The private sector is generally considered to be a significant component in providing various economic opportunities in an economy.
Nonetheless, to put focus on growth alone presents a risk of exacerbating or creating inequality which is particularly hazardous in developing economies that are in a midst of a spontaneous transition from subsistence-based economies to that cash-based ones.
As such, development interventions and the deployment of aid money must first avoid creating harm in relation to inequality and then act to increase inclusivity. That must occur not only through the lens of opportunity but also when it comes to benefiting from enhanced economic growth at the national level.
On a global scale, the role of the private sector in encouraging growth and economic development cannot be understated. The private sectors are the major agents in establishing employment opportunities, providing funds, driving innovation, and building competitiveness.
All these are crucial instruments for growth. The private sector usually engages in entrepreneurial risks, which is significant in how it translates various investments into wealth creation as well as income generation.
The role of the private sector is further important as it spurs economic growth in emerging economies. For instance, India has indicated a strong resilience when faced with global volatility and has managed to grow steadily, and remains among the fastest growing economies in the world.
The Indian economy attained a growth rate of 6.8 percent in 2018 and a growth rate of 7 percent in 2019 and a 7.2 percent growth rate in 2020. The private sector has contributed immensely to the economic growth in India and it is hugely responsible for the astronomical growth that the country registered since the economy was opened-up in 1991.
The private sector is also important in providing better goods and services and is mainly responsible for the provision of goods and services at a low cost. Moreover, the lack of monopoly means amenities are accessible to the populace of a given country. The private sector is also central to the welfare of people.
The sector has always stepped in the times of need. During an outbreak of a virus or a disaster, it has come up with different solutions to serve citizens in different economies and end their problems. In terms of response to Covid-19, the private sector has been offering monetary support and giving out life-saving instruments to the health sector.
The role of the private sector in Africa
The private sector has been hailed as the major engine for growth in Africa. It contributes to approximately 70 percent of output in Africa, approximately two-thirds of its overall investments and 90 percent of the employment opportunities in the continent.
With regard to the statistics provided by the African Union (AU), the creation and development of jobs in the private sector are viewed as one of the sustainable and most effective strategies to alleviate poverty in African countries.
Increased diversification of the African countries has since emerged as a significant policy focus for most countries in Africa. Efforts towards attaining economic diversification have brought the importance of development in the private sector, mainly the small-to medium-scale enterprises (SMEs).
As a result, African governments are embarking on various structural reforms that aim at enhancing development and business environment that leads to essential prospects for job creation and inclusive growth over a long duration.
The growth in the private sector has also continued to be vital in financing the future of development in Africa.
When the private sector is dynamic, it allows domestic revenues to achieve considerable growth, ultimately minimizing dependence on foreign aid. The combined domestic revenues in the African continent are currently over ten times the aid flow value in Africa.
Africa has attained huge progress in enhancing the business regulatory environment together with increasing competition, and trade investment in the last decades.
Some of the major strong performers are countries such as Algeria, Morocco, Ghana, Mali, and Burkina Faso. Moreover, the competitiveness of African countries has also improved even though it commenced from a low base.
Only three African countries have featured in the top half of the global rankings with regard to competitiveness. They are Mauritius, Tunisia, and South Africa. Numerous countries in Africa have started to improve their overall positions in the last decades.
The major constraint to private sector development in Africa is the ease of access to finance for development. Most companies and small-scale enterprises struggle to get finance on suitable terms. Nonetheless, there have been encouraging signs.
Over the years, there have been crucial access to financial services providers, together with micro-finance institutions. Traditionally, the private sector in Africa has been drawn back by several factors such as education systems that do not offer essential needs of the labour market and insufficient infrastructure.
However, with the increased penetration of the private sectors in African countries, it is time to attain maximum economic growth in different sectors.
The role of the private sector in East Africa
The private sector has an important role to play in enhancing regional integration in East Africa. It enhances trade among the East African countries because private sectors understand the constraints that enterprises face, and have the capacity to utilize the advantages of the opportunities created by such regional trade initiatives.
The private sector is important in enabling access to increased economies of scale, raw materials and technology in both global and regional value chains.
Therefore, the private sector plays a vital role in boosting Eastern Africa’s manufactured exports, mainly textile and clothing exports, heavy manufacturing, processed food and livestock, and meat products. It is also important in increasing trade among the East African economies and thus improving the overall GDP and exports.
The private sector is thus the key driver of the East African economy because it accounts for 80 percent of the overall production, 60 percent of the investments, and 75 percent of the lending within the East African economy. The private sector is also important in job creation, offering about 90 percent of the job opportunities for the working-age population.
The role of the private sector in Kenya
The Kenya private sector has substantially contributed to the process of economic development over the years. The sector contributes to 80 percent of the overall GDP, a significant percentage of the total export earnings and employment.
The primary growth sectors are restaurants and hotels, trade, real estate, insurance, finance, manufacturing, Agriculture, transport, storage, and communications.
Even though the sector has experienced a lot of internal and external shocks, it has remained resilient and has contributed to export market diversification and many export products. The role of the private sector is not only restricted to investment and financing. Human resources, innovative capacities, and technological inputs are other potential contributions.
The private sector drives the economic sector by over 70 percent in development, driving sustainability, employment, and economic growth by bringing numerous opportunities for value creation.
Moreover, attaining sustainable development will enhance the building of markets and the business environment. Billions of dollars in both private and public funds are to be channeled towards the SDGs, thus creating huge opportunities for companies to offer solutions.
Kenya, is thus, by far poised to benefit from private sector investments and partnerships.
-The Writer is a Business Leader and Brand Africa Trustee