Search News Results
Lopes: Africa needs a new aid paradigm
African governments need to find consensus positions so that continent’s voice is heard in international negotiations, says Carlos Lopes, the Executive Secretary of the United Nations Economic Commission for Africa.
Next year will be a critical point for international development assistance. The Sustainable Development Goals are set to replace the Millennium Development Goals; the third International Conference on Financing for Development will redefine the shape of overseas development assistance (ODA). The Paris Conference will look to set the terms for the international response to climate change, including adaptation funding.
“This is a time when the continent, thanks to its growth and its new narratives, has the opportunity to join the other regions of the world that have ‘liberated’ themselves from ODA,” Lopes says. “We have a unique opportunity to review completely what is the purpose of ODA, on one hand, and on on the other hand reach out to new types of partnerships – partnerships which are not ODA-centred.”
These partnerships, Lopes says, need to include the public and private sectors and need to focus on unlocking and leveraging Africa’s own resources through technical assistance, by helping to stem the tide of illicit financial flows out of the continent and by improving the investment climate.
Lopes is encouraged by the progress that has been made in formulating coherent positions in negotiations with the European Union over Economic Partnership Agreements. He is also impressed, he says, with the way that governments in several resource-rich countries, including Guinea, Gabon and Niger have aggressively renegotiated deals with mining companies which they viewed as exploitative, making difficult short-term decisions to achieve long-term gains.
“I think it is encouraging is that you have countries looking at their context with different eyes and being willing to pick a fight if they have not been respected,” Lopes says.
“The good news that in most cases where countries have gone into these kinds of negotiations, they have won big for their countries… In each case, they had to go through a very difficult period. It’s not a free lunch.”
In the long run, ending “predatory” relationships between the public and private sector makes for a more stable environment for both, Lopes says. Pragmatism is gradually winning out over the ideologies that pushed African governments to invite the private sector in at almost any cost.
“I really believe that these dichotomies are over,” he says. “We are in a period where countries need to be strategic, and being strategic means the best mix… The less ideological we are the less we are going to have hangovers of past discussions between market and state and so on, because it doesn’t make any sense anymore.”
Africa is also finding coherence as it addresses common challenges, such as regional economic integration and climate change.
“Africans are the first group of countries that have a committee at the head of state level on [climate change], chaired by President Kikwete. The blueprint that they are proposing is no longer the usual African position of just trying to get some compensation for adaptation, but rather saying that they are part of the solution, that they can industrialise and do it in a green and cleaner way,” Lopes says.
That coherence has not entirely translated into solutions, but there is definite progress, he believes. “We have to find the common denominators that are powerful enough and have the pulling effect that will allow for
“Africa to take advantage of a unified position,” he says. “I believe we have seen the baby steps in that direction. It’s not yet consolidated, but we are making huge progress in terms of forming African positions and getting Africa ready for a more assertive role.”
Click here for more from the Ninth African Development Forum.
Related News
Africa’s transformation depends on how well we mobilize inputs and promote infrastructure through Africa50
The Ninth African Development Forum (ADF) opened on October 13 in Marrakech with the call by the African Development Bank Group (AfDB) for stronger emphasis on infrastructure and for ownership of the Africa50 Fund, “a profit-driven entity seeking to provide risk-adjusted returns to its investors, while building Africa of the future.”
Speaking on behalf of the Bank Group, Operations Vice-President, in charge of Agriculture, Human Development and Governance, Aly Abou-Sabaa, said he believes in Africa’s transformation. He said many countries in the region are hungry for infrastructure investments, and now is the best time for African governments and their development partners to focus on fast-tracking resources.
Abou-Sabaa said infrastructure is vital for transformation, but added that “other sectors are central, including agriculture, good governance, health, education systems.
“Africa’s transformation cannot occur with weak governance, health or education systems or within a context of prevailing food insecurity,” he said. He also addressed various unforeseeable crises prevailing in the region, including HIV-AIDS, malaria and Ebola.
The Vice-President explained that in spite of agriculture contributing up to 25% of Africa’s GDP and employing about 60% of the population, the continent still imports US $25 billion worth of food every year. “The Bank is promoting participation of anchor investors in private sector investment in agriculture,” the Vice-President stated.
Infrastructure, a gap of US $50 billion annually
The big challenge is that Africa invests only 4% of its collective GDP in infrastructure, compared with China’s 14%. For the continent’s future to be rosy, its premier development finance institution – the AfDB Group – has made every effort to help bridge the infrastructure gap.
Abou-Sabaa expounded on the Bank’s estimates, observing that “the annual financing need for African infrastructure is about US $95 billion, of which only US $45 billion is currently invested each year, from African governments, development finance institutions and the private sector.”
Building on these facts and figures, Abou-Sabaa argued that Africa’s transformation largely depends on how well countries mobilize inputs from a range of stakeholders, promote infrastructure through new vehicles such as the Africa50 Fund, invest in their human capital, and foster good governance to enable a business-conducive environment.
Africa50 Fund to directly inject US $10 billion in projects
He also said the Bank has created Africa50 Fund, headquartered in Casablanca, as the new game-changing solution to stimulate and drive the African infrastructure market.
The Africa50 Fund, “seeks to reconcile governments’ strategic objectives of meeting the substantial investment needs in infrastructure and the attractiveness of African assets to the growing sources of domestic and international capital,” Abou-Sabaa said.
More importantly, the long-term strategic aim of Africa50 is to invest directly US $10 billion in projects, and facilitate total project investments of US $100 billion by crowding in private-sector players and enticing investors.
The Bank Group in recent years has put much emphasis on the key role played by the private sector in implementing infrastructure projects, especially in the power and transport sectors, for the development and transformation in Africa.
AfDB strongly believes in Africa’s transformation
The Operations Vice-President vividly called for a significant involvement of the private sector, as well as more bankable projects with viable local financial markets capable of leveraging project investments.
Stressing the need for sustainable tax systems and systematic analysis of new and innovative ways of mobilizing domestic resources, the Vice-President offered the Bank’s assistance to African countries in reforming their tax systems and in modernizing revenue administration systems including, where appropriate, systems automation.
The opening session also heard keynote addresses from the Kingdom of Morocco, Ivoirian President Alassane Ouattara, Senegalese President Macky Sall, as well as Cape Verde’s Prime Minister, José Maria Pereira Neves.
The ADF in Marrakech brings together more than 800 participants, comprising political leaders, government officials, academics, key players of the private sector and civil society organization as well as national and international media.
The ADF is a flagship biennial event of the UN Economic Commission for Africa, convened in collaboration with the African Union Commission, the African Development Bank and other key partners. The event, which runs from October 12-16 in Marrakech, offers a multi-stakeholder platform for debating, discussing and initiating concrete strategies for Africa’s development.
Related News
Post-Bali Negotiations on Agriculture: the Challenge of Updating Global Rules on Trade
At the ninth WTO Ministerial Conference in Bali, Ministers agreed to prepare a “clearly defined” work programme on the remaining Doha Development Agenda (DDA) issues. However, the global agricultural trade landscape has evolved significantly since negotiations froze in 2008 – and even more so since Doha was launched in 2001. As WTO Members start crafting the contours of a possible post-Bali agenda, developing a sound understanding of this new global reality and its implications for future multilateral disciplines in agriculture is critical.
This information note summarises some of the findings of the ICTSD e-book “Tackling Agriculture in the Post-Bali Context: A Collection of Short Essays”, edited by Ricardo Meléndez-Ortiz, Christophe Bellmann and Jonathan Hepburn. The book builds on the most recent analysis of global trends and domestic policy reforms to inform negotiations on a post-Bali agricultural trade agenda. It features a series of concise, non-technical and solution-oriented papers by leading experts and thinkers, covering systematically all elements of the agricultural negotiations on market access, domestic support and export competition.
Related News
Kenya is ill-prepared for global food price spikes as happened in 2008/2011
Kenya is not prepared for another spike in global and regional food prices.
In 2008, Kenya suffered from the combination of post-election violence, rising prices for food and fuel internationally, and poor harvests nationally.
This sent food inflation as high as 27 per cent that year, hampering the ability of Kenyans across the country to afford a nutritious diet.
This, and a subsequent spike in 2011, sparked protests both large and small, the most visible and memorable being the Unga revolution.
Having researched the policy responses to the price spikes of 2008 and 2011, we have concluded that Kenya’s current food and agricultural policies will not effectively mitigate the impact of the inevitable reoccurrence of global food price spikes.
The measures that the government took then (such as the short-lived provision of subsidised unga to designated depots in low-income areas of Nairobi) were driven by momentary political anxiety and the rivalry that defined the Grand Coalition government, rather than commitment to institute a sustained response to hunger that can effectively mitigate the differential impact of food price shocks on millions of people on low incomes.
Kenya’s drought response and famine relief programmes have all but eliminated hunger-related deaths over the last two decades.
While this is laudable it leaves unaddressed the problem of chronic hunger or persistent undernourishment caused by high food prices. Since the price rises of 2008, Kenyans eat less, and eat cheaper but less nutritious foods.
This is one of the reasons that Kenya remains the African country with the fourth-highest rate of undernourishment: not starving, but suffering from an inadequate intake of nutrients, which can be deeply harmful for long-term cognitive development of children.
FREEDOM FROM HUNGER
The 2010 Constitution guarantees to every Kenyan the right “to be free from hunger, and to have adequate food of acceptable quality” (Article 43 (1)(c).
There is as yet no system of institutionalised accountability that protects this right for citizens. The system we have in place at the moment can only guarantee us the right not to die from hunger.
Some efforts have been made to create social safety net programmes.
The examples include cash transfer programmes for the elderly, orphaned and vulnerable children, those living with HIV/Aids, and through a Hunger Safety Nets Programme.
These have limited coverage, and heavy donor dependence raises questions on their sustainability.
The expansion of social safety net programmes should not be our main preoccupation though.
