An Economic Challenge Demanding Private-sector-led Interventions
FEATURED BLOG
An Economic Challenge Demanding Private-sector-led Interventions
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By Isaac Kwaku Fokuo Jr
March, 2024
This article was originally published in African Business on 5th January 2024
The global displacement crisis has reached unprecedented levels, with over 110m forcibly displaced persons (FDPs), representing over 1.2% of the world’s population. Most of these individuals lack access to education and decent employment opportunities, trapping them in limbo for decades; and 90% of these FDPs live in countries already facing significant economic strains, leaving them ill-equipped to support the needs of these vulnerable populations. In Africa, the number of FDPs increased from 36m in 2021 to 45m in 2023. While humanitarian aid and emergency assistance are vital components of addressing the immediate needs of those affected by conflict and climate disasters, it is time to recognise the displacement crisis as an economic crisis that demands private-sector-led and market-based interventions to provide long-term solutions. At its core, the displacement crisis is not just a humanitarian issue but an economic challenge that requires collective action to address and alleviate the suffering of the displaced.
Businesses play a crucial role in mitigating political instability and conflict, not only for the sake of social good but also to safeguard their economic interests. The impact of conflict and instability on regional business activity can be profound, leading to an increase in risk perceptions, market closures, and disruptions in trade and investment. The conflict in Sudan shows the severe impact of war on economic activity, not only within the country, where the economy is predicted to shrink by over 12%, but also on its neighbouring countries. Sudan was the world’s leading exporter of gum arabic, a critical ingredient in the food industry, and one of the top exporters of gold globally, with exports worth over $2.8bn before the war broke out.
The instability in Sudan is causing real economic effects on several countries in the African continent. For instance, Sudan is one of Egypt’s main destination markets, having imported over $0.7bn in goods and services from Egypt in 2021. Additionally, Sudan is the second-largest importer of Ugandan coffee after the European Union. It is also a crucial part of the air route for Nigerian Hajj air carriers, and the war would force most of these carriers to find alternative, potentially more expensive, routes.
Sudan also benefits from economic ties with countries outside the continent, such as the UAE; in 2021, it exported goods worth close to $3bn to the UAE. This trade between the two countries has come to a stop because the war has caused the shutdown of the airport and commercial ports. The sudden halt in trade is catastrophic to the economy, as it has already deprived the country of much-needed foreign currency to support crucial imports. The impact of conflict on economic activity is a stark reminder of how political stability and peace are essential not only for social good but also for the economic well-being of nations and their neighbours.
Forging sustainable futures
As the world grapples with the increasing impact of displacement and conflict, there is a growing recognition of the private sector’s important role in creating sustainable pathways to reconstruction and stability. Moreover, there is also a growing appreciation of the innovative solutions emerging from the African continent to tackle this crisis. In November, at the Africa Forum on Displacement: Private Sector Solutions, companies from various sectors, including tourism, real estate, healthcare, private equity, telecoms, and financial services, among others, convened to discuss their work and the increasing role they are playing in addressing the crisis on the continent.
The discussions highlighted real market opportunities and incentives for the private sector to intervene in the displacement crisis and/or work in areas that host refugees or internally displaced persons (IDPs). These incentives include factors such as the commitment and loyalty of refugee employees; studies have also found that these employees generally have a higher retention rate. Furthermore, operating in areas that host refugees and IDPs could motivate a company to be more innovative and resilient to challenges.
Finally, in this era in which a company’s success is measured not just by its profits but also by its contributions to society, the displacement space offers a unique opportunity to contribute to several sustainable goals – such as education access, climate action and gender equality. By leveraging market opportunities and committing to inclusive approaches, businesses can play a crucial role in shaping the future of displaced populations in Africa and beyond.
Collaborative solutions
The Forum also underscored the commitment of stakeholders from other sectors, such as government, religious leaders, and displaced people themselves, to support the private sector’s efforts to address this issue. Governments play a crucial role in creating policies and a conducive environment for the private sector to implement their solutions. African governments have taken several positive steps towards policy reform, such as Kenya’s recently launched Shirika plan, which shifts the country’s refugee hosting approach from a camp-based model to an integrated one that promotes local economic development. Religious leaders at the Forum also emphasized the common values shared by different faiths and the necessity to approach this crisis with compassion and kindness.
These faith leaders shared examples of how they have supported economic solutions for displaced individuals, such as serving as verifiers and guarantors to displaced persons, enabling them to access financial services. It was evident from the Forum’s discussions that addressing the refugee crisis requires a collaborative effort from all stakeholders, including government, private sector, and religious leaders. None of these solutions and approaches can work effectively without the input and leadership of individuals with lived experiences of displacement. These people understand the impact and root causes of displacement better than anyone; furthermore, many are heavily involved in peace-building efforts and creating economic opportunities.
The proven interest from the private sector and partnership with other stakeholders marks an important shift in mitigating the displacement crisis. This market-based approach focuses on the economic impact of displacement, the potential to transform post-conflict state reconstruction, the hosting and integration of displaced people, and how they access economic opportunities. The examples of Turkey’s approach and the impact of conflict on economic activity in Sudan show that innovative solutions and market-based interventions can provide long-term solutions to alleviate the suffering of the displaced. As we move forward, we must recognise the economic implications of displacement and prioritise private-sector-led interventions to create sustainable pathways to stability and reconstruction.