AFRICAN FORUM AND NETWORK ON
DEBT AND DEVELOPMENT
Contribution at the
6th Joint Annual
meeting of the AU Conference of Ministers of Economy and Finance and the ECA
Conference of African Ministers of Finance, Planning and Economic Development.
By Dr. Collins Magalasi
Abidjan, Cote d’Ivoire
Opening Remarks
On behalf of the African Forum
and Network on Debt and Development (AFRODAD) Board, Management and Staff, I
would like to thank the African Union (AU) and the Economic Commission for Africa
(ECA) for inviting AFRODAD to the Conference and also for the opportunity to
contribute to the discussions. I have a few points to state and suggest on, but
first a short background.
Background
AFRODAD is a Pan African Civil
Society institution born of a desire to secure lasting solutions to Africa’s
debt and development problems which has impacted negatively on the lives of the
continent’s citizens and the future generation. AFRODAD’s strategic goal is to
support ‘African Governments institute and implement policies and practices
that enable African countries to develop without indebtedness.
The African continent is richly
endowed with high value natural and human resources including gold, platinum,
diamonds and other precious metals, timber, gas and oil. Paradoxically Africa
is the poorest continent on earth, and yet highly indebted to the developed
countries. Many African countries have become heavily indebted in the process,
or as a result of following western prescribed policies and programmes such as
Structural Adjustment Programmes (SAPs). Three quarters of Africa’s population,
whose majority are women and youths are poor and lack basic services such as
food, clean, water, shelter and clothing.1 Unfortunately, poverty makes these majority of the citizens
disempowered and are unable or prevented from decision making processes largely
due to structural reasons.
Africa has for long wished and
discussed the need for industrialisation. The African Heads of State and
Government, at January 2008 Summit of the African Union, endorsed the
resolution of the 2007 Conference of African Ministers of Industry (CAMI)
themed “Africa’s Industrialisation” and resolved to put into action the
Accelerated Industrial Development of Africa (AIDA).
In 2013 the 6th Joint
Annual meeting of the AU Conference of Ministers of Economy and Finance and the
ECA Conference of African Ministers of Finance, Planning and Economic
Development are meeting in Abidjan, Cote d’Ivoire to discuss the
operationalisation of “Industrialisation
for an Emerging Africa.”
AFRODAD was officially invited to
the aforementioned 2013 Joint Annual Meeting and is participating as an
“Observer” and is entitled to making contributions to the Committee of Experts
that prepares reports for adoption by the Conference of Ministers. Following
therefore is the submission that AFRODAD and its partners make to the Committee
of Experts and subsequently to the Conference of Ministers.
1.
AFRODAD is fully in support of the
industrialisation of Africa.
Literary, all
developed countries are industrialised; and evidence shows that their
industrialisation came about through specific trade, industrial and technology
policies and institutions that protected their national infant industries.
AFRODAD therefore calls on African governments to resist and desist any
irresponsible western-type laissez-faire and free market dogma, and take
responsibility and deliberate actions to promote African institutions to
industrialise, including small and medium enterprises (SMEs).
2. Enough lessons should have been learned from
Africa’s experience under the painful Structural Adjustment Programmes (SAPs)
which focused on creating macroeconomic stability and structural reforms
conducive for foreign firms at the expense of Africa’s own home grown firms.
SAPs made Africa withdraw its support to infant domestic firms in the presence
of pervasive market failures and unfair trade liberalization. New SAPs, in
whatever forms or languages must not be entertained.
3. AFRODAD is aware that the industrialisation
of Africa faces many challenges, among them (a) poor infrastructure, (b)
Inadequate or poor access to finance, (c) low labour productivity, (d) high
uncertainty and investment risks (both perceived and real), (e) lack of
capacity to improve, certify and assure quality and standards of Africa’s
industrial products, (f) limited technology, and (g) threats of climate change.
We call on African governments to work on these challenges and others
expediously.
In this regard,
AFRODAD recommends that studies and decisions must be documented on the
following areas:
·
Lessons that Africa has learned from its past
efforts on industrial policy, in order to design, implement, monitor and
evaluate its new industrial strategies.
· Lessons that Africa can draw from the industrialization
of East Asia (as their conditions are similar).
· Define in clear terms what role the governments
and other stakeholders will play in addressing the above constraints.
· Agree on how Africa can stand against the
pressure against Africa’s industrialization that is exerted in the World Trade
Organisation talks.
