In­ter­view with Car­los Lopes

Africa Renewal - - Contents - — Car­los Lopes

Fol­low­ing the launch of the 2014 Economic Re­port on Africa in Abuja, Nige­ria, Car­los Lopes, the ex­ec­u­tive sec­re­tary of the Economic Com­mis­sion for Africa, at­tended the New York launch of the same re­port. The re­port ad­dresses two es­sen­tial ques­tions: what are the right poli­cies for in­dus­tri­al­iza­tion and what role can the pri­vate and public sec­tors play? In an exclusive in­ter­view with Africa Re­newal’s Kings­ley Igho­bor, Mr. Lopes ex­plored th­ese is­sues. Th­ese are ex­cerpts from the in­ter­view.

Africa Re­newal: Give us a snap­shot of the cur­rent state of the African econ­omy

Car­los Lopes: The cur­rent sta­tus of the African econ­omy is good but it’s volatile par­tic­u­larly in the oil and gas sec­tor, which as you know ac­counts for a lot of Africa’s com­bined gross do­mes­tic prod­uct. We pre­dict a 6% growth this year. We should not bank too much on the sta­bil­ity in the en­ergy ex­port front be­cause the shale gas revo­lu­tion in the US is go­ing to change the rules of the game on en­ergy, par­tic­u­larly oil and gas. The US is not go­ing to need to im­port en­ergy in the near future.

Which means oil and gas pro­duc­ing coun­tries should be wor­ried?

Yes, wor­ried about the US mar­ket con­tin­u­ing to be one of their des­ti­na­tions.

How ex­actly will the US en­ergy mar­ket be a game changer?

In about five years they will not im­port oil and gas. The US is poised to be­come a net ex­porter of en­ergy. In five years, ei­ther you have an al­ter­na­tive mar­ket or you may be marginal­ized in terms of US de­mand.

What about in­creas­ing con­sump­tion in Africa? A ris­ing mid­dle class should lead to more de­mand for en­ergy.

That’s my en­tire point, that Africa’s in­dus­tri­al­iza­tion cen­tres around three big char­ac­ter­is­tics and one of them is in­ter­nal mar­kets. The sec­ond is the fact that we have re­new­able en­ergy po­ten­tials. Also, our leapfrog­ging ca­pa­bil­i­ties, tech­no­log­i­cally speak­ing, make the case for a green, clean in­dus­tri­al­iza­tion. The third is that Africa’s en­try tick­ets are its com­modi­ties.

This year’s Economic Re­port on Africa em­pha­sizes “pock­ets of ef­fi­ciency.” What does that mean?

Th­ese are seg­ments of the global value chain cre­ated be­cause they have the best con­tex­tual en­vi­ron­ment to thrive, for in­stance, tex­tiles in Ethiopia and ICT [in­for­ma­tion and com­mu­ni­ca­tions tech­nol­ogy] in Kenya. I will give you the ex­am­ple of Morocco, which iden­ti­fied the aero­nau­tic in­dus­try as a seg­ment they could en­ter. They needed to ad­just the school cur­ricu­lum to re­spond to it; they needed to make sure that the right con­di­tions—from tax­a­tion, in­vest­ment in­cen­tives, to reg­u­la­tory frame­works—were all lined up. Now they have 5,000 jobs in that sec­tor.

A World Bank re­port last year fore­cast that Africa’s agribusi­ness could be worth $1 tril­lion by 2030. How do you re­spond to those who say that this sec­tor doesn’t at­tract huge in­vest­ments?

The first thing I would like to say about agri­cul­ture is that we have done a very poor job un­til now. There is a dis­in­cen­tive pol­icy that is an im­ped­i­ment to higher pro­duc­tiv­ity in agri­cul­ture. This is par­tic­u­larly true if we con­tinue to prac­tise, from the devel­op­ment aid per­spec­tive, food se­cu­rity and poverty re­duc­tion poli­cies as the only en­try points to deal­ing with agri­cul­ture. Of course, I am for food se­cu­rity. But I do have difficulties un­der­stand­ing how we can pour about $1 bil­lion into agri­cul­ture ev­ery year from devel­op­ment aid alone with­out any re­sults. Be­cause we still have the same yield per hectare to­day that we had 20 years ago.

What’s the prob­lem?

The prob­lem is that we are do­ing poverty re­duc­tion. We are not do­ing economic ac­tiv­ity.

How do we re­verse that?

The most im­por­tant thing is to make the case for agribusi­ness. That’s where we are go­ing to cre­ate mod­ern jobs. The young peo­ple don’t want to be farm­ers any­more but they will be in­ter­ested in mod­ern jobs re­lated to agri­cul­ture. It’s ap­palling that in Côte d’Ivoire, only 15% of con­sumed yo­ghurt is pro­duced lo­cally! Isn’t it a prob­lem that the prices for some of Africa’s com­modi­ties are de­ter­mined from abroad?

What I am talk­ing about here is slightly dif­fer­ent, namely agro-busi­ness

op­por­tu­ni­ties for African mar­kets. Yes, agri­cul­tural sub­si­dies in the West af­fect our soft com­modi­ties’ trade. But we still have the op­por­tu­ni­ties to do very well in agri­cul­ture with pro­duc­tion that is ori­ented to­wards African mar­kets, not for ex­port. Is there enough de­mand in­ter­nally to at­tract farm­ers and in­vestors to agribusi­ness?

