors often spend billions of dollars on technologies, including internally developed systems, that do not meet the highest standards of data privacy and security, putting the personal data of millions of users at risk. These are usually well-intentioned but misguided efforts to foster local innovation, or because public sector agencies believe they are saving costs by developing in-house. For example, UN agencies have built internal data platforms that collect sensitive data such as religion, use beneficiary data without informed consent, and may not meet best-in-class security standards. However, private companies already have secure, interoperable digital infrastructure by design with data privacy that can be rapidly deployed even in vulnerable offline environments. The United Nations could benefit from leveraging private sector innovation, which could be faster, cheaper, more scalable, and more secure than solutions developed solely in the public sector. What if private sector capacity was leveraged as it already exists, and funding was directed to fill the gap, encourage private sector innovation and reduce risk? There are too few last-mile entities serving rural areas. Companies like mine are building ways to keep data safe for banks, agritech, health care providers, and more to serve rural communities. However, they struggle to find entities with large agent networks that can provide last-mile fund management capabilities and services. Agent networks are essential to enabling local commerce and provide high-value work. What if donors and NGOs channeled their funding into building last-mile capabilities that can be leveraged by both local and global companies? Lack of sustainable commercial models: Requests for Proposals (RFPs) are now the primary commercial tool for governments, NGOs, and UN agencies to contract with the private sector. However, RFPs are blunt and shoddy tools in the digital space where government agencies do not understand what they need, and multilateral agencies often prevent necessary up-front consultations with suppliers to avoid the appearance of fraud. Furthermore, the certification process is often market-specific, with only a few thousand potential beneficiaries in the market. In these situations, the opportunity is not commercially viable and most large actors are unable to respond, as local actors often lack the capacity to respond to complex RFPs that are not written in local languages. What if private sector experts collaborated with governments and development stakeholders to develop best-in-class solution architectures, and private sector actors were compensated to execute at lower overall costs?The regulatory landscape for digital transactions in emerging markets is nascent, opaque, and complex. Operating in this environment is unattractive for private companies that have to deal with limited but rapidly evolving policies around data security and privacy, know-your-customer (KYC) laws, and more. Additionally, many governments enact soil regulations in haphazard attempts at data security, even though replicating systems in small markets adds significant costs to an already low/no-profit economic model. To make matters worse, many supranational humanitarian and development workers actively collect and store sensitive data on laptops and other methods that are vulnerable to attack. What would happen if governments partnered with the private sector to create regulations that created an enabling environment for innovation and deployment, while ensuring the protection of individuals? (For a discussion on the future of data privacy in Africa, see views by Lesly Goh and Buhle Goslar.)
Enabling communities across Africa to access the critical services they need will benefit the entire world. If private investment is encouraged, more can be done with existing aid flows to build sustainable infrastructure and create jobs. We need to create efficient and effective models for deploying the private sector resources we currently have. And in the digital age, we need to start building more effective digital infrastructures that can leverage the capabilities of private industry.
The Brookings Africa Growth Initiative receives support from the Mastercard Foundation.
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