Private sector support for achieving critical development goals is a huge opportunity for business
Investing in the health and education of Africa's youth makes good business sense
It’s difficult to understand an enormous number such as $2.5-trillion. To put it in context, it’s about the size of France’s economy — the seventh largest in the world.
It’s also the amount of money we need to find every year to ensure the world meets the ambitious sustainable development goals to end global poverty, hunger and inequality.
This figure comes from the UN Conference on Trade and Development (Unctad), which estimated that achieving the sustainable development goals by 2030 would require a $3.9-trillion investment in developing countries each year. But with annual investments totalling $1.4-trillion, there is a $2.5-trillion gap — and $600bn of that unmet need is in Africa.
The public sector, donors and philanthropists obviously have a big role to play in closing this financing gap. But so does the private sector. In fact, private sector investment in the sustainable development goals is a huge opportunity for business, one that could open up $1.1-trillion in market opportunities in Africa alone and make life-altering strides towards achieving critical goals.
We are at a pivotal moment in the continent’s history. At a time when we should be increasing our commitments to development, we’re doing just the opposite. Though foreign aid spending doubled between 2000 and 2016, it has since fallen every year. Not only is progress not guaranteed, it is in jeopardy.
We need to close the financing gap, but the need for private sector involvement isn’t about money. It’s also about the skills and competencies the private sector brings to the field. Its ability is to fast track innovation, eliminate inefficiencies, scale rapidly and provide sustained interventions. These capabilities make the private sector a critical partner in solving development challenges.
There are a growing number of enablers that encourage investment in projects to advance development on the continent. In 2001 more than $81bn had been unlocked globally through blended finance deals — a mechanism that uses development finance and philanthropic funds to mobilise private capital flows. Though not all of this was channelled towards the very poor, a full quarter of this money was focused on improving financial inclusion, one of the indicators where we've seen impressive growth.
We should catalyse more effects such as this and encourage more financial investment into human capital, because these are the investments — especially in health and education — that provide the biggest effects on a country’s development. That is why we support the World Bank’s human capital project, which highlights the importance of investing in the health and education of a country’s next generation of workers.
Philanthropic investments can act as catalysts by creating markets or by lowering the risks associated with investments, both of which have the potential to benefit the world’s poorest.
A great example of this is when a group of public and private organisations (including the foundation) came together in 2012 to provide volume guarantees to two pharmaceutical companies Bayer and Merck. This allowed them to lower the price by up to 50%, making the products more affordable for the world’s poorest countries. Since then annual procurement has more than doubled, leading to a return on investment for the companies and more importantly more than $240m in savings for developing country governments in the first three years of the programme.
The Gates Foundation’s strategic investment fund works like an equity fund, investing in companies to harness the power of private enterprise to create change for those who need it most. In 2017 we invested in Hester Biosciences Africa to construct an animal vaccine manufacturing facility near Dar es Salaam in Tanzania. Leveraging a $12m loan from the foundation, alongside Hester Africa’s own equity, the company is creating low-cost vaccines that particularly benefit smallholder farmers in Africa.
But we must do more, especially if we want to realise the continent’s potential; we must invest in the health and education — or “human capital” — of its youth. These investments make development and business sense.
Just as the private sector is a key player in delivering infrastructure, it can also become a stronger player in other development priorities such as health. In 2018, $7.7bn was raised across the continent in public-private partnerships, almost triple the amount of the year before.
But these partnerships centred on large-scale hard infrastructure projects, and while public-private partnerships for health have grown, their implementation is uneven and not focused on health priorities. More than half of the public-private partnerships in health are concentrated in 10 countries — including SA — while many countries with the poorest health outcomes are omitted.
African philanthropists are also leading the way. Through a partnership with the Aliko Dangote Foundation in Nigeria, we convened the Nigeria Food Processing and Nutrition Leadership Forum, where leading food processors, the federal government and development partners united to achieve the goal of improving nutrition through food fortification.
Seeing the devastation caused by malaria on the continent — with 90% of cases occurring in Sub-Saharan Africa — South African entrepreneur and Nandos founder Robbie Brozin helped established the Goodbye Malaria campaign. Supported by corporate partners, the campaign is helping to reduce the malaria burden by catalysing on-the-ground elimination programmes. During the World Economic Forum, Goodbye Malaria pledged $5.5m to the Global Fund to expand a grant that aims to eliminate cross-border malaria transmission.
These interventions, and many others such as them, are supporting the progress we are seeing in global development and demonstrating the effect we can have on local communities when we work together. In the past, the private sector has proven itself to be a committed partner in development projects, delivering billions into critical investments on the continent. Today we need the private sector to join with philanthropists and the public sector and commit more deliberately to driving inclusive growth.
Without the contribution and innovations of the private sector we miss important opportunities to make life-altering strides towards achieving critical goals. It isn’t just a moral and social priority; it makes great business sense too.
• Suzman is chief strategy officer and president for global policy & advocacy at the Gates Foundation.