Ag­ile pol­icy shifts will drive Africa’s re­cov­ery

CityPress - - Business - THULETHO ZWANE thuletho.zwane@city­press.co.za

The World Bank be­lieves that Africa’s road to eco­nomic re­cov­ery must be paved with sound eco­nomic poli­cies, and that African coun­tries need to re­con­sti­tute their fis­cal space to fi­nance pro­grammes that can stim­u­late re­cov­ery, im­prove debt man­age­ment and fight cor­rup­tion.

How­ever, the most cru­cial mea­sure of African coun­tries’ eco­nomic re­cov­ery will de­pend on how fast they can pri­ori­tise pol­icy ac­tions and in­vest­ment that ad­dress the dual chal­lenges of ex­treme unem­ploy­ment and in­equal­ity.

These as­ser­tions are con­tained in the World Bank’s Africa’s Pulse: Chart­ing the Road to Re­cov­ery re­port, which was re­leased on Thurs­day and looks at the im­pact of the Covid-19 pan­demic on the con­ti­nent’s economies. The re­port also makes rec­om­men­da­tions for how African coun­tries can move towards re­cov­ery, both in­di­vid­u­ally and col­lec­tively.

World Bank chief economist for the African re­gion, Dr Al­bert Ze­u­fack, said the Covid-19 pan­demic had ex­posed acute macroe­co­nomic vul­ner­a­bil­i­ties across the con­ti­nent. He said most coun­tries would emerge from the cri­sis with his­tor­i­cally large bud­get deficits.

“Fis­cal deficits in the re­gion will widen by 3.5 per­cent­age points of GDP in 2020. Debt bur­dens will be heav­ier. The risk of debt de­fault has started to ma­te­ri­alise for some coun­tries in the re­gion. De­clines in ex­port rev­enues, in­clud­ing from in­ter­na­tional tourism, have com­pounded the do­mes­tic im­pact of the Covid-19 shock in most coun­tries,” said Ze­u­fack.

He added that re­duc­tions in re­mit­tance flows, the slow­down in for­eign di­rect in­vest­ment and de­clin­ing pri­vate cap­i­tal flows had also tight­ened ex­ter­nal con­straints, leav­ing coun­tries in the re­gion with daunt­ing debt chal­lenges.

Ac­cord­ing to the World Bank, sub-Sa­ha­ran Africa needs sound poli­cies to lead the re­cov­ery. The re­port in­cludes the “jobs and eco­nomic trans­for­ma­tion agenda”, which pro­vides a pol­icy frame­work for the re­gion to im­ple­ment struc­tural re­forms, di­ver­sify trade, boost in­vest­ments in non-re­source-based sec­tors and ac­cel­er­ate digi­ti­sa­tion.

Ze­u­fack said South Africa was im­ple­ment­ing the struc­tural re­form agenda.

“The re­cently an­nounced sweep­ing re­forms to ad­dress en­ergy short­ages and re­duce the coun­try’s de­pen­dence on the state pub­lic util­ity, Eskom, is one such re­form.

“Pri­vate com­pa­nies have been in­vited to sub­mit bids to sup­ply ad­di­tional re­new­able en­ergy, mu­nic­i­pal­i­ties can di­rectly pro­cure elec­tric­ity from pri­vate-sec­tor re­new­able en­ergy pro­duc­ers and busi­nesses are al­lowed to pro­duce elec­tric­ity for their own use, thus end­ing the Eskom sin­gle-buyer model,” said Ze­u­fack.

The World Bank re­port states that jobs and eco­nomic trans­for­ma­tion are key to sus­tained, in­clu­sive and re­silient growth.

To achieve this, African coun­tries’ pol­icy pri­or­i­ties need to op­er­ate through three crit­i­cal and in­ter­re­lated chan­nels – dig­i­tal trans­for­ma­tion, sec­toral re­al­lo­ca­tion and spa­tial in­te­gra­tion.

Ac­cord­ing to the re­port, African coun­tries must ex­pand dig­i­tal in­fra­struc­ture and make con­nec­tiv­ity af­ford­able, re­li­able and univer­sal across the con­ti­nent.

“A shift­ing of re­sources towards non­tra­di­tional eco­nomic sec­tors with higher pro­duc­tiv­ity, lower volatil­ity and greater value ad­di­tion, as well as fully lever­ag­ing the African Con­ti­nen­tal Free Trade Area agreement, will be equally crit­i­cal,” said Ze­u­fack.

He said the fos­ter­ing and re­al­lo­ca­tion of re­sources from less to more ef­fi­cient jobcre­at­ing lo­ca­tions through en­hanced ru­ralur­ban and in­land-coastal con­nec­tiv­ity would be key to eco­nomic trans­for­ma­tion.

He added that African coun­tries needed a reg­u­la­tory en­vi­ron­ment so that they could pro­vide the right in­cen­tives for fast dig­i­tal tech­nol­ogy adop­tion.

“More com­pe­ti­tion among mo­bile op­er­a­tors (in­clud­ing ac­tions to at­tain univer­sal, af­ford­able ac­cess to high-qual­ity com­mu­ni­ca­tions ser­vices), sup­port of crit­i­cal ser­vices and high net­work re­silience – cy­ber­se­cu­rity – are crit­i­cal. Dig­i­tal skills, which rest on foun­da­tional hu­man cap­i­tal, are linked to bet­ter op­por­tu­ni­ties and will be cru­cial to pre­vent the ex­clu­sion of al­ready marginalis­ed seg­ments of the pop­u­la­tion from the ben­e­fits of con­nec­tiv­ity,” said Ze­u­fack.

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