More and more African countries are moving out of aid dependency as the private sector boosts economic growth on the continent. The domestic private sector becomes the engine of growth across much of Africa.
Currently, at least a third of the African countries receive aid equal to less than ten percent of their tax revenue. This includes countries as Algeria, Angola, Equatorial Guinea, Gabon and Libya, who experience a big change after years of high dependency on aid.
The African Economic Outlook 2011 found that on average, Africa raises an estimated $441 in taxes per person per year, while receiving $41 per person annually in aid. This means that “Africa as a whole receives aid that is less than 10 % of collected taxes”, says Ken Mwai a financial analyst and real increasing its focusestate investor in Kenya.
According to Mwai, development in Kenya is donor-driven, but because of the aid it has been possible to build a sustainable infrastructure. The strong infrastructure creates an environment attractive to private investments. “For instance, the Thika road superhighway has made the real estate business in that region exponentially profitable. This has attracted private investors and will have a positive direct and indirect impact on taxes, as people establish and expand existing businesses."
The involvement of the private sector in establishing profit-driven educational institutions has become another source of revenue. According to Unesco, South Africa, Senegal and Nigeria have the highest number of such institutions.
The African private sector is increasing its focus on corporate social investment and core business alignment, to help African governments to implement their national development agenda initiatives. Michael Sudarkase, CEO of the African Business Group argues that “the end result of both domestic resource mobilisation and private-public partnership acceleration has been greater African autonomy in regard to the continental development agenda – and this has been universally regarded as a very positive trend."
Source: The Guardian