IFC’s Private Enterprise Partnership for Africa

Today I was fortunate enough to meet briefly with Bernard Chidzero, the General Manager for Private Enterprise Partnership for Africa (PEP-Africa).  Some background to this initiative is as follows.  For more detailed information please see An Introduction to IFC’s Private Enterprise Partnership for Africa Brochure.

In April 2005, the International Finance Corporation (IFC) teamed up with donor partners to launch a far-reaching new initiative: the Private Enterprise Partnership for Africa (PEP-Africa). The objective is to help Africa meet its need for a stronger private sector that can raise local incomes and hold its own in the global marketplace. Based in Johannesburg, PEP-Africa is replacing and expanding on the work of the Africa Project Development Facility (AFDF), IFC’s initial program for developing small and medium enterprises (SMEs).  For some of Bernard’s thoughts on this initiative and improving business in Africa, check out the article titled, Corporate Solutions to Rural Problems.

The AFDF on average had an annual budget of USD $5-7 million, which supported SME development.  It apparently was able to target anywhere from 300-400 SMEs per year, offering a wide range of technical support.  Bernard noted that although some of these SMEs flourished, some even being listed, IFC quickly realized that the impact on the economy at large was insignificant.  Clearly this program was not achieving the level of overall development desired, and it was an expensive program with 18 years of history.  However many good lessons have emerged and in the later stages of APDF’s life, they began to  shift the focus to the meso level, for example supporting business associations, with the intention of impacting sectors, instead of individual SMEs.  It is out of this trend that PEP-Africa has evolved.  PEP-Africa is taking a sector approach, focusing on infrastructure, financial markets, Oil, gas and mining, agribusiness, tourism and health and education.  However, cross-cutting themes include creating an enabling environment for SME development and access to finance to promoting supply chain linkages between SMEs and large corporations.

Under PEP-Africa, work has begun on:

Entrepreneurship: With approximately USD $1.4 million in support from the Netherlands, a new SME Entrepreneurship Development Initiative is underway. This will continue and expand on the key projects of the existing facility, which has strengthened Africa’s small and midsize businesses and their support institutions for more than 15 years.

Leasing: A grant of more than USD $900,000 from Switzerland is helping IFC adapt its successful efforts in other regions to expand Tanzania’s access to leasing, an effective financing option for smaller businesses that can neither afford to purchase needed new equipment outright nor qualify for bank loans to finance them. A similar Swiss-funded IFC project in Uzbekistan has helped the country’s number of leases increase dramatically in the past year, and there are indications that similar results can be achieved in Tanzania and other East African countries.

PEP-Africa joins a family of regional technical assistance facilities managed by IFC that together have more than 600 full-time staff in the field. PEP-Africa is also a key part of IFC’s new strategy in Africa; other initiatives include the USD $225 million, 10-country, IDA-IFC Africa Micro, Small, and Medium Enterprise initiative with the World Bank, as well as the creation of integrated SME Solution Centers in Madagascar and Kenya.  PEP-Africa’s indirect costs are covered by IFC profits, but funds for program implementation consist of donor support.  To date, they have managed to raise approximately USD $30 million form the likes of SDC, AfDB, Sida, NORAD and the Japanese.  Presently, CIDA and DFID are considering investing in PEP-Africa.

So what about collaboration between PEP-Africa and IDRC?

Bernard made it clear that PEP-Africa is an implementation vehicle for private sector development.  He sees the research of the ICBE fund connected to their ability to implement appropriate programs in Africa i.e. their actions being guided by our research.  He also suggested that PEP-Africa could easily create a research program around IDRC’s wishes, and manage the fund.  However, I pointed out that we wish to have the research proposals emerge from African stakeholders on the issues that they believe to be most pertinent.  In this case, PEP-Africa would not be the appropriate institution for managing such a process.  They are not in the business of vetting proposals and managing that process.  But it is apparent to me that there is plenty of reason for our institutions to collaborate.

We briefly discussed the upcoming Investment Climate Facility (ICF), which I will discuss in more detail, following a meeting tomorrow with its lead Hugh Scott.  Bernard pointed out that this ambitious initiative is yet another vehicle to raise funds for private sector development, and they welcome such efforts, as his program is well placed to implement programs on the ICF’s behalf.  To date they have already submitted five proposals for programs worth approximately USD $30 million.  It is envisaged that these programs would help the ICF get on the ground as quickly as possible.  He sees linkages between IDRC and the ICF as a very useful contribution to guiding its programming efforts.  He hopes to see this initiative fly, which is obvious given PEP-Africa’s position, but he recognizes that the ICF is being viewed by some as too UK driven, or seen as part of the Blair Commission, and therefore making some donors cautious.

We chatted a little about the scope of IDRC’s research fund, being African-wide.  He suggested that IDRC should consider limiting its scope to a cluster of countries which are struggling with similar issues i.e. tax regulation or licensing issues.  In his opinion, IDRC’s CAD $1.6 million is not sufficient to cover a large geographical scope.

Finally, with regards to a governance structure for IDRC’s fund, I queried Bernard if somebody from PEP-Africa would consider being a member.  He is open to such possibilities, but warns that IFC has a very strict set of ethics and conflicts of interest policies which could prevent an appointment.  If he had to choose a staff member for such a role, he quickly nominated Jim Emery, PEP-Africa’s specialist for Investment Climate.

This was a short but useful meeting.  Bernard is possibly slated to visit Ottawain November, and I suggested that he meet with IDRC’s Vice President Rohinton Medhora and the PSD Chair, Alain Berranger.  This will be confirmed at a later date.

Comments

[Foundation]

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[Hassan Jalloh]

Dear Sir/Madam,

We like to esatblish working relayion with PEP in order to encourage African Diaspora in Europe to be able to participate in your scheme.

I thank you in advance and look forward to hearing from you.

Yours Sincerely

Mr. Hassan Jalloh, MSc

Director

AfroNeth Foundation/The Netherlands

www.afroneth.nl

[Pussen Tabengwa]

I am looking for enterprise support funding for a guesthouse and small hotel project in South Africa

[Jeremy Banda]

We have registered a new Institution to provide funding to SMEs (debt and equasi-debt) in Malawi. We are looking for long term funding in the form of loan or equity.

[Term Papers]

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