Sustaining Africa’s Economic Transformation

Fri, May 31, 2013
By publisher
7 MIN READ

AfDB Special Coverage, Featured

Participants at the seminars and panel discussions which formed part of the 48th annual meeting of the African Development Bank stress the need for the prevailing economic growth in Africa to be sustained and transformed

|  By Maureen Chigbo, reporting from Marrakech, Morocco  |  Jun. 10, 2013 @ 01:00 GMT

THE 48th annual meeting of the African Development Bank, AfDB, opened on May 27, in Marrakech, Morocco, with an avalanche of seminars and panel discussions on a variety of issues affecting the development of Africa. The five-day meeting which ended Friday May 31, focused on the need for Africa to turn economic growth into a truly shared and sustainable economic transformation in the next half century. The sessions for discussions which were scheduled almost at the same time at different venues, within the Palais de Congress PGP complex, had more than 2,000 delegates from different countries in Africa and the world attending who participated actively.

African leaders at the formal opening ceremony of the 2013 AFDB annual meeting
African leaders at the formal opening ceremony of the 2013 AFDB annual meeting

The large number of delegates made it possible for the various meeting venues not to lack participants who were interested in the issues being discussed. As a result, various meeting arenas were crammed with investors, development partners and representatives of donor agencies, and media organisations. About 150 journalists from all over the world covered the annual meeting, which was basically geared towards moving the continent forward. Some journalists, especially those from media houses which had only one reporter covering the events were overstretched as they had to dash from one interesting discussion session to another.

Participants at various forums discussed issues ranging from what Africa’s energy sector needs, sustainable development in Africa, transformation of the continent’s infrastructure, sustainable energy funding for Africa to the launching of two different reports – African Development Report 2012: Towards Green Growth in Africa and African Economic Outlook 2013 with the special theme: Structural Transformation and Natural Resources.

According to the African Economic Outlook 2013 report, Africa’s GDP grew at 6.6 percent in 2012 from 3.5 in 2011. This acceleration was partly due to considerable rebound in Libya’s GDP which in 2012 grew by 96 percent, after a sharp contraction of 60 percent in 2011 following the revolution. Netting out the Libyan effect,  the growth in Africa’s real GDP was recorded at 4.2 percent. Thus, Libya’s economic recovery added more than two percentage points to Africa’s growth in 2012.

The report said that the medium term economic outlook for Africa remains favourable despite some countries’ specific challenges and headwinds from the global economy, in particular Europe’s debt crisis and fiscal uncertainty in the United States. “The projections assume a gradual improvement in global economic conditions, consolidated domestic macroeconomic stability coupled with the reign of peace in countries still plagued by political instability.

“Under these conditions, consolidated domestic macroeconomic stability in Africa is projected to grow by 4.8 percent in 2013 and accelerate to 5.3 percent in 2014. The main engines of growth are expected to be an expansion in agricultural production, robust growth in services and, a rise in oil production and increased mining activity mainly in resource-rich countries,” the report said. This relatively broad-based pattern of economic growth will be underpinned by resurgence in supply and domestic demand conditions, the latter driven by an increase in consumption and investment.

Cross section of audience at the opening ceremony
Cross section of audience at the opening ceremony

The report said that in 2012, Africa’s monetary authorities had to contend with inflationary pressures stemming from higher food and fuel prices, and in some East African countries, rapid credit expansion and depreciation of exchange rates. Accordingly, average inflation in Africa increased to 9.1 from 8.5 percent the previous year, with Sudan’s inflation topping at 36 percent. In view of the inflationary risks, the authorities in several countries pursued a delicate trade-off between supporting economic growth and controlling domestic inflation. In some countries, fiscal policy was used to boost demand, thus mitigating the adverse impact from the global economy. However, countries with limited fiscal space, continued with fiscal consolidation strategies to ensure debt sustainability.

“For 2013 and 2014, we expect some easing of inflationary pressures, largely due to relatively stable oil and food prices,” the report said. According to it, the main short-term challenge for the continent is to consolidate stable macroeconomic conditions in the face of a more volatile economic environment. In addition, institutions and regulations for private sector activity must further improve. Also addressing infrastructural bottlenecks, increasing access to key public services such as education, health and security would put countries on a durable high growth path while simultaneously paying heed to concerns of high poverty and widening income inequality.

On the other hand,  the African Development Report 2012 said that reducing poverty and improving the livelihood prospects remain an absolute priority in Africa, but the aim should be to identify development choices that reach economic objectives while also ensuring that a country’s social and environmental assets are managed effectively and sustainably.

Despite the reports’ projections, the annual meetings where they were launched was held at a crucial time, a time that the quality of growth and the sustainability of growth “are the two main issues confronting Africa today”, said Donald Kaberuka, AfDB president, on  May 25, at the African Union’s 50th anniversary celebrations in Addis Ababa, Ethiopia. For Kaberuka, “Africa is rising, and it needs a push. The rest of the world is languishing, and it too needs a push. Africa needs the world, and the world needs Africa. Each can give the other a push.” For the AfDB, Africa’s challenge is to bring its extraordinary progress of the last decade to scale over a critical lack of infrastructure namely, transport, energy, water, telecommunications, which is the basis for all growth; lack of regional economic integration between what are still fragmented national markets; and the pockets of serious fragility that still persist across the continent.

Nizar Baraka Moroccan Minister of Finance and chairman of the board of governors of AFDB
Nizar Baraka Moroccan Minister of Finance and chairman of the board of governors of AFDB

“Africa, the African Development Bank and our international friends are on the case with all three. We have the will, we have the systems, but we still don’t have all the funds. The Bank can work magic with what it is given, raising nine dollars for every one of its own,” he said. According to the AfDF president, the Bank’s two main financial challenges are: “First, we need our non-African members’ full support in making a big injection into the Africa Development Fund – Africa’s fund, for Africa’s future. The AfDF gives concessional loans and grants to our most vulnerable members, whose need is the greatest. Its track record is superb. With a serious push now, it can bring a lasting change to our fragile states, as it has done in Liberia and Sierra Leone to name but two, and as it is in the process of doing  so in Somalia and Mali.

“Secondly, we need our African members’support in a new initiative which we believe is a visionary solution to bring about the vision of transformation, and a revolutionary response to failings in finding, facilitating and funding infrastructural projects.”Our new Jubilee infrastructure bond will combine public and private investment, both domestic and international, and bring projects to bankability. With a $10 billion start-up – that is just two percent of Africa’s combined foreign exchange reserves – it will allow us to finance $100 billion worth of projects, more than the entire Programme for Infrastructure Development in Africa, PIDA, Priority Action Plan for 2020,” Kaberuka said. The Marrakesh meeting involved the AfDB Board of Governors decision on the Bank’s return to its original headquarters in Abidjan, Cote d’Ivoire next year.

The annual meeting ended with a 15-point communique in which the board of governors agreed on the need for Africa’s structural transformation that required long-time commitment of African leaders. This is critical in order to develop timely solution to the challenges of job creation, equitable allocation of benefits of growth and the continent’s natural resources as well as effectively harnessing the demographic dividends of Africa’s young population.

The board also decided that the next annual meeting  will be in Kigali, Rwanda. It also approved a road map for the bank’s return to its headquarters in Abidjan, Cote d’Ivoire. The board also welcomed the proposed Africa-50-fund in response to the request of the heads of government to innovative financing solution to address Africa’s infrastructural deficit.

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3 thoughts on "Sustaining Africa’s Economic Transformation"

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