The fundamental obstacle to securing affordable food is two-fold. First, skewed policies such as maize marketing interventions and production subsidies that benefit only the producers of surplus: 50 per cent of Kenya’s maize production comes from only two per cent of farmers; and 70 per cent of Kenya’s small-scale maize farmers are net buyers, meaning that they end up buying more than they sell, so the producer prices offered as an incentive by the National Cereals and Produce Board are ultimately of no benefit to them.
The second factor is government failure to hold to account its own officials as well as millers and grain traders engaging in corrupt and predatory practices that drive food prices up.
A system of accountability for hunger that delivers on the constitutional right to food is unlikely to be secured without a national right-to-food movement that cuts across urban and rural parts of the country in a sustained effort to eradicate predatory and corrupt practices in food markets and food aid.
Related News
CFS to endorse principles for responsible investments in agriculture and food systems
International forum will also endorse policy recommendations on food losses and waste and sustainable fisheries and aquaculture
The Committee on World Food Security, the world’s foremost inclusive intergovernmental and multi-stakeholder platform for food security and nutrition, on Monday opened its 41st session (CFS 41). The Committee is expected to adopt a set of principles for responsible investment in agriculture and food systems that have been in development for the past two years.
“Progress against hunger continues,” said FAO Director-General José Graziano da Silva in his address to the CFS. He cited FAO figures showing that about 805 million people are chronically undernourished in the world today, some 209 million less than in 1990-92.
“Food security is everyone’s business. It is a society – not a government – that decides to eradicate hunger and achieve food security. Political commitment and leadership from governments is the first step. However, civil society, private sector and other non-state actors also need to embrace this goal. At the global level the CFS promotes an enabling environment for this to happen,” the FAO chief said.
Reading out an address to the CFS by UN Secretary-General Ban Ki-moon, UN Assistant Secretary-General, Thomas Gass, said the CFS’ “focus on knowledge and expertise, on rights and effective multi-stakeholder dialogues and partnership is advancing our shared work to realize my vision of a world with zero hunger.”
Since its establishment the CFS has envisaged a future without hunger and I share that vision. A focus on rights, on sustainable waste-free food systems and on responsible, accountable collaboration between stakeholders will, help us tackle root causes of food and nutrition insecurity,” the UN Secretary-General said.
CFS Chair Gerda Verburg said that reports on food insecurity and malnutrition all emphasize the key role played by responsible and sustainable investments in agriculture and the food system.
“This is why we have negotiated principles for responsible investment in agriculture and food systems, which are on the agenda for endorsement at this session,” of CFS, Verburg said. These would foster “not only more but especially better investment in agriculture and food systems to meet the challenge of sustainable global food and nutrition security for all.”
In her address, Ertharin Cousin, Executive-Director of the World Food Programme (WFP) said that the CFS session is taking place at a time “when our world is increasingly fragile.”
“An unprecedented number of shocks, stresses and-ever-more complex-crises now threaten food and nutrition security, repeatedly proving that without stability-the fourth dimension of food security-food systems can quickly collapse, sometimes in matter of weeks, to humanitarian crisis, setting back years of progress in hunger reduction,” Cousin said.
In his statement to the opening of the CFS, International Fund for Agricultural Development (IFAD) Vice President, Michel Mordasini, noted how “investing into rural transformation and smallholder farming is pivotal for achieving national and global food and nutrition security, as well as for ending poverty.”
Policy roundtables
During CFS 41, the first of two policy roundtables will focus on the issue of food losses and waste, which currently amount to one-third of food produced worldwide.
Topics include the need to identify the causes of food losses and waste through an integrated perspective along the food chain and to consider any interventions as part of the whole, not in isolation.
Participants were expected to debate the findings of a scientific report by the High Level Panel of Experts on Food Security and Nutrition (HLPE). CFS participants were also to discuss the technical, economic and cultural dimensions of such waste and losses as well as ways to curb the negative impact on food security and nutrition.
Improved labelling and other forms of information for producers and consumers are among the measures to curb losses and waste identified by the HLPE.
The second roundtable, deals with the increasingly critical - but often not duly recognized - contribution made by fish to food security and to healthy diets, as specified in an HLPE report.
Farmed fish production has increased 12-fold over the last three decades and is the fastest growing food production sector, both in small and large scale systems. Most of the fishers or fish farmers, fish processing and/or trading people live in developing countries, earn low income, often depend on informal work. They need decent work and social protection and gender sensitive approaches. A very high number of female workers are engaged in fish processing and in informal small-scale fish trading operations. Governance is particularly important to determine access to fisheries resources, integrity of fisheries resources and distribution of fish benefits.
The HLPE report stressed the importance of international partnerships and initiatives on oceans and fish to better link fish production growth, sustainability and food security and nutrition
CFS participants highlighted the importance of the Voluntary Guidelines on Small-Scale Fisheries adopted earlier this year by the FAO Committee on Fisheries.
Ahead of the CFS, countries agreed on a series of policies aimed at ensuring that people around the world have access to healthier diets. The agreement, consisting of a Declaration and a Framework for Action will be adopted at the Second International Conference on Nutrition (ICN2) to be held in Rome from 19-21 November 2014. This high-level intergovernmental meeting is jointly organized by FAO and WHO.
Related News
End of super commodity cycle could bruise SA
“The super commodity cycle is behind us as producers again care more about cost containment than expansion,” according to economist Mike Schüssler.
In a report he wrote for TreasuryOne Schüssler explained that South African commodity prices are the lowest in over four years.
Using South Africa’s four main export commodities of platinum, gold, iron ore and coal it is clear that the current drop in the prices of these commodities is actually massive as the overall index dropped by 10.5% over the last three months.
The last few days saw further sharp declines in gold and platinum as investors exit precious commodities to re-enter American assets as they feel that rising interest rates will increase the cost of holding gold and platinum.
Coal is feeling the effect from the oversupply of energy products and iron ore is feeling the slower Chinese economy plus an oversupply.
Already the world’s two largest producers are talking of bringing down production costs, from about $27 to about $20 a tonne for BHP and for Rio Tinto - from about $21 to under $20 a tonne.
“Over the last 15 odd years many commodity prices rose substantially and that brought more production from commodity producers and also cost containment measures by users,” said Schüssler.
“Today the platinum used in cars is half of that a decade ago and current efforts are to reduce that by about as much again. At the same time more platinum is being produced.”
Fuel prices
He also pointed out high oil prices lead to major reductions in fuel usage in motor vehicles and planes.
At the same time new sources were found and the idea of peak oil declined as new drilling techniques allowed ever deeper offshore production. Also other sources such as shale gas reduced gas prices so that gas now costs only a quarter of electricity from about two thirds of the price of power for major smelters and heavy industry.
Coal competition
Coal had to compete again with not only nuclear power (which was often turned off in Europe and Japan, but on in China) but with solar, wind, and gas which had become much cheaper.
“Then of course the fact that, because of high energy costs many devices now use far less electricity. Such devices ranging from LED TVs, LED lights and energy efficient fridges, induction stoves and of course solar geysers,” said Schüssler.
“So the higher commodity prices have had an effect in that demand changed and consumption patterns changed. At present, unless there is about a 2% to 3% cut back soon, oil supply will be more than demand in the beginning of 2015.”
Why commodity prices are about to decline further
According to Schüssler, while it is difficult to forecast any cycle with 100% confidence there are now the first big signs that the commodity cycle will slip into a longer term soft mode.
“It is a known fact that higher American interest rates are normally bad for commodity prices, as the cost of holding them for investors apart from storage increases,” said Schüssler.
“With five years of negative real interest rates behind us the CRB commodity price index is already taking a pounding. So any move up in American interest rates will probably be a big nail in the super cycle coffin.”
In Schüssler’s view it may take three or four years for positive real interest rates, at which point holding gold and other precious metals will no longer make sense.
“But en-route to positive real interest rates one can expect more declines in commodity prices than increases,” he said.
Demand and supply
The next big factor Schüssler pointed out is that the demand for many commodities is growing less than supply is growing, particularly metal commodities.
“The higher prices have helped the recycling industry again get its groove back. The world has many people who look for scrap metal, platinum from older cars, bottles and plastic. In some cases, like glass, the world already has too much with the recycling,” said Schüssler.
Change in China
As a third reason for Schüssler thinking the commodity cycle is on the decline, is the forecast that China itself is becoming more services orientated.
“The investment led growth in China is slowing and becoming more of a service led growth. And the Chinese government is trying to slow growth too. It is not great if the number one commodity importer slows and undergoes a structural change to services at the same time,” he said.
Most forecasters from the Royal Bank of Canada to Goldman Sachs are all indicating lower commodity prices in general.
“This gives one the rather sad combination of falling demand, increasing supply and a monetary headwind, given that most commodities are priced in US dollars. This is the complete inverse of the super cycle conditions that have prevailed through most of the last fifteen years,” he said.
Related News
World Investment Report 2014: Investing in the SDGs
Investing in the Sustainable Development Goals (SDGs): An Action Plan
This edition of the World Investment Report provides valuable analysis that can inform global discussions on how to accelerate progress toward the Millennium Development Goals and shape a long-range vision for a more sustainable future beyond 2015.
The Report reveals an encouraging trend: after a decline in 2012, global foreign direct investment flows rose by 9 per cent in 2013, with growth expected to continue in the years to come. This demonstrates the great potential of international investment, along with other financial resources, to help reach the goals of a post-2015 agenda for sustainable development.
Transnational corporations can support this effort by creating decent jobs, generating exports, promoting rights, respecting the environment, encouraging local content, paying fair taxes and transferring capital, technology and business contacts to spur development.
This year’s World Investment Report offers a global action plan for galvanizing the role of businesses in achieving future sustainable development goals, and enhancing the private sector’s positive economic, social and environmental impacts. The Report identifies the financing gap, especially in vulnerable economies, assesses the primary sources of funds for bridging the gap, and proposes policy options for the future.
Key messages
Global investment trends
Cautious optimism returns to global foreign direct investment (FDI). After the 2012 slump, global FDI returned to growth, with inflows rising 9 per cent in 2013, to $1.45 trillion. UNCTAD projects that FDI flows could rise to $1.6 trillion in 2014, $1.7 trillion in 2015 and $1.8 trillion in 2016, with relatively larger increases in developed countries. Fragility in some emerging markets and risks related to policy uncertainty and regional instability may negatively affect the expected upturn in FDI.