A study done in Nige­ria re­cently by Aliko Dan­gote [Nige­rian bil­lion­aire

The prob­lem is that we are do­ing poverty re­duc­tion. We are not do­ing economic ac­tiv­ity.

busi­ness­man] found that about 80% of tomato paste was be­ing im­ported from abroad. We are im­port­ing tomato paste from as far away as China! This doesn’t make any sense. There’s de­mand that al­ready ex­ists and it’s go­ing to grow. There is a good case: one of South Africa’s largest su­per­mar­ket chains, Sho­prite, is ex­pand­ing very ag­gres­sively in the rest of the con­ti­nent. And when they went to Zam­bia, in their first year of op­er­a­tion, about 80% of their su­per­mar­ket prod­ucts were im­ported from South Africa. Five years later, they had worked deals with [Zam­bian] small-scale en­trepreneurs to pro­duce lo­cally at cer­tain stan­dards.

Between 1970 and 2008, about $800 bil­lion van­ished from Africa due to il­licit fi­nan­cial flows. Mo Ibrahim [Su­danese phi­lan­thropist] said last year that Africa could be los­ing up to $40 bil­lion an­nu­ally due to tax eva­sion. Isn’t there a cred­i­bil­ity prob­lem with Africa’s pri­vate sec­tor?

Stud­ies re­veal that our pri­vate sec­tor is ex­tremely lazy in mov­ing into manufacturing and in­dus­trial sec­tors. It cor­re­lates with the lazi­ness of the banks to lend to this sec­tor. Nor­mally, they do busi­ness in the ser­vice area where they re­spond to in­ter­nal de­mand; you can evade taxes and be in­for­mal more eas­ily than if you had a fac­tory be­cause ev­ery­body can see the fac­tory. So we don’t have to be dis­tracted by the pref­er­ences of the pri­vate sec­tor be­cause they are re­spond­ing to in­cen­tives. We should rather cre­ate the pol­icy and reg­u­la­tory in­cen­tives that will move them into in­dus­tri­al­iza­tion.

The World Bank has crit­i­cized Nige­ria for ban­ning the im­por­ta­tion of cer­tain goods. What’s your take on that?

The World Bank is within its man­date to pro­mote lib­er­al­iza­tion on all fronts. But all coun­tries that have in­dus­tri­al­ized started with de­grees of pro­tec­tion­ism. We can­not prac­tice crude pro­tec­tion­ism any­more; we are en­gaged in the global de­bate in­clud­ing trade ne­go­ti­a­tions. But if we have to make the rules work for Africa, that ba­si­cally means smart pro­tec­tion­ism. Is there not an ar­gu­ment that with­out lib­er­al­iza­tion, there will be no com­pe­ti­tion and prices of prod­ucts will shoot up?

There are sub­si­dies and pro­tec­tion rules that are coun­ter­pro­duc­tive. In the case of Nige­ria, fuel sub­si­dies are hurt­ing the poor and pro­tect­ing a chain of cor­rup­tion that has not been favourable to pro­duc­tiv­ity and to economic ac­tiv­ity. On the other hand, if we were talk­ing about Nige­ria with 16 re­finer­ies and pro­duc­ing the full gamut of oil-re­lated prod­ucts – from fer­til­iz­ers to plas­tics – and then put in place leg­is­la­tion to pro­tect that nascent in­dus­try so it can con­sol­i­date its po­si­tion in the mar­ket, sub­si­dies would have been a good thing.

The Nige­rian gov­ern­ment hasn’t been able to cal­i­brate the economic im­pli­ca­tions of a fuel sub­sidy with the po­lit­i­cal con­se­quences of its re­moval be­cause the sub­sidy is pop­u­lar with the peo­ple.

If peo­ple don’t trust you to re­move the sub­sidy so that they get bet­ter ed­u­ca­tion, hos­pi­tals, roads, air­ports and so on, it is nor­mal that they are not con­vinced. The gov­ern­ment must build trust and some­times it has to do so in a way that is not abrupt.

The Kenyan econ­omy has slowed down lately. It grew at 4.5% in 2010 and 3.3% in 2011. What can Kenya do to shore up its econ­omy?

I am very hope­ful for Kenya. There is a cer­tain qual­ity of ur­ban, in­no­va­tive youth in­ter­ac­tion that you see in Nairobi. That is why their ICT in­dus­try is sur­pris­ing us all the time with new prod­ucts. As much as we are all very ex­cited about the ex­pe­ri­ences of Ethiopia and Rwanda be­cause of the con­sis­tency of state en­gage­ment in pol­icy, I think in the long run Kenya has a bet­ter com­bi­na­tion of fac­tors even with some lack of co­or­di­na­tion now. I think Kenya is go­ing through a low phase that is very tem­po­rary.

How tem­po­rary?

I think a num­ber of fac­tors are go­ing to pro­pel Kenya. The first is when they fix their en­ergy prob­lem, and that is on the way. The sec­ond, there are lo­gis­ti­cal in­vest­ments tak­ing place that will make Kenya the hub for East Africa—air­ports, sea­ports, roads, rails. I would say in about three to four years’ time, Kenya will have a strong come­back. The third el­e­ment is that this is a very fresh new gov­ern­ment that came into power on the heels of a num­ber of chal­lenges in­ter­na­tion­ally, in­clud­ing the So­ma­lia in­sur­gency and the ICC [In­ter­na­tional Crim­i­nal Court].

Car­los Lopes, Ex­ec­u­tive Sec­re­tary of the UN Economic Comm

Africa Sec­tion / Bo Li

mis­sion for Africa.

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