Unlocking the keys of finance
Panellists on the opening day of the Afreimbank Annual Meetings included Tarek Hassan Amer, Governor of the Central Bank of Egypt; Dr Denny H. Kalyalya, Governor of the Bank of Zambia; Dr Vera Songwe, UN Under-Secretary General and Executive Director of UNECA; Rose Whitaker, President and Chief Executive Officer, Whitaker Group; Arnold Ekpe, former Group Chief Executive of Ecobank; and H.E Albert Muchanga, African Union Commissioner for Economic Development.
Africa finds itself at a difficult juncture. Opportunities abound and it is home to strategic resources, not only in the industries of today, but also the industries of the future. Nonetheless, sovereigns have little fiscal space, exogenous shocks are more frequent and more prevalent, and current market conditions are volatile, meaning that global portfolio funds are shying away from frontier and emerging markets.
This means that Africa will have to rely on its own domestic resources and African-led solution to reverse the slowdown of the last two years and to help it achieve sustained double-digit growth that helped East Asian economies achieve the economic miracle that helped propel them to become so successful.
However, Dr Vera Songwe, Executive Secretary at the UN Economic Commission for Africa (UNECA), called for more international support, especially from the large multilateral institutions. She said Africa had every right to access support from external sources, recalling that following the financial crash of 2008, European countries had to be supported through
Special Drawing Rights (SDRs) from the multilateral institutions to survive the crisis and its after-effects, which is why she has been fighting so hard over the past two years to allow similar treatment for African economies.
Africa would need such a vehicle in the face of the current crises, with food and petroleum prices expected to rise and wreak further damage on African economies. She said the SDRs could mean an extra $2.4bn for a country like Egypt, which would be helpful as it confronts the prospect of spending much more money on imports of wheat to feed its people. She emphasised that ultimately the solutions remain the same as what has been prescribed for many years now:
African countries still need to trade more with each other to create more jobs and provide more opportunities so that the youth can play useful roles in their social and economic systems.
In response to a comment from Presi
dent Abdel Fattah el-Sisi of Egypt that ultimately governments were being penalised by a lack of support on international markets and extortionate borrowing costs, Songwe said UNECA is working with Afrexim to set up a liquidity and sustainability facility to reduce cost of financing.
Albert Muchanga, Commissioner at the African Union (AU), who was instrumental in the creation of the AfCFTA, reemphasised the need for quality infrastructure for greater trade and integration. Regarding the AfCFTA and how to reap its benefits, he said that the AU, in partnership with the African Standards Organisation, was close to finalising “Made in Africa” standards to help ensure control guarantees that will help intra-African trade.
He also highlighted how the AU has partnered with Afreximbank to develop an automotive industry strategy that will be presented to trade ministers for approval. This is already generating interest and will help in the drive to improve Africa’s share of global trade, which has receded from
6% in the 1970s to 2.7% currently. He said the AU is working with Afreximbank on an export diversification programme with a view to accelerating manufacturing and agro-processing on the continent.
Rose Whitaker identified four crisis points that in her view, also represent opportunities for the continent. The cost of capital, which is crippling investment in infrastructure, health and education on the continent, estimated at $213bn a year, can be addressed when one considers that Africa is endowed with $28 trillion worth of mineral resources.
With climate change, Africa may end up paying for the excesses of other economies, but its strength in the green economy is ultimately an advantage. Africa also needs to address the lack of physical and digital connectivity and prepare for the fourth industrial revolution.
Whitaker, a former adviser to President Bill Clinton who helped institute the AGOA programme, which provided African countries with preferential terms to sell to the American market, said she has put forward a plan to President Biden’s administration, through tax credits and other initiatives, to help channel US capital investments into the continent.
Renowned banker and investor Arnold
Ekpe argued that the future of Africa lies in greater integration and the removal of barriers to movement for Africans in their own continent.
While the challenges of Ukraine, Covid-19 and the supply chain will eventually be addressed, Mr Ekpe said Africa must learn lessons from the crisis, by trading more with each other, developing native payment systems and building scale to absorb any potential shocks in the future.
He also made a clarion call to grow Africa’s financial institutions: no country ever developed with small banks, and as such we need to capitalise our banks so that they can be the drivers of development and urged policy makers to pursue initiatives to make this possible.