Although Africa has witnessed outstanding economic performance, poverty remains prevalent because economic growth has not been translated into more jobs and higher income. Still trapped within the confines of a mono-cultural economy, Africas dependency on a limited inventory of primary goods and its retreat into de-industrialization hinders it from escaping the poverty trap. With the shifting paradigm of development cooperation from a public sector led development to private sector development, the development of Africas private sector is considered crucial in translating economic growth into inclusive growth. However, Africas private sector faces many challenges including the accessibility of SMEs to government services, large size of the informal sector and excessive regulations.
Analysis of a wide spectrum of variables through a cross-sectional model to identify areas that increase the effects of private sector development and their degree of efficacy shows that small business ownership is the most important factor that affects both income and employment. Other variables such as technological readiness, market size and concentration of rent had an impact on income while improvements in higher education and training, labor market efficiency and primary education had an impact on employment.
With reference to the PSD policies of the UK, US and Germany and in consideration of Koreas development experiences and handicaps four areas are considered as a priority for PSD cooperation with Africa: entrepreneurial support, construction of industrial complexes, human resource development and agricultural development.