4. AFRODAD is also fully aware that financing
the industrialization drive is killer challenge. With gross savings in Africa
at only 17.6% of GDP (compared to South Asia’s 26%, Latin America’s 24% and
East Asia’s and Pacific’s 42.9%),[1]
innovative financing is needed for
the industrialization, and in Africa the financing mechanism that is needed is
one that promotes savings and investment
in the economy. Areas to consider seriously include Financial Intermediation
and a well functioning financial system that can mobilize resources and
allocate them to productive investments.
The following
are areas that Africa should concentrate in raising the innovative finances for
industrialisation:
(a)
Domestic Resource Mobilisation
Africa can easily have resource-based
industrialization. In this regards, governments must put in place policies and
strategies that allow financial and capital markets to make credit available to
SMEs, who constitute over 75% of Africa’s intra-trade is with SMEs. In
addition, Africa needs to build on the progressive growth of stock markets,
development and capitalisation of Development Financial Institutions[2]
and consider establishment of National Sovereign Wealth Funds.[3]
(b)
Continental Resource Mobilisation
The African Union has been considering the
establishment of a continent wide fund for industrial development in Africa. It
is time for action and make this plan a reality. The African Union Industrial
Development Fund must have special purpose funds that can be tapped at regional
or national level, especially to finance machinery and equipment, which
accounts for over 80% of any industry set ups.[4]
(c)
International Resource Mobilisation
For over half a century, Africa has been duped by
foreign investors. In the bid to attract these FDIs, Africa has lost its
control over its development agenda and lost trillions of dollars that could
have been reinvested in Africa. AFRODAD recommends that the AUC and UNECA
should study the cost that Africa pays
for attracting FDIs. Governments must withdraw tax incentives and holidays
given to FDIs and promote local firms.[5]
Much as FDIs to Africa have increased over the years,
it is regrettable that most of these have gone into natural resource
exploitation. African government need to be in the driving seat and direct the quality of investment flows into
their countries towards productive and value addition sectors.
In addition, deliberate actions must be taken to
promote local enterprises to become
suppliers or subcontractors to Multinational Companies (MNCs).
Every effort must be made to stop MNCs from illicit financial flows. In this regard, Africa must
demand closure of tax havens and ensure country-by-country reporting.
(d)
Hybrid Savings and Investment Resource
Mobilisation
One innovative source of financing for Africa’s
industrilaisation is savings from Africans living in diaspora. It is estimated
that between 2012 and 2014, a whooping US$75 billion will be sent to Africa
from Africans in diaspora.[6]
This is more than half of the net aid expected from donors in the same period.[7]
AFRODAD is pleased to note that the African Union has been
championing the setting up of a facility that would leverage diaspora
resources. We note however that at the moment there is no Diaspora policy that
would guide the relationship between Africans in diaspora to their home
countries and we call for development of Diaspora Policy to be developed as a
matter of urgency.
All of the above
innovative sourcing of financing requires, as a preliquisite, review of legal and institutional
frameworks of African countries in order to be able to stimulate
sustainable access to credit and private financial resources.
With the debt
crisis fresh in the memory of every African, it is imperative that financing of
this ‘new African’ industrialization must not lead to continent back into the
debt trap. In this regard, we propose that the AUC and UNECA should conduct
study on Debt and Industrialisation.
Conclusion and Closing Remarks
In conclusion, AFRODAD fully
supports our leaders’ commitment to industrialise Africa. We believe in the
saying that “where there is a will there
is always a way” and we hope our leaders know that it is time for ACTION,
and not just talk. Africa’s wise leaders Kwame Nkrumah and Julius Nyerere gave
the scenarios for industrialisation and our generation therefore has the motivation
to do things differently. AFRODAD appreciates the growing relationship with the
AUC and ECA, Regional Economic Blocks in Africa and individual African
governments. Together, we can.
Thank you
Dr.
Collins Magalasi and Ms. Nyasha
Munditi
Abidjan, Cote d’Ivoire, 23rd March
2013
[1]
World Bank, 2011
[2]
Such as Development Bank of Southern Africa, IDC, PTA Bank, Islamic Bank, AfDB
etc
[3]
Lessons can be learned from the Norwegian Oil fund , for example
[4]
UNCTAD, 2012
[5]
Tax incentives given to FDIs are subsidies that poor people make to the rich
foreign investors.
[6]
World Bank estimates that in 2012 remittances will be $24 billion, 25 billion
in 2013, and up to $27 billion in 2014. See http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22141991~menuPK:34480~pagePK:64257043~piPK:437376~theSitePK:4607,00.html
accessed on 2nd March 2013.
[7]
See OECD/DAC, 2012
