Leveraging the private sector to develop services in Africa – Lessons from the Caribbean

13 August 2012

Drawing on experiences in the Caribbean, Sub-Saharan Africa’s efforts should be focused on building a strong and functional relationship with government(s), securing financial support for the first 3-5 years of operation, and ensuring an immediate attention on avenues for attaining financial self-sufficiency over the long-term.  An effective communication and outreach strategy to get the right messages to the right stakeholders has also proved to be an essential factor of success.

What is a service coalition and how do they differ in developing countries?
A service coalition is an organisation of stakeholders related to the services sector who may have diverse interests, but nevertheless share a common objective: the development of the service industry. The aims of the stakeholders are seen to be more efficiently accomplished through a coalition.

The US Coalition of Service Industries (USCSI) was the first coalition, formed in 1982. Since then, new coalitions have been established in countries throughout the world, with the Global Services Coalition (GSC) now boasting 13 members worldwide (the Caribbean serves as a single regional member). Like USCSI, most developed country service coalitions focus on lobbying and raising the profile of the services sector.  Their efforts traditionally revolve around the promotion of services liberalisation. However, a slightly different model has emerged in developing countries (starting with Malaysia circa 2001) which focus on developing the services sector in order to be able to better take advantage of available market access opportunities.

In this respect, service coalitions in developing countries, including those emerging in SSA, have the potential to offer a range of more robust interventions. In doing so, they can serve to augment and complement public sector institutional roles, thereby helping to provide essential support services for catalysing dynamic entrepreneurial activity.

Challenges facing domestic services firms in developing countries
Despite the vast potential of the services sector, the challenges faced by developing-country firms to harness them are numerous, and exacerbated by the endemic scarcity of available and/or quality services data.  Some of the characteristics and challenges facing domestic African services firms include:
· Fragmentation – firms are often fragmented and small with little or no representation across sectors.
· Lack of understanding – the areas in which they operate (and services more generally) are not well understood, even by policymakers, politicians, and the public at large.
· Little influence – many services firms, especially micro and small firms, often have little political influence.
· Weak policy/regulatory environment – emanating in part from the lack of understanding, the policy and regulatory environments are often quite weak, especially when it comes to providing targeted incentives to help develop the sector domestically.
· Low access to affordable finance – the limited capital base of these firms and their inability to access affordable finance is perhaps the single-most important constraint on firm/sector growth (resulting from the intangibility of services and exorbitant interest rates).
· Low recognition – these firms also tend to suffer from low brand recognition and credibility
· Poor market information – these firms often suffer from an inability to readily access critical information on overseas markets.

How can service coalitions help?
Service coalitions can take a more proactive role in helping to address many of the challenges above.  This can be done by (i) offering a unified voice on services issues and helping to raise awareness. By serving as a focal point on services, coalitions can help to better articulate and disseminate private sector needs and commercial interests, as well as raise awareness amongst a cross-section of stakeholders (public and private, including the donor community); (ii) providing training to small and micro enterprises, including sector-specific associations; (iii) advocating for policy and regulatory reforms, trade negotiations, standards, and incentives; and (iv)  assisting service providers to promote and increase trade and exports, including through the dissemination of information on export opportunities, market intelligence, trade missions and fairs, as well as collecting data and offering award/recognition programs.

Taking on such roles, coalitions can also serve as an important conduit for targeting development cooperation (or aid-for-trade) resources towards the services sector.

Experiences in the Caribbean offer important lessons for Africa
The initial implementation of service coalitions in the Caribbean proved more difficult than expected.  While floated as a concept for more than a decade prior, by early 2010 only four coalitions could have been considered operational.  One key obstacle was the lack of awareness pertaining to private sector needs vis-à-vis services policy, negotiations, and even trade promotion, and thus the associated challenge of articulating their own needs as well as generating public sector buy-in. Another challenge emerged due to assumptions about the relationships coalitions would have with their national Chambers of Commerce (which was not always feasible). Lastly, the lack of adequate and consistent funding for the coalitions resulted in delays and a number of false starts.  These challenges (notably with funding) were largely mirrored at the regional level.

Significant progress has been achieved in the region.This includes the December 2010 inauguration of the Caribbean Network of Service Coalitions alongside the strengthening of existing coalitions in Barbados, Dominica, Saint Lucia, and Jamaica (notably via additional financial and human resources), as well as the launch of the Antigua and Barbuda CSI, the Belize Coalition of Service Providers and the Grenada CSI.  Helping to underpin this momentum has been varying combinations of support from national governments, alongside the Caribbean Export Development Agency, GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH), and DFID’s CARTFund (Caribbean Aid for Trade and Regional Integration Trust Fund).

Experiences of services coalitions in SSA
Experiences establishing service coalitions in SSA remain at a preliminary stage (despite also having been floated over a decade ago).  East and Southern Africa is perhaps most advanced on this front, with Uganda serving as the most commonly known coalition in the region.  With laudable achievements to-date, the Uganda-CSI continues to face challenges in shifting from ad-hoc activities and influence to a more systemic role as a fully functioning coalition.   As in the initial Caribbean phase, progress has been hampered by the availability of financial resources, alongside the political challenges of situating itself in the existing landscape.

At a regional level, the East African Business Council (EABC) has taken the lead, collaboratively with ILEAP, to establish the East Africa CSI (EACSI).  Building on efforts in 2009 and 2010, stakeholders outlined a road map for bringing the coalition to fruition.  While the full scope of this effort has not yet garnered the financial support needed to move into implementation, results have been achieved in the context of securing support to develop a Professional Services Platform to be housed at EABC.  As noted by stakeholders early in the process, the Platform constitutes an essential stepping stone to the formation of the EACSI.

Similar efforts are underway throughout the continent – including: Burundi, Congo-Brazzaville, Cote d’Ivoire, Ghana, and South Africa.  At a regional level, the COMESA Business Council is also advancing on its mandate to support the formation of coalitions throughout COMESA.

Seen in this light, service coalitions in SSA are emerging with the potential to serve as an essential business support organisation, helping to mitigate institutional deficiencies across a range of interventions that might otherwise be provided by the public sector in developed countries.  They also have the potential to serve as innovative channels for delivering aid-for-trade resources.  Doing so requires that stakeholders in SSA take heed of the success factors in the Caribbean, as well as development partners’ recognising the different nature of coalitions on the continent, and associated support needs to facilitate their success.

Authors:

David Primack, Trade Economist and Executive Director, ILEAP.

Michelle Hustler, a Caribbean-based expert on service coalitions.

This article is based on the ILEAP’s publication: Harnessing Services Trade for Development: A Background and Guide on Service Coalitions in Africa and the Caribbean; available at www.ileap-jeicip.org

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