Developing economies maintain their lead in 2013. FDI flows to developed countries increased by 9 per cent to $566 billion, leaving them at 39 per cent of global flows, while those to developing economies reached a new high of $778 billion, or 54 per cent of the total. The balance of $108 billion went to transition economies. Developing and transition economies now constitute half of the top 20 ranked by FDI inflows.
FDI outflows from developing countries also reached a record level. Transnational corporations (TNCs) from developing economies are increasingly acquiring foreign affiliates from developed countries located in their regions. Developing and transition economies together invested $553 billion, or 39 per cent of global FDI outflows, compared with only 12 per cent at the beginning of the 2000s.
Megaregional groupings shape global FDI. The three main regional groups currently under negotiation (TPP, TTIP, RCEP) each account for a quarter or more of global FDI flows, with TTIP flows in decline, and the others in ascendance. Asia-Pacific Economic Cooperation (APEC) remains the largest regional economic cooperation grouping, with 54 per cent of global inflows.
The poorest countries are less and less dependent on extractive industry investment. Over the past decade, the share of the extractive industry in the value of greenfield projects was 26 per cent in Africa and 36 per cent in LDCs. These shares are rapidly decreasing; manufacturing and services now make up about 90 per cent of the value of announced projects both in Africa and in LDCs.
Private equity FDI is keeping its powder dry. Outstanding funds of private equity firms increased to a record level of more than $1 trillion. Their cross-border investment was $171 billion, a decline of 11 per cent, and they accounted for 21 per cent of the value of cross-border mergers and acquisitions (M&As), 10 percentage points below their peak. With funds available for investment (“dry powder”), and relatively subdued activity in recent years, the potential for increased private equity FDI is significant.
State-owned TNCs are FDI heavyweights. UNCTAD estimates there are at least 550 State-owned TNCs – from both developed and developing countries – with more than 15,000 foreign affiliates and foreign assets of over $2 trillion. FDI by these TNCs was more than $160 billion in 2013. At that level, although their number constitutes less than 1 per cent of the universe of TNCs, they account for over 11 per cent of global FDI flows.
Regional investment trends
FDI flows to all major developing regions increased. Africa saw increased inflows (+4 per cent), sustained by growing intra-African flows. Such flows are in line with leaders’ efforts towards deeper regional integration, although the effect of most regional economic cooperation initiatives in Africa on intraregional FDI has been limited. Developing Asia (+3 per cent) remains the number one global investment destination. Regional headquarter locations for TNCs, and proactive regional investment cooperation, are factors driving increasing intraregional flows. Latin America and the Caribbean (+6 per cent) saw mixed FDI growth, with an overall positive due to an increase in Central America, but with an 6 per cent decline in South America. Prospects are brighter, with new opportunities arising in oil and gas, and TNC investment plans in manufacturing.
Structurally weak economies saw mixed results. Investment in the least developed countries (LDCs) increased, with announced greenfield investments signalling significant growth in basic infrastructure and energy projects. Landlocked developing countries (LLDCs) saw an overall decline in FDI. Relative to the size of their economies, and relative to capital formation, FDI remains an important source of finance there. Inflows to small island developing States (SIDS) declined. Tourism and extractive industries are attracting increasing interest from foreign investors, while manufacturing industries have been negatively affected by erosion of trade preferences.
Inflows to developed countries resume growth but have a long way to go. The recovery of FDI inflows in developed countries to $566 billion, and the unchanged outflows, at $857 billion, leave both at half their peak levels in 2007. Europe, traditionally the largest FDI recipient region, is at less than one third of its 2007 inflows and one fourth of its outflows. The United States and the European Union (EU) saw their combined share of global FDI inflows decline from well over 50 per cent pre-crisis to 30 per cent in 2013.
FDI to transition economies reached record levels, but prospects are uncertain. FDI inflows to transition economies increased by 28 per cent to reach $108 billion in 2013. Outward FDI from the region jumped by 84 per cent, reaching a record $99 billion. Prospects for FDI to transition economies are likely to be affected by uncertainties related to regional instability.
Investment policy trends and key issues
Most investment policy measures remain geared towards investment promotion and liberalization. At the same time, the share of regulatory or restrictive investment policies increased, reaching 27 per cent in 2013. Some host countries have sought to prevent divestments by established foreign investors. Some home countries promote reshoring of their TNCs’ overseas investments.
Investment incentives mostly focus on economic performance objectives, less on sustainable development. Incentives are widely used by governments as a policy instrument for attracting investment, despite persistent criticism that they are economically inefficient and lead to misallocations of public funds. To address these concerns, investment incentives schemes could be more closely aligned with the SDGs.
International investment rule making is characterized by diverging trends: on the one hand, disengagement from the system, partly because of developments in investment arbitration; on the other, intensifying and upscaling negotiations. Negotiations of “megaregional agreements” are a case in point. Once concluded, these may have systemic implications for the regime of international investment agreements (IIAs).
Widespread concerns about the functioning and the impact of the IIA regime are resulting in calls for reform. Four paths are becoming apparent: (i) maintaining the status quo, (ii) disengaging from the system, (iii) introducing selective adjustments, and (iv) undertaking systematic reform. A multilateral approach could effectively contribute to this endeavour.
Investing in the SDGs: An action plan for promoting private sector contributions
Faced with common global economic, social and environmental challenges, the international community is defining a set of Sustainable Development Goals (SDGs). The SDGs, which are being formulated by the United Nations together with the widest possible range of stakeholders, are intended to galvanize action worldwide through concrete targets for the 2015-2030 period for poverty reduction, food security, human health and education, climate change mitigation, and a range of other objectives across the economic, social and environmental pillars.
The role of the public sector is fundamental and pivotal, while the private sector contribution is indispensable. The latter can take two main forms, good governance in business practices and investment in sustainable development. Policy coherence is essential in promoting the private sector’s contribution to the SDGs.
The SDGs will have very significant resource implications across the developed and developing world. Global investment needs are in the order of $5 trillion to $7 trillion per year. Estimates for investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year, mainly for basic infrastructure (roads, rail and ports; power stations; water and sanitation), food security (agriculture and rural development), climate change mitigation and adaptation, health, and education.
The SDGs will require a step-change in the levels of both public and private investment in all countries. At current levels of investment in SDG-relevant sectors, developing countries alone face an annual gap of $2.5 trillion. In developing countries, especially in LDCs and other vulnerable economies, public finances are central to investment in SDGs. However, they cannot meet all SDG-implied resource demands. The role of private sector investment will be indispensable.
Today, the participation of the private sector in investment in SDG-related sectors is relatively low. Only a fraction of the worldwide invested assets of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is in SDG sectors. Their participation is even lower in developing countries, particularly the poorest ones.
In LDCs, a doubling of the growth rate of private investment would be a desirable target. Developing countries as a group could see the private sector cover approximately the part of SDG investment needs corresponding to its current share in investment in SDG sectors, based on current growth rates. In that scenario, however, they would still face an annual gap of about $1.6 trillion. In LDCs, where investment needs are most acute and where financing capacity is lowest, about twice the current growth rate of private investment is needed to give it a meaningful complementary financing role next to public investment and overseas development assistance (ODA).
Increasing the involvement of private investors in SDG-related sectors, many of which are sensitive or of a public service nature, leads to policy dilemmas. Policymakers need to find the right balance between creating a climate conducive to investment and removing barriers to investment on the one hand, and protecting public interests through regulation on the other. They need to find mechanisms to provide sufficiently attractive returns to private investors while guaranteeing accessibility and affordability of services for all. And the push for more private investment must be complementary to the parallel push for more public investment.
UNCTAD’s proposed Strategic Framework for Private Investment in the SDGs addresses key policy challenges and options related to (i) guiding principles and global leadership to galvanize action for private investment, (ii) the mobilization of funds for investment in sustainable development, (iii) the channelling of funds into investments in SDG sectors, and (iv) maximizing the sustainable development impact of private investment while minimizing risks or drawbacks involved.
Increasing private investment in SDGs will require leadership at the global level, as well as from national policymakers, to provide guiding principles to deal with policy dilemmas; to set targets, recognizing the need to make a special effort for LDCs; to ensure policy coherence at national and global levels; to galvanize dialogue and action, including through appropriate multistakeholder platforms; and to guarantee inclusiveness, providing support to countries that otherwise might continue to be largely ignored by private investors.
Challenges to mobilizing funds in financial markets include start-up and scaling problems for innovative financing solutions, market failures, a lack of transparency on environmental, social and corporate governance performance, and misaligned rewards for market participants. Key constraints to channelling funds into SDG sectors include entry barriers, inadequate risk-return ratios for SDG investments, a lack of information and effective packaging and promotion of projects, and a lack of investor expertise. Key challenges in managing the impact of private investment in SDG sectors include the weak absorptive capacity in some developing countries, social and environmental impact risks, and the need for stakeholder engagement and effective impact monitoring.
UNCTAD’s Action Plan for Private Investment in the SDGs presents a range of policy options to respond to the mobilization, channelling and impact challenges. A focused set of action packages can help shape a Big Push for private investment in sustainable development:
-
A new generation of investment promotion and facilitation. Establishing SDG investment development agencies to develop and market pipelines of bankable projects in SDG sectors and to actively facilitate such projects. This requires specialist expertise and should be supported by technical assistance. “Brokers” of SDG investment projects could also be set up at the regional level to share costs and achieve economies of scale. The international investment policy regime should also be reoriented towards proactive promotion of investment in SDGs.
-
SDG-oriented investment incentives. Restructuring of investment incentive schemes specifically to facilitate sustainable development projects. This calls for a transformation from purely “location-based” incentives, aiming to increase the competitiveness of a location and provided at the time of establishment, towards “SDG-based” incentives, aiming to promote investment in SDG sectors and conditional upon their sustainable development contribution.
-
Regional SDG Investment Compacts. Launching regional and South-South initiatives towards the promotion of SDG investment, especially for cross-border infrastructure development and regional clusters of firms operating in SDG sectors (e.g. green zones). This could include joint investment promotion mechanisms, joint programmes to build absorptive capacity and joint public-private partnership models.
