Huge benefits to joining Islamic Development Bank Group
THIS coming week the finance ministers of Mozambique, Adriano Afonso Maleiane, and Uganda, Matia Kasaija, will join 20 counterparts from sub-Saharan African (SSA) countries at the top table at the 46th Annual Meetings of the 57-member Islamic Development Bank (IsDB) Group in Tashkent, Uzbekistan.
As IsDB board governors they will join their counterparts from the five North African member countries and 30 Asian, Middle Eastern and Latin America ones, to discuss the ongoing challenges of the Covid-19 pandemic that has ravaged the global economy.
Whether it is GDP growth rebound in 2021, access to and delivery of vaccines and supply of essential medicines, medical equipment and food, the developing countries, especially in Africa and Asia, are at the bottom end of the recovery curve.
The IMF, for instance, projects SSA to have the slowest GDP growth rebound in 2021 at about 3-4%. The notable absentee in Tashkent is Africa’s third largest economy after Egypt and Nigeria, namely South Africa.
While the leaders of Christian majority Mozambique and Uganda had the foresight to join the IsDB in 1995 – a year after democracy in South Africa – and in 1977, two years after its establishment in Jeddah, the nascent ANC government perhaps was preoccupied with transforming from a liberation movement into a governing party.
There was a certain naivety in ANC foreign policy then. Even in Madiba’s term, there was a failure in formulating a coherent foreign policy towards the Organisation of Islamic Co-operation (OIC).
Above all, his failure to join the OIC and its organs, including the IsDB, was a major oversight that potentially cost South Africa billions in lost opportunity costs, especially in concessionary trade and development financing.
The membership of the OIC and IsDB, contrary to popular misconception, is not confined to Muslim majority countries.
The business case for South African accession to the IsDB Group is clear and present. The IsDB, after the World Bank, is well resourced with the second-largest subscribed capital of any MDB at $70 billion and operating assets of more than $16bn, with access to further callable capital and fundraising in the capital markets through regular Sukuk issues.
Despite its economic and social issues, South Africa has the potential to be the FDI destination of choice for many of the wealthier member countries that are searching to diversify their investments into sustainable opportunities in line with the UN SDGs and the provisions of the Paris Climate Change Accord on global warming.
IsDB membership could fast-track a much-needed upward FDI trajectory to South Africa.
GCC interest in South African assets is fast gaining momentum judging by the investment of Saudi Arabia’s ACWA Power in two renewable power projects in the Northern Cape, and the R12.7bn cash offer in July by Dubaibased DP World for JSE-listed Imperial Logistics.
Perhaps the real economic benefits of IsDB Group membership are best articulated by Amadou Hott, Senegal’s Minister of Economy and Planning: “In the pandemic period,” he maintained, “optimising our borrowing has become a crucial exercise. Senegal has benefited from ICIEC’s insurance to mobilise resources from private lenders given the scarcity of concessional lending.
“This gives comfort to investors and allows them to be more flexible in extending the maturity on facilities.
“Thanks to ICIEC’s risk mitigation tools we managed to secure private financing for the rehabilitation of a major water collection system in Dakar.
“The financial structure was innovative because it enabled Senegal to borrow in local currency. Without ICIEC’s support many of these investments would have taken time to financial close, and probably at a much higher cost,” he declared.