Sérgio Pimenta is the IFC’s Vice President for the Middle East and Africa. He is one of the guest speakers at the Africa Europe Forum on 17 and 18 May. Africa has the potential to become the largest growth region in the world. With a growing middle class, a young population and many investment projects, it offers diverse opportunities for European companies in Africa FAIReconomics spoke to him about the challenges of digitalisation, young businesses, women’s empowerment and education.
Q: When we talk about Africa, we often look at the role of Western countries as so-called donor countries, at NGOs that are involved on the continent. What role does the private sector have for you?
Sérgio Pimenta: The private sector is critical to economic development and job creation. In Africa – as elsewhere around the globe – we see the private sector designing sustainable business models to increase financial inclusion, promote trade, support small businesses, bridge electricity and Internet connectivity gaps, and create jobs and opportunity for young people and women. In light of the COVID-19 pandemic, and with many government balance sheets deteriorated, the private sector will need to play a bigger, but also different, role than it did before to support countries’ recovery from the effects of the pandemic on health systems and economies.
We believe that the solution lies in creating new markets, which do not yet exist, to bring in new investors, buyers and sellers, allowing constrained public resources to be directed to other areas. This means working at the country level with multiple stakeholders to unlock opportunities and establish conditions that lead to private sector investments. IFC’s goal is to address development challenges and create opportunities in emerging markets with the private sector as a key partner to develop critical infrastructure projects, for example, to increase access to electricity and broadband Internet, and to enable small businesses to access finance and opportunities to thrive and grow.
Q: Name the three most important challenges for the African continent (I know, the question is very undifferentiated, because the socioeconomic differences are very big)
Sérgio Pimenta: The COVID-19 crisis could widen the social and economic divide between Africa and the rest of the world, with devastating consequences for all. COVID-19’s economic impact on Africa is already clear: a first recession in 25 years in 2020 with about 40 million people pushed into extreme poverty as a result, and economic activity that is expected to remain below the pre-COVID-19 projections in 2021 for most countries. The crisis has widened the access to finance gap for small businesses, disrupted trade and supply chains, exacerbated pressures on the continent’s health systems, and highlighted the infrastructure divide from electricity to broadband Internet.
Having said this, I am convinced that Africa’s recovery from COVID-19 will be an opportunity to create a stronger, more resilient, and more connected continent by working across the private and public sector. I would like to stress four areas that I believe are essential for the continent’s recovery and critical areas where we need to support investment to create jobs and opportunities for the continent’s growing young population: digitization, greening of economies, urbanization, and regional integration.
Boosting investment in Africa’s Internet economy can boost livelihoods and help address key development challenges, unlocking new pathways for economic growth, innovation, job creation as well as access to services otherwise not possible. However, except for South Africa, only 5 percent of Africans have access to fixed broadband and only around 34 percent have access to mobile broadband. Closing the infrastructure finance gap from broadband Internet to electricity will be vital to fully reap the digital opportunity.
Tackling the effects of climate on the region will also be critical. By 2040, renewable energy could provide more than 40 percent of all power generation capacity in sub-Saharan Africa and this will require innovative solutions to help more countries develop solar and wind power markets as well as implement climate adaptation practices across agribusiness to manufacturing and infrastructure.
Urbanization is also transforming the continent, creating new demand for goods and services. Key to sustainable urbanization is increasing access to affordable and quality housing and requires us to work together to improve affordability of building supplies and improve access to mortgage financing models. It also means building greener to improve building efficiency that leads to cost savings and reductions in greenhouse gas emissions across homes, hospitals, commercial real estate, warehouses, and airports.
Lastly, fully realizing the opportunities afforded by regional integration, both at the continental level and within each of the main economics blocs, can help Africa accelerate progress and economic gains. According to a World Bank report, implementing the African Continental Free Trade Agreement could boost Africa’s income by $450 billion by 2035 (from about $2,400 billion today).
Q: Our experience is that entrepreneurship is underdeveloped in many parts of Africa. How can you achieve a mind shift? What role does education play in this, and what role also does transparency and compliance play?
Sérgio Pimenta: Ensuring young people have an environment that fosters entrepreneurism and innovation is vital, from regulation to access to finance and networks. Africa has the world’s youngest and fastest-growing workforce and needs an additional 1.7 million jobs every month to keep up with its population growth. Entrepreneurship plays an important role in creating jobs and opportunities, as well as generating solutions that can transform the continent’s development.
While there is room to continue to grow and expand entrepreneurship, I do want to stress that tech talent in Africa is at a historical peak and continues to rise. IFC and Google released e-Conomy Africa 2020: Africa´s $180 million Internet economy future last year, which surveys Africa’s Internet landscape and details how its digital entrepreneurs are creating a resilient and transformative Internet economy.
There are nearly 700,000 professional developers across Africa. The number of active developer hubs that support digital entrepreneurship in Africa doubled between 2016 and 2019 to almost 650, helping developers learn new skills, creating networking ecosystems, and opening avenues to engage with mentors, encouraging entrepreneurship and creativity. In 2019, there were also more than 90 active accelerator programs across the continent enabling startup growth. This growth is attracting attention from funders. Venture capital funding for startups has increased year on year for the past five years, with a record of over $2 billion in equity funding raised in 2019.
These startups are having an impact. This includes TradeDepot in Nigeria which is improving supply chain management for informal retailers by enabling their connection with manufacturers, and Fawry in Egypt which is facilitating mobile payments and e-commerce solutions for more people and businesses. IFC is proud to be an investor in both businesses.
There are key areas where funders, development partners and the private sector can play a role to continue to fuel the continent’s entrepreneurship growth. By working across the public and private sectors, we need to focus on opening access to skills training for more young people especially in the classroom and through coding programs. We must continue to create channels to access funding for small businesses, early stage startups and emerging tech leaders in the continent. And entrepreneurs also need strong policy and regulation frameworks that create the market conditions to foster technology deployment, the development of a broader technology ecosystem, and overall broadband Internet service access and affordability.
Helping to close the gender gap is also critical. The biggest potential for Africa is creating an ecosystem that empowers more women, addresses constraints women face accessing finance, and supports more women to access training, the job market and entrepreneurship opportunities.
Sérgio Pimenta is IFC’s Vice President for the Middle East and Africa. In this capacity, he is in charge of all advisory and investment operations in a region with about 650 staff and a committed portfolio of nearly $18 billion, including mobilization.
Previously, Mr. Pimenta was the Director and Global Head of Industry—Manufacturing, Agribusiness, and Services at IFC, managing all operations in these sectors worldwide. He led a team of 350 staff working across more than 100 countries to expand the private sector’s role in addressing urgent development challenges in areas such as agribusiness, health, education, manufacturing, and commercial services.
Mr. Pimenta also served for three years as IFC’s Regional Director responsible for East Asia and the Pacific, based in Hong Kong. Earlier in his career at IFC, he held senior managerial positions in the manufacturing, agribusiness, and services sectors in the Asia Pacific region, the Middle East and North Africa, and Washington, DC. Prior to joining the World Bank Group through its Young Professionals Program in 1996, Mr. Pimenta worked for the Treasury Department of the French Ministry of Finance, as well as for the Banque Nationale de Paris (BNP). A Portuguese and French national, he holds an engineering degree from the École Polytechnique, Paris, and a post-graduate degree from the École Nationale des Ponts et Chaussées, Paris.