-
New forms of partnership for SDG investments. Establish partnerships between outward investment agencies in home countries and investment promotion agencies (IPAs) in host countries for the purpose of marketing SDG investment opportunities in home countries, provision of investment incentives and facilitation services for SDG projects, and joint monitoring and impact assessment. Concrete tools that might support joint SDG investment business development services could include online tools with pipelines of bankable projects, and opportunities for linkages programmes in developing countries. A multi-agency technical assistance consortium could help to support LDCs.
-
Enabling innovative financing mechanisms and a reorientation of financial markets. Innovative financial instruments to raise funds for investment in SDGs deserve support to achieve scale. Options include innovative tradable financial instruments and dedicated SDG funds, seed funding mechanisms, and new “go-to-market” channels for SDG projects. Reorientation of financial markets also requires integrated reporting. This is a fundamental tool for investors to make informed decisions on responsible allocation of capital, and it is at the heart of Sustainable Stock Exchanges.
-
Changing the business mindset and developing SDG investment expertise. Developing a curriculum for business schools that generates awareness of investment opportunities in poor countries and that teaches students the skills needed to successfully operate in developing-country environments. This can be extended to inclusion of relevant modules in existing training and certification programmes for financial market actors.
The Action Plan for Private Investment in the SDGs is meant to serve as a point of reference for policymakers at national and international levels in their discussions on ways and means to implement the SDGs. It has been designed as a “living document” and incorporates an online version that aims to establish an interactive, open dialogue, inviting the international community to exchange views, suggestions and experiences. It thus constitutes a basis for further stakeholder engagement. UNCTAD aims to provide the platform for such engagement through its biennial World Investment Forum, and online through the Investment Policy Hub.
Related News
Energy sector is key to powering prosperity in sub-Saharan Africa
IEA World Energy Outlook Special Report finds that action in the energy sector could unleash an extra decade of growth
Increasing access to modern forms of energy is crucial to unlocking faster economic and social development in sub‑Saharan Africa, according to the International Energy Agency’s (IEA) Africa Energy Outlook, a Special Report in the 2014 World Energy Outlook series. More than 620 million people in the region (two-thirds of the population) live without electricity, and nearly 730 million people rely on dangerous, inefficient forms of cooking. The use of solid biomass (mainly fuelwood and charcoal) outweighs that of all other fuels combined, and average electricity consumption per capita is not enough to power a single 50-watt light bulb continuously.
“A better functioning energy sector is vital to ensuring that the citizens of sub-Saharan Africa can fulfil their aspirations,” said IEA Executive Director Maria van der Hoeven. “The energy sector is acting as a brake on development, but this can be overcome and the benefits of success are huge.”
In the IEA’s first comprehensive analysis of sub-Saharan Africa, it finds that the region’s energy resources are more than sufficient to meet the needs of its population, but that they are largely under-developed. The region accounted for almost 30% of global oil and gas discoveries made over the last five years, and it is already home to several major energy producers, including Nigeria, South Africa and Angola. It is also endowed with huge renewable energy resources, including excellent and widespread solar and hydro potential, as well as wind and geothermal.
The report finds that investment in sub-Saharan energy supply has been growing, but that two-thirds of the total since 2000 has been aimed at developing resources for export. Grid-based power generation capacity continues to fall very far short of what is needed, and half of it is located in just one country (South Africa). Insufficient and unreliable supply has resulted in large-scale ownership of costly back‑up generators. In the report’s central scenario, the sub-Saharan economy quadruples in size by 2040, the population nearly doubles (to over 1.75 billion) and energy demand grows by around 80%. Power generation capacity also quadruples: renewables grow strongly to account for nearly 45% of total sub-Saharan capacity, varying in scale from large hydropower dams to smaller mini- and off-grid solutions, while there is a greater use of natural gas in gas-producing countries.
Natural gas production reaches 230 billion cubic metres (bcm) in 2040, led by Nigeria (which continues to be the largest producer), and increasing output from Mozambique, Tanzania and Angola. LNG exports onto the global market triple to around 95 bcm. Oil production exceeds 6 million barrels per day (mb/d) in 2020 before falling back to 5.3 mb/d in 2040. Nigeria and Angola continue to be the largest oil producers by far, but with a host of other producers supplying smaller volumes. Sub-Saharan demand for oil products doubles to 4 mb/d in 2040, squeezing the region’s net contribution to the global oil balance. Coal supply grows by 50%, and continues to be focused on South Africa, but it is joined increasingly by Mozambique and others.
The capacity and efficiency of the sub-Saharan energy system increases, but so do the demands placed upon it, and many of the existing energy challenges are only partly overcome. In 2040, energy consumption per capita remains very low, and the widespread use of fuelwood and charcoal persists. The outlook for providing access to electricity is bittersweet: nearly one billion people gain access to electricity by 2040 but, because of rapid population growth, more than half a billion people remain without it. Sub-Saharan Africa also stands on the front line when it comes to the impacts of climate change, even though it continues to make only a small contribution to global energy-related carbon dioxide emissions.
“Economic and social development in sub-Saharan Africa hinges critically on fixing the energy sector,” said IEA Chief Economist Fatih Birol. “The payoff can be huge; with each additional dollar invested in the power sector boosting the overall economy by $15.”
In an “African Century Case”, the IEA report shows that three actions could boost the sub-Saharan economy by a further 30% in 2040, and deliver an extra decade’s worth of growth in per-capita incomes by 2040. These actions are:
-
An additional $450 billion in power sector investment, reducing power outages by half and achieving universal electricity access in urban areas.
-
Deeper regional co-operation and integration, facilitating new large-scale generation and transmission projects and enabling a further expansion in cross-border trade.
-
Better management of energy resources and revenues, adopting robust and transparent processes that allow for more effective use of oil and gas revenues.
As well as boosting economic growth, these actions bring electricity to an additional 230 million people by 2040. They result in more oil and gas projects going ahead and a higher share of the resulting government revenues being reinvested in key infrastructure. More regional electricity supply and transmission projects also advance, helping to keep down the average cost of supply. But the report warns that these actions must be accompanied by broad governance reforms if they are to put sub‑Saharan Africa on a more rapid path to a modern, integrated energy system for all.
The following factsheets are available for download from the IEA:
About the IEA
The International Energy Agency (IEA) is an autonomous organisation which works to ensure reliable, affordable and clean energy for its 29 member countries and beyond. Founded in response to the 1973/4 oil crisis, the IEA’s initial role was to help countries co-ordinate a collective response to major disruptions in oil supply through the release of emergency oil stocks to the markets. While this continues to be a key aspect of its work, the IEA has evolved and expanded. It is at the heart of global dialogue on energy, providing reliable and unbiased research, statistics, analysis and recommendations.
Inclusive and sustainable growth towards Africa 2030
EY launched a new report on 7 October 2014, Africa 2030: Realizing the possibilities, in advance of the firm’s Strategic Growth Forum Africa that took place at the Sandton Convention Centre, South Africa.
This new report builds on EY’s flagship Africa attractiveness series, reinforcing the tremendous progress that has been made in Africa over the past 15 years.
Ajen Sita, CEO for EY Africa, says “Africa’s rise over the past decade has been very real. While there are still a number of sceptics, we have developed a robust data- and knowledge base to help provide quantitative substance to support the ‘business case’ for Africa; the evidence of Africa’s clear progress is irrefutable.”
“However, as important as it is to continue to provide evidence of the continent’s progress, it is perhaps more important to shift the focus towards the future of Africa, and what it will take to sustain and accelerate the progress we have seen over the past 15 years,” adds Sita.
With this in mind, the report also presents the perspectives of a diverse group of leaders with interests in Africa, providing points of view on what the future of Africa might look like, and what the drivers of change and critical success factors are likely to be.
Optimism is a sentiment coming through the various contributions, but this optimism is tempered by notes of caution. A consistent thread running through the contributions is the observation that intra-regional trade is substantially below what can be achieved, and that legislation and regulation still act as blocks to cross-border trade – a stumbling block that has to be removed to promote African prosperity.
Agriculture also receives attention, particularly the need to break down the barriers of traditional subsistence agriculture and then replace it with large-scale commercial operations capable of meeting the production objectives required by a continent in transition.
The depth of human resources, and the availability of a future pool of labour on a continent populated by young people, raised excitement and concern; excitement because of the availability of people to drive the African economy of the future; concern about the delivery of education and the creation of skills appropriate to growing economies.
However, the dominant view is that change is real. Economic growth and development will continue, and will be driven by a burgeoning African middle class with growing levels of discretionary income, growth in local entrepreneurship and investment in bridging the infrastructure gap.
One of the key factors, mentioned by many of the contributors, is the proliferation of mobile telecommunications, the convergence of technologies and the ability for these to drive forward financial inclusion, government efficiency, trading opportunities, and the delivery of education, healthcare and other services to urban and rural populations.
Whatever the differences or similarities in perspective, the point is that active dialogue and collaborative action is required to realise Africa’s possibilities. In this context, EY is promoting five priorities for action that will be most critical to a successful African future:
-
Embracing shared value: The central premise behind creating shared value is that the competitiveness of a company and the health of the communities and economy around it are mutually dependent. It is a fundamental business philosophy that recognises that profit AND purpose can co-exist and be mutually reinforcing. For EY, a philosophy of shared value is underpinned by core purpose as an organisation – building a better working world – a working world with increased trust and confidence in business and capital markets, the development of talent in all its forms, greater collaboration across private, public and social sectors, and inclusive, sustainable growth at its heart; a purpose that is more relevant in the African context than ever before.
-
Promoting partnerships: The relationship between government and business across many parts of the continent is not always as engaging and productive as it could and should be. Too often business is viewed as part of the problem. In contrast, government and business, both local and international, need to become partners both in embracing a philosophy of shared value and driving a common agenda of inclusive, sustainable growth. Partnership, co-operation and collaboration across the private, public and social sectors could be a powerful force for transformative change and growth.
-
Fostering entrepreneurship: Entrepreneurs provide one of the main engines of growth in any healthy economy. They act as vital agents of change by developing new products and services, implementing more efficient production methods, and creating new business models and industries. Perhaps most importantly, small and medium sized enterprises (SMEs) will be the main drivers of the job creation required to realise inclusive, sustainable growth. For organisations genuinely committed to shared value and collaborative partnerships, the promotion of local content and enterprise development should clearly be a key business priority.
-
Accelerating regional integration: With the shifting dynamics in the global economy, Africans have a unique opportunity to break the structural constraints that have long marginalized the continent. This will, however, only be achieved by driving greater regional coherence from the current patchwork quilt of 54 sovereign states. Regional integration and stronger regional institutions (such as the African Union and Regional Economic Communities) are key to promoting greater levels of regional investment and trade, because it will make it much easier and more efficient to conduct cross-border business, and will create markets with greater critical mass, coherence and density of economic activity.
-
Bridging the infrastructure gap: Ultimately, though, regional integration will be enabled by sufficient investment in infrastructure; road networks, electricity access, telecommunications, and trade infrastructure (such as ports, highway corridors and railroads) will physically connect markets, reduce the cost of delivered goods, facilitate the mobility of people and products, remove productivity constraints, and enhance the overall competitiveness of the region.
Sita concludes, “It is clear to us that we Africans are presented with a wonderful opportunity to make a genuine difference in our working lives; the potential exists for us to be part of an African future that would have been virtually unimaginable a generation ago. The reality though is that this future is neither inevitable nor will it happen without active participation and commitment from multiple stakeholders. This is the time and place for us to collaborate to realise Africa’s future; it is our generation of leaders that can make it happen.”
About EY
EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.
EY refers to the global organization and may refer to one or more of the member firms of EY Global Limited, each of which is a separate legal entity. EY Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.
Related News
WB-IMF report gauges progress on development goals, including new target of promoting shared prosperity of bottom 40 percent
Much more work needs to be done to end poverty and close the gap in living standards between those in the bottom 40 percent and the top 60 percent of the population around the world, says the Global Monitoring Report 2014/2015, released on 8 October 2014 by the World Bank and International Monetary Fund (IMF).
The report details, for the first time, the World Bank Group’s twin goals of ending extreme poverty by 2030 and promoting shared prosperity, measured as income growth of the bottom 40 percent. GMR 2014/2015 continues to monitor progress on the Millennium Development Goals, which inspired the WBG twin goals.
“The world has made great progress in the last quarter-century in reducing extreme poverty – it was cut by a stunning two-thirds – and now we have the opportunity to end poverty in less than a generation,” said World Bank Group President Jim Yong Kim. “But we will not finish the job unless we find ways to reduce inequality, which stubbornly persists all over the world. This vision of a more equal world means we must find ways to spread wealth to the billions who have almost nothing.”
The report notes that much success has been achieved in reducing extreme poverty – those living on less than a $1.25 a day. However, the number of poor remains unacceptably high, at just over 1 billion people (14 percent of the world population) in 2011, compared with 1.2 billion (19 percent of the world population) in 2008.
Forecasts in the report show that poverty will remain stubbornly high in the South Asia and Sub-Saharan Africa regions, where an estimated 377 million of the world’s 412 million poor will likely reside in 2030. In 2011, the two regions were home to 814 million of the world’s 1 billion poor.
“If it is shocking to have a poverty line as low as $1.25 per day, it is even more shocking that 1/7th of the world’s population lives below this line,” said Kaushik Basu, Senior Vice President and Chief Economist of the World Bank Group. “The levels of inequality and poverty that prevail in the world today are totally unacceptable. This year’s Global Monitoring Report, which brings together in one volume a statistical picture of where the world stands in terms of these goals, is essential fodder for anyone wishing to take on these major challenges of our time.”
In a new database on shared prosperity in 86 countries, including 24 high-income countries, initial results show that incomes of the bottom 40 percent grew faster than the national average in many of them. Deeper analysis is needed to understand the success factors of these countries.
However, in terms of living standards, the bottom 40 percent in the developing world are much worse off when it comes to access to education, health, and sanitation. For example, children in the poorest households are almost twice as likely to be malnourished than those in the top 60 percent. In the high-income world, which the report analyzes for the first time, the main concern is income inequality, which has reached levels unprecedented since World War II. The analysis on high-income countries is contributed by the Organization for Economic Cooperation and Development (OECD). The OECD chapter finds that, among high-income countries, the average income of the richest 10 percent of the population is now about 9.5 times that of the poorest 10 percent, as opposed to 7 times 25 years ago. The chapter also analyzes the extent to which wealthier countries are amending their tax and transfer systems to improve their redistributive impact.
On the MDGs, the report reiterates that the target on poverty has been achieved, three years ahead of the MDGs deadline of 2015. In addition, three other sub-targets have been met, and those on gender equality in secondary education and the incidence of malaria could be met by 2015. But the maternal and child mortality and sanitation sub-targets will not be met by the 2015 deadline.
“Despite the weakness in the global economy in 2014, we still project growth for low-income developing economies to be over 6 percent over the medium term, which bodes well for the world’s poor. We are generally optimistic about the growth prospects of the three regions with almost 95 percent of world’s poor in 2011 – East Asia, South Asia, and Sub-Saharan Africa, but need to keep in mind that there are many individual countries within these regions where growth prospects are less benign,” said Sean Nolan, IMF Deputy Director, Strategy, Policy, and Review Department.
The report reaffirms the centrality of growth for development but highlights that growth is more effective in reducing poverty and promoting shared prosperity if it is inclusive and sustainable. Three key elements are considered to be of particular importance: greater investment in human capital, judicious use of safety nets, and steps to ensure the environmental sustainability of development.
Priorities for investments in education differ across countries. Developing countries require more attention to early childhood development because poor nutrition at a young age has lifelong implications for educational attainment and the ability of the poor to get better paying jobs and, ultimately, break the intergenerational transmission of poverty. In high-income OECD economies, emphasis is needed on ensuring that children of disadvantaged groups attend pre-school as a means to improve their advancement in life.
Well-designed safety nets can play a pivotal role in fostering inclusive human development. In some middle and low-income countries, safety nets assist the poor and vulnerable, redistribute the gains from growth, and enhance the ability of the poor to benefit from economic development. In developed countries, social protection systems are inclusive and efficient if they operate in tandem with employment policies, in particular if they promote employment of young and older workers.
Ensuring environmental sustainability is vital and all countries face challenges from natural resource depletion, ecosystem degradation and pollution, and climate change. When carefully designed, green growth strategies can tackle these challenges by improving the management of natural resources, reducing pollution and emissions, increasing resource efficiency, and strengthening resilience.
“These three elements of investment in human capital, safety nets, and environmental sustainability are at the core of any country’s development strategy as well as fundamental to the achievement of the WBG twin goals, the MDGs, or the Sustainable Development Goals expected to succeed the MDGs,” said Jos Verbeek, Lead Author of GMR 2014/2015.
» Global Monitoring Report 2014/2015: Ending Poverty and Sharing Prosperity (PDF, 6.74 MB)
Related News
Private sector urged to invest in sustainable development at World Investment Forum
Leading members of the global investment community gathered to meet sustainable development stakeholders as UNCTAD’s World Investment Forum commenced with a grand opening ceremony at the Palais des Nations, Geneva.
“There is a strong business case for investing in sustainability. Private sector approaches can help us to innovate,” UN Secretary-General Ban Ki-moon said in a welcoming address delivered by video. “At the same time, collaboration and partnership can ensure that investment in sustainable development is inclusive and aligned with the priorities of countries.
This Forum helps to forge such links.” Mr. Ban added: “You have the opportunity to contribute to improved livelihoods and well-being for billions of people over decades to come.”
President of Switzerland Didier Burkhalter, co-host of the grand opening with UNCTAD and the canton and city of Geneva, reiterated his government’s support for the objectives of UNCTAD in mobilizing private sector funding for sustainable development in partnership with the public sector.
“We need a strong and realistic ‘business plan’ to finance fair and efficient sustainable development,” Mr. Burkhalter said. “The latest UNCTAD World Investment Report has shown this and proposed an Action Plan that offers a promising path and underlines the need for innovation.”
United Nations Office at Geneva Acting Director-General Michael Møller said that discussions at the Forum were “not merely technical debates [but went] to the heart” of the mission of the entire United Nations. He welcomed the opportunity that the Forum gives to “break down silos” between public and private stakeholders in development.
UNCTAD Secretary-General Mukhisa Kituyi said that “already investors are more aware of opportunities in developing economies and, at the same time, countries are doing more to attract investment and ensure it makes a positive impact.”
“The Forum is an opportunity to consider solutions, to promote leadership in international investment and to influence the future direction of investing in sustainable development,” Dr. Kituyi said.
UN Development Programme Goodwill Ambassador and footballer Didier Drogba spoke about investment into infrastructure in his own country Côte d’Ivoire, and held it up as an example of the need for investment in the agricultural, demographic, industrial, educational and healthcare challenges in many countries.
“As much as we, people like myself, can do in raising charitable money and donations for these things, it will never be enough. We need real investment on a solid economic basis to make a real impact and to achieve the sustainable development goals.”
He addressed the participants of the opening by saying “you have to get serious. I expect it from you… Make it happen.”
Mr. François Longchamp, President of the Council of the State of Geneva, and Inter-Parliamentarian Union President Abdelwahad Radi were also present at the event. The Master of Ceremonies was James Zhan, Director, Division of Investment and Enterprise of UNCTAD.
The evening also saw the presentation of the Investment Promotion Awards 2014 and a musical performance by contemporary Swiss alphorn player and singer Eliana Burki.
Investment agencies from Rwanda, South Africa, Trinidad and Tobago and the UK receive awards for attracting green foreign direct investment
The work of investment promotion agencies (IPAs) from around the world was recognized by four awards given for outstanding performance in attracting foreign direct investment (FDI) projects that support sustainable development during the grand opening of the UNCTAD World Investment Forum on 13 October 2014 at the Palais des Nations in Geneva.
The four winning agencies were invesTT from Trinidad and Tobago, the Rwanda Development Board, Trade and Investment South Africa, and UK Trade and Investment from the United Kingdom.
The awards were presented by the interim Prime Minister of Tunisia Mehdi Jomaa, President of the Swiss Confederation Didier Burkhalter, Inter-Parliamentarian Union President Abdelwahad Radi and UNDP Goodwill Ambassador Didier Drogba.
Thirty-one projects from 29 agencies had qualified for the awards. These agencies showed achievements in the areas of renewable energy, green manufacturing, waste treatment, electrical vehicles and green housing construction.
The IPAs received the awards for their role in attracting and facilitating these projects and their efforts in magnifying their economic, social and environmental impact, the Director of UNCTAD’s Investment and Enterprise Division, James Zhan, said.
Among those in attendance were United Nations Office in Geneva Acting Director-General Michael Møller, UNCTAD Secretary-General Mukhisa Kituyi, and the President of the Council of State of Geneva François Longchamp.
This year’s Investment Promotion Awards for excellence in promoting foreign direct investment for sustainable development come at a critical juncture as United Nations member States prepare to adopt a set of sustainable development goals (SDGs) for the period up to 2030.
The SDGs will encompass a wide range of economic, social and environmental objectives as well as measures aiming at climate change mitigation and adaption.
IPA executives, senior policy makers and business leaders from over 130 countries will carry forward the momentum created by the awards ceremony through discussing best practices and exploring means of attracting FDI for infrastructure projects, green growth, more and better jobs, and social development.
Related News
World finance chiefs outline steps to spur growth, boost jobs
Against the backdrop of a fragile and uneven global recovery, the IMF’s policy steering body – the International Monetary and Financial Committee – met today to discuss ways to boost growth and to foster a sustainable, balanced, and job-rich global economy.
Bold action is needed, especially on structural reforms, said Singapore Finance Minister and IMFC Chair Tharman Shanmugaratnam, referring to changes to the fabric of an economy that can help to jump start growth.
“We all recognize that structural reforms have been too slow and we’ve got to pick up the pace,” he stated, speaking during a press conference on the heels of the IMFC meeting.
“Our single biggest focus is to be on the reforms that enable us to lift potential growth and build a better tomorrow,” Tharman said. “If we don’t focus with urgency on that, we won’t solve even today’s problems. We’ve got to bring the long term into the short term, and that has to be our whole way of thinking about how we complete this recovery process.”
IMF Managing Director Christine Lagarde emphasized the need for swift action on reforms, adding that reforms can spur growth in both the short term and over the long haul.
“Structural reforms and infrastructure investment can address both the demand, short-term side, and the supply, medium-term issues,” said Lagarde.
More growth, more jobs
Lagarde said that she was encouraged by the IMFC’s support and endorsement of the IMF’s work agenda. Going forward, the Fund will focus its efforts on three areas to help the global community achieve stronger growth, specifically:
-
First, growth and jobs remain a priority. More infrastructure investment, appropriately designed and implemented, can also help increase growth and jobs.
-
Second, spillovers and spillbacks. The membership acknowledged that the Fund is uniquely placed to analyze risks and policy spillovers in a multilaterally consistent manner.
-
Finally, the IMF must push on to complete financial sector reform. There was strong support for the Fund’s work with the Financial Stability Board on global regulatory reforms, including on the risks arising from shadow banking, and on making banks better fit to support the recovery.
In its communiqué, the IMFC also endorsed the IMF’s work on international taxation and on sovereign debt restructuring issues. Lagarde added that the IMF will be promoting the use of strengthened collective action clauses, which are already being used by some sovereign bond issuers.
Ebola crisis
Lagarde stressed the urgent situation in the countries affected by the Ebola crisis. The Fund moved quickly to provide a total of $130 million in additional financing to Guinea, Liberia, and Sierra Leone to help them deal with the immediate economic consequences of the Ebola outbreak.
“The purpose is to eradicate Ebola but not isolate the countries themselves,” said Lagarde, noting that all three countries are under IMF financial support programs.
Lagarde also said that she was pleased with the IMFC’s support for the extension of the zero interest rate charged on loans to low-income countries and said she would put a proposal recommending extension forward to the IMF’s Executive Board in the very near future.
Governance reforms
Lagarde said that approval and implementation of the 2010 quota reforms was urgently needed. She said she hoped that the U.S authorities would ratify the agreed governance reforms and the doubling of quotas by the end of the year.
Download the Managing Director’s Global Policy Agenda to the International Monetary and Financial Committee.
Related News
Lower forecasts, but reason to be hopeful at the World Bank/IMF Annual Meetings
As the World Bank and International Monetary Fund annual meetings wrapped up in Washington, DC on Sunday, finance ministers and bankers from around the world expressed deep concerns that the global economy is slipping backward. The IMF is now putting 2014 expansion at a tepid 3.3 percent while giving a more hopeful forecast of 3.8 percent in 2015. But a different concern, Ebola, overshadowed the weak economic outlook.
The hemorrhagic disease, which the African Development Bank Group has already contributed $210 million to fight, dominated a number of panels and bilateral discussions this week beginning with the “Impact of the Ebola Crisis” panel Thursday morning.
That is where AfDB President Donald Kaberuka cautioned the world to “be careful with doomsday narratives.” He told delegates including the IMF’s Managing Director, President of the World Bank Group, the Secretary-General of the United Nations, the Director of the US Centers for Disease Control and Prevention along with the Presidents of the three hardest-hit nations that “the narrative getting out of this room must be one which says we can overcome Ebola.”
It was a message Kaberuka repeated in bilateral talks and forums including the WB/IMF Development Committee meeting, a session on the data revolution in Sub-Saharan Africa, the State of the African Region seminar and more.
He asked the international community to increase the flow of resources, worked to boost investor confidence in affected countries, urged preparation to battle the next epidemic and called for member nations to strengthen health systems in Liberia, Sierra Leone and Guinea. One priority, Kaberuka said this week, is the need for greater “budgets for governments of those countries so they can do what governments do” to protect citizens.
Kaberuka’s early push this week to reframe the approach to dealing with Ebola helped galvanize a week of increased attention and action to finance the fight against the disease, which has already taken more than 4,000 lives.
The IMF agreed to increase fiscal deficits of the countries at the centre of the outbreak, and the World Bank fast-tracked a $105 million aid package to fight it.
“Usually the World Bank Group has worked in the medium to long term on development projects,” said President Jim Yong Kim. “To combat Ebola, we needed to move to an emergency footing and quickly.” He added that “we must act now because delay exponentially raises the human and economic cost of stopping the epidemic.”
Though financial markets around the world fell after the weak growth forecast coming out of this week’s meetings, Kaberuka says he remains “bullish on Africa.”
The next Spring World Bank/International Monetary Fund meetings are set for April 2015 in Washington, DC.
Related News
Joint statement issued at the conclusion of the 19th BASIC Ministerial Meeting on Climate Change
Final statement
Sun City, South Africa, 10 October 2014
-
The 19th BASIC Ministerial Meeting on Climate Change was held in Sun City, South Africa, on 10 October 2014. H.E. Ms. Edna Molewa, Minister of Environmental Affairs of South Africa, H.E. Mr. Xie Zhenhua, Vice Chairman of the National Development and Reform Commission of China, H.E. Mr. Ashok Lavasa, Secretary of the Ministry of Environment, Forests and Climate Change of India and H.E. Ambassador José Antonio Marcondes de Carvalho, Under Secretary-General for the Environment, Energy, Science and Technology of the Ministry of External Relations of Brazil attended the meeting.
-
Ministers reflected on the Climate Summit convened by the Secretary-General of the United Nations on 23 September 2014 and recognised the efforts to generate the political support required for the adoption of an agreement under the United Nations Framework Convention on Climate Change (UNFCCC) in 2015 and welcomed the political momentum achieved. In this regard, Ministers welcomed the announcements made by some developed countries for the initial capitalisation of the Green Climate Fund (GCF) and called on other developed countries to do likewise as soon as possible, but no later than the pledging session for the initial resource mobilisation process of the fund in November 2014.
-
Ministers highlighted the need for enhanced ambition, noting that delivery on existing commitments in the pre-2020 period by developed Parties will contribute to the enhancement of trust and confidence indispensable for the successful conclusion of the 2015 agreement. In particular, they stressed the need for clearer indications from developed countries on meeting their commitment to provide US$100 billion in climate finance per year by 2020, and meaningful and substantial contributions to the Green Climate Fund.
-
Ministers emphasised that the Lima Climate Change Conference in December 2014 is an important milestone for the successful conclusion of the negotiation of the 2015 agreement, which requires the strengthening of the multilateral rules-based regime under the Convention, in order to achieve its Objective. As agreed at COP17 in Durban, the 2015 agreement should be in accordance with the principles and provisions of the Convention, in particular the principles of equity and common but differentiated responsibility and respective capabilities (CBDR&RC).
-
Ministers concurred that the agreement must provide an inclusive, equitable and effective framework within which Parties can put forward their contributions to keep the world on a path to limiting the increase in average global temperatures to below 2 degrees Celsius. In this regard, the agreement should allow Parties to progressively enhance their contributions, without providing for regression on existing commitments.
-
Ministers stressed the importance of reaching agreement in Lima on elements for a draft negotiating text for the 2015 agreement, as well as the information that they will provide when putting forward their intended nationally-determined contributions (INDCs). In this regard, Ministers reiterated that the INDCs must cover mitigation, adaptation, finance, technology development and transfer and capacity-building, in line with Parties’ respective commitments under the Convention.
-
Ministers expressed their conviction that adaptation needs are driven by the extent of adverse effects of climate change, experienced both now and in the future. Adaptation is an issue which requires a global response and is as important as mitigation, and all elements in paragraph 5, decision 1/CP.17 should be treated in a balanced manner in the 2015 agreement.
-
Ministers indicated that National Adaptation Plans (NAPs) could be the basis for Parties’ adaptation INDCs. Investment in adaptation by developing countries would represent an adaptation contribution.
-
Ministers are of the view that the Lima Conference of Parties must ensure adequate resource allocation to the Adaptation Fund and the adaptation window of the Green Climate Fund (GCF).
-
Ministers expressed their view that the Lima conference must provide clarity on how developing countries will be supported in the implementation of their contributions under the 2015 agreement, given the serious socio-economic challenges they face and their urgent efforts to eradicate poverty. The 2015 agreement must establish a clear link between the actions by developing countries to contribute to effectively addressing the climate change challenge and the scale of finance, technology and capacity-building support required by them for implementation.
-
In the context of the above priorities, Ministers agreed that the 2015 agreement should ensure transparency, minimise the ambition gaps, if any, and keep its implementation under review, in accordance with the principles and relevant provisions of the Convention.
-
Ministers concurred that the elements of the 2015 agreement should give effect to the principles of equity and CBDR&RC through implementation of provisions of the Convention that reflect Parties’ common and differentiated commitments, related to mitigation, adaptation, finance, technology transfer and capacity building.
-
Ministers emphasised that existing institutions and mechanisms created under the Convention should be used and further strengthened beyond 2020. They stressed that the elements of the 2015 agreement should strengthen and enhance the effectiveness and efficiency of climate action. This will be done through provisions to strengthen institutional linkages between the adaptation committee and the Technology Executive Committee with the Standing Committee on Finance with the GCF and other operating entities of the Convention’s Financial Mechanism.
-
Ministers reiterated their commitment to strengthen the G77 and China. They warmly welcomed South Africa as the chair of the Group of 77 and China in 2015 and pledged their full support.
-
Ministers expressed their full support for the Peruvian Presidency to ensure a transparent, inclusive and successful COP20/CMP10. They committed to work proactively to ensure a successful outcome in Lima in 2014 and in Paris in 2015.
-
Ministers welcomed the offer by Brazil to host the 20th BASIC Ministerial Meeting in the first semester of 2015.
Related News
Rural wages rise sharply across Asia – report
An end to the seemingly inexhaustible source of cheap, unskilled labour in Asia is within sight as rural wages rise sharply across the region – according to the Overseas Development Institute, the UK’s leading think-tank on development issues.
The Rural Wages in Asia report, a comprehensive study of rural wages in the continent, shows that lower birth rates, combined with growing demand for labour in factories which is pulling workers away from rural areas, are behind this trend.
In Bangladesh, for example, the average male rural wage rose by 45% in real terms between 2005 and 2010, while in India it increased by 35% between 2005 and 2012, and more than doubled in China between 1998 and 2007.
ODI Research Fellow Steve Wiggins said: “Rural wages are key as they mark the lowest returns to labour on offer. Falling birth rates in rural areas and an expected continued growth in manufacturing means that rural wages will probably keep rising, potentially taking hundreds of millions of people across Asia out of extreme poverty.”
In China, average earnings for male rural workers surpassed the $7 mark in 2007, up from $3.02 a decade earlier. Bangladeshi male farm labourers meanwhile have seen their earnings increase from $1.52 in 2005 to $2.21 five years later, while in India these rose from $2.15 in 2005 to $2.91 in 2010.
The growth of rural wages in these three countries has accelerated since the mid-2000s, but the impact is being felt in other places with less pronounced rises:
-
In Malaysia, it has become increasingly difficult to recruit workers for oil palm estates. Indonesians covered 80% of these jobs, but job applications have plummeted owing to higher wages and rapid urbanisation in Indonesia.
-
Farm labour shortages are reported in Myanmar as casual labourers leave the land for construction jobs in Rangoon.
-
In Thailand, some workers are returning to rural areas as wages rose by a third in the relatively poor northeast of the country.
Despite this trend, rural wages remain low across the region compared to rich countries, with only Malaysian farmers and South Korean dairy process workers earning more than $10 a day.
Female rural workers are particularly worse off. In the four countries with data on gender – China, India, Pakistan and Bangladesh – women are shown to earn between a quarter and one third less than their male counterparts even though the wage gap appears to be narrowing.
The study finds that the overall rise is rural wages is enough, however, to continue pushing up factory wages, with the authors speculating that this will lead to an automation of Asian plants and further relocation of production to poorer areas where labour costs are lower – including Africa.
Steve Wiggins added: “Increasing rural wages in Asia is a potential game-changing opportunity for Africa as Asian manufacturers increasingly look for cheap labour elsewhere. This can already be seen outside Addis Ababa in Ethiopia with the arrival of the first pioneer wave of relocated Chinese plants. African countries need to prepare for this, by ensuring they have a trained workforce and basic infrastructure in place – otherwise they may miss this boat.”
See also: New research: A wage revolution could end extreme poverty in Asia, with massive knock-on effects in Africa - blog by Duncan Green, strategic adviser for Oxfam GB
Related News
Foreign investors’ participation on NSE Drops to 25%
The level of foreign investors’ participation on the Nigerian Stock Exchange (NSE) has continued to shrink, dropping to 25.17 per cent as at July, 2014.
Foreign Portfolio Investment (FPI) had declined from 62.53 per cent in July 2013 to 25.17 per cent at the end of July 2014.
Data from major custodians and market operators on domestic and foreign portfolio participation polled by the NSE for the month of July revealed that the FPI which increased from 49.28 per cent in January to 68.59 per cent in February and further up to 78.25 in March.
However, the FPI started declining in April to 75.25, went down in May to 52.32 and further down to 25.17 per cent in July. Domestic investors can be categorised into either institutional or retail investors. Their transaction, on the other hand, rose to 74.83 per cent of total equity transaction in July, 2014 from 37.47 per cent in July, 2013.
The data indicated that total foreign investors transaction went down by 37 per cent from N89.42 billion in January, 2014, to N56.46 billion as at the end of July, while on the other hand, total domestic transactions stood at N167.77 billion as against N92.30 billion total transaction in the same period in 2013. The total transactions increased by 23.20 per cent from N181.97 billion in January to N224.19 billion in July and foreign portfolio investors’ inflows accounted for 14.58 per cent of total transactions while the outflows accounted for 10.59 per cent of the total transactions in July 2014.
In comparison to the same period in 2013, total FPI decreased by 39.79 per cent, whilst the total domestic transactions increased by 198.79 per cent. FPI inflows outpaced outflows which were the opposite when compared to the same period in 2013. Overall, there was a 49.60 per cent increase in total transactions in comparison to the same period in 2013. For instance, a comparison of the total flows with the transactions on the NSE for 2014 Year-To-Date (YTD) showed that the total transaction on the exchange was put at N1.38 trillion. The total FPI flow stood at N761.57 billion, while the total domestic transaction was put at N621.68 billion, representing 44.94 per cent. FPI inflow was put at N335.20 billion while their outflow stood at N426.37 billion.
According to the data from the NSE, between 2011 and 2012, there was an increase in the FPI transaction which outperformed the domestic investors transaction in the market. But in 2013, there was a major rebound in the domestic component which led to an almost equal split in foreign vs. domestic transactions. This gives credence to stakeholders’ worry of undue domination of the equity market by foreign investors and contrasts sharply with the exchange’s optimism of increasing local investors’ participation.
The managing director of Highcap Securities Limited, Mr David Adonri, attributed the drop in foreign investments to insecurity and the upcoming elections. He pointed out that the foreign investors are holding back and just waiting for something positive to happen to propel them to return. However some market analysts said, “The challenge with the huge presence of foreign portfolio investors in the country’s capital market is the heightened risk of market reversal and possible market crash should these portfolio investors have any reason to exit the market.”
According to the managing director of Investdata Consulting Limited, Mr Ambrose Omodion, the market may end the year on a poor performance lower than what the market analysts has anticipated in the beginning of the year due to the 2015 general elections. He pointed out that the foreign investors, who are the drivers of the market, are skeptical of the likely outcome of the elections.
In his remarks at the 2014 Investors Forum organised by the Nigerian capital market, the chief executive officer (CEO) of the NSE, Oscar Onyema, said that local investors’ participation in the stock market year-to-date outweighed foreign participation. He said that the NSE was working on the next phase of growth to be able to attract more foreign and domestic investors to the market.
“The NSE has started work on its new medium-term strategic direction, covering the 2014-2019 corporate strategic plans with clearly outlined objectives leading up to 2019,” he said.
Related News
State of the Africa Region 2014: Using Africa’s growth to reduce poverty, improve lives
While Sub-Saharan Africa has sustained positive economic growth in the last 20 years, this growth has not translated into a fast-enough reduction in poverty, which remains more widespread and deeper in Africa than in the rest of the world.
This is the crux of the World Bank Group’s (WBG) concerns, Francisco H.G. Ferreira, WBG chief economist for the Africa Region, said during an event titled State of the Africa Region. The event was part of the 2014 World Bank-IMF Annual Meetings.
“We don’t care about growth per se, we care about growth as a means to something,” Ferreira told the standing-room only crowd. “In this institution, we care about growth as a way of improving the living standards of people. We care about poverty reduction.”
Using analytical data from recent reports such as Africa’s Pulse and the Economic Impact of the 2014 Ebola Epidemic, Ferreira led a panel discussion with a presentation highlighting the “weak link” between growth and poverty reduction; the uneven nature of the region’s growth across countries, sectors and regions.
For example, while agriculture continues to grow and employ most of Sub-Saharan Africa’s employed, the services and natural resource sectors are growing much faster. Manufacturing is also growing at a slower rate than the services and natural resource sectors, Ferreira said, changing the way the WBG views structural transformation in Africa.
While promoting agricultural productivity growth remains paramount, data show that there is evidence of a “service elevator” out of poverty, Ferreira said. The service sector has shown strong growth, and it is making a significant impact on poverty, inspiring the WBG to look at how people can further benefit from the service sector, and how policies can help.
In addition, Ferreira said, there are core reasons why the manufacturing sector is declining in Africa; but they can be addressed by providing a skilled labor force, providing reliable and affordable power, and lowering transport, trading and transaction costs.
“The weaknesses of the manufacturing sector become less surprising when you look at all of the challenges that firms face,” Ferreira said. “But we shouldn’t give up on manufacturing.”
While exploring the services and manufacturing sectors, H.E. Newai Gebre-ab, minister and economic advisor to the Prime Minister of the Federal Democratic Republic of Ethiopia, reminded the crowd of the importance of agriculture for fast and sustainable growth.
“Services, while good for providing employment, is not a dynamic sector,” said Gebre-ab. “Fast, sustainable growth starts with agriculture.”
H.E. Amadou Cissé, minister for state planning for the Republic of Niger, also participated in the panel discussion. He pointed out some risks specific to Niger that create economic challenges for the country, such as the need for regional integration practices, and urbanization, which results in the rural poor not being able to take advantage of the wealth in urban areas.
“The policies we can currently adopt regarding economic development and transformation to reduce poverty reduction should definitely take into account this background,” he said. “We should make sure that we don’t adopt policies that exacerbate difficulties.”
There are also additional risks that impact GDP growth across the continent, Ferreira said, including fiscal deficits, the current Ebola epidemic and a new source of conflict; terrorism.
Related News
WTO and World Bank join forces to provide Trade Facilitation support
Trade is critical for boosting growth in developing world, particularly in Africa
The World Bank Group and the World Trade Organization (WTO) have agreed to enhance their co-operation in assisting developing and least-developed countries to better utilize trade facilitation programs which can help countries reduce trade costs and more fully engage in the global economy.
Trade facilitation aims to reduce barriers developing countries now face moving goods quickly and cost effectively by increasing port efficiency, improving customs and regulatory environments, and upgrading infrastructure to increase trade exports.
“Trade is a critical component to ending poverty and boosting shared prosperity and we are pleased to work with our partners at the WTO and other organizations to pursue these goals together,” said World Bank Group President Jim Yong Kim.
“Our own research tells us that African countries are missing out on opportunities for billions of dollars in extra export earnings because of existing trade barriers. Trade Facilitation was one of the important elements of the outcome from the Bali Ministerial and we remain fully committed to supporting implementation of the Bali deal as we see the development benefits of reducing costs to trade,” he said.
In July, the WTO launched its Trade Facilitation Agreement Facility, to ensure that no country is left behind and all are able to access the support they need. The Facility, which is designed to provide a fail-safe mechanism for developing countries that are unable to obtain support from the development community, will be available to help those countries implement the provisions of the Trade Facilitation Agreement – agreed on by all WTO Members at their December 2013 WTO meetings in Bali.
The WTO will work closely with partner organizations, including the World Bank Group, to identify sources of funding and support.
“I am delighted to announce this strengthened partnership between the World Bank Group and the WTO. Our coordinated efforts will ensure that developing countries are able to obtain the support they need to tackle the bottlenecks and high costs that impact so heavily on the competitiveness of traders in many developing countries. Our two organizations, working closely with all our development partners, will support trade facilitation reforms that are so crucial in cutting the costs of trade, alleviating poverty and promoting development,” said WTO Director-General Roberto Azevêdo.
Mr. Azevêdo and Dr. Kim, will discuss these matters and other trade issues at a Flagship Seminar Event at the World Bank to be held today, from 4pm to 5pm.
In June the World Bank Group announced a new Trade Facilitation Support Program to assist developing countries to implement the WTO’s Trade Facilitation Agreement. As the world’s largest multilateral provider of trade-related assistance the World Bank Group is a primary partner in the effort. The Bank’s support in this area is now more than $13.2 billion in grants and financing, half of which is focused on Trade Facilitation.
Today’s announcement confirms that the two organizations will work closely together to ensure that support is available for all who need it under the terms of the Trade Facilitation Agreement.
DG Azevêdo and President Kim have agreed that their organizations will work together to prepare a joint World Bank Group/WTO Study on the role of trade in ending extreme poverty while boosting shared prosperity next year.
Related News
Sustain Africa’s growth by easing structural bottlenecks
Sustaining growth in sub-Saharan Africa requires proactively addressing structural bottlenecks to growth such as infrastructure gaps and poor business climates, IMF African Department Director Antoinette Sayeh said.
She told an October 10 news conference at the 2014 IMF-World Bank Annual Meetings that avoiding the emergence of macroeconomic imbalances such as excessive fiscal and external current account deficits would also underpin expansion.
“The challenge will be striking the right balance between scaling up investment in infrastructure and other development objectives while avoiding an unsustainable public debt buildup,” Sayeh told reporters.
She said the underlying picture for sub-Saharan Africa remains favorable, with the region’s economy expected to expand by 5 percent in 2014 and 5 ¾ percent in 2015. Sayeh noted that most sub-Saharan African economies are enjoying strong growth, driven by investment in infrastructure, buoyant services sectors, and strong agricultural production.
“Overall, sub-Saharan Africa is expected to continue being the second fastest–growing region in the world, just behind emerging and developing Asia,” Sayeh said. But she added that this positive outlook coexists with a dire situation in Guinea, Liberia, and Sierra Leone, where the Ebola outbreak continues to spread unabated.
Ebola’s effects
“Beyond the unbearable number of deaths, suffering, and social dislocation that it is causing, it is also causing extensive damage to the economies and institutions of these three already fragile countries,” Sayeh declared. Even with the disease limited to these three countries, there are tangible negative economic spillovers on neighboring countries.
She said that heavily tourist-reliant The Gambia and, to a lesser extent, Senegal have seen a large number of booking cancelations, and some other regional transportation hubs such as Ghana and Kenya may also see transitory declines in airline and hotel activity.
Sayeh also pointed to a small number of countries where economic activity is facing headwinds from homegrown policy challenges. For instance, in South Africa, growth remains lackluster due to electricity bottlenecks, weak product market competitiveness, and difficult industrial relations. In a few other countries, including Ghana, and until recently Zambia, large macroeconomic imbalances have resulted in pressures on the exchange rate and inflation.
Sustain growth, foster inclusion
Against this backdrop, most African countries’ policymakers should focus on sustaining growth and policies to make growth more inclusive, Sayeh said. In particular
-
Addressing structural bottlenecks to growth such as infrastructure gaps and poor business climates, as well as avoiding macroeconomic imbalances such as excessive fiscal and external account deficits.
-
Sustaining growth is a necessary condition to foster job creation and reduce poverty. But growth is not always a sufficient condition for inclusiveness, and should be supported by social safety nets, better targeting of public services, and investment in worse-off regions.
More financing to fight Ebola
In the countries currently being affected by the Ebola outbreak, fiscal deficits need to widen to enable the countries to accommodate higher Ebola-related spending and to help avoid an even more pronounced decline in economic activity. The main constraint on allowing fiscal deficits to widen in these countries is financing.
Sayeh noted that the IMF Board recently approved some $130 million in additional financial assistance for Guinea, Liberia, and Sierra Leone. “But there remain further significant financing gaps both for the rest of 2014 and for 2015, and additional support from both bilateral and multilateral creditors will be important to assist these countries,” Sayeh stated.
Responding to questions, Sayeh stressed that the IMF’s financial assistance to the three Ebola-affected countries is interest free and covers a considerable amount of the countries’ combined financing gap of around $300 million, which may need to be revised in light of changing circumstances.
However, noting that the IMF’s concessional financing comprises loans, not grants, Sayeh added “The first best solution for countries facing shocks like Ebola, and the huge humanitarian devastation that it causes, is significant grant financing from the donor and partner community.”
Market financing
Welcoming sub-Saharan African countries’ increased access to international capital markets through recent sovereign debt issuance, Sayeh said such borrowing signaled increased interest in the region by investors, stressed the region’s progress in implementing better macroeconomic policies, helped countries diversify their financing sources, and stimulated debt issuance by the private sector.
But she stressed that countries have to be prudent in how they take advantage of bond issuance, and allow for the obligations of bullet repayments and for exchange risk, while also putting sovereign bond proceeds to good use through high-quality investments that will help finance subsequent repayment.
On the broader issue of public borrowing, Sayeh observed that the IMF hoped to present a revised debt limits policy to its Executive Board soon after the Annual Meetings. This would, she said, be important in allowing countries more flexibility in striking a balance between scaling up infrastructure and maintaining debt sustainability.
Rebase more often
Sayeh also hailed regional countries’ ongoing efforts to rebase their GDP, but urged authorities to rebase more frequently. “Typically, some countries have had 20 years or more pass before updating the surveys that feed their GDP estimates. The best practice in this area is for countries to try to rebase every five years.”
Acknowledging the expense and complexity of surveys to update GDP, she emphasized that statistics work needed more support from donors and from national authorities, as government statistical agencies were often deprived of resources. Sayeh also noted that IMF regional technical assistance centers included long-term statistical advisors.
The IMF’s Regional Economic Outlook for Sub-Saharan Africa will be released October 20, 2014.
Related News
Zambia sees lower 2015 budget deficit due to higher royalties
Zambia plans to narrow its budget deficit in 2015, helped by changes to the mining tax regime which should boost revenue, Finance Minister Alexander Chikwanda said on Friday.
Presenting a 46.7 billion kwacha ($7.4 billion) to parliament, Chikwanda forecast higher economic growth next year, citing a good farm harvest, as well as increased power generation and manufacturing output.
The budget shortfall in Africa’s second largest copper producer would edge lower to 4.6 percent of GDP in 2015 from a projected 5.5 percent this year, while the economy would grow by 7 percent, up from 6.5 percent.
Revenue would rise to 18.5 percent of gross domestic product from an expected 17.2 percent for 2014, Chikwanda said.
Domestic revenue would finance 75.2 percent of the budget, which changes to the mining tax seen adding 1.7 billion Zambian kwacha ($269 million) to the collection.
“The Treasury will continue to exercise prudent fiscal management,” Chikwanda vowed, predicting a budget gap of around 3.3 percent of GDP by 2017. He set a year-end inflation target of 7 percent for 2015 from 6.5 percent in 2014.
The government would increase underground mining royalties to 8 percent from 6 percent as part of an effort to revamp the industry’s tax system, and introduce a 30 percent corporate processing and smelting tax.
Another 30 percent tax would be applied to income earned from “tolling”, industry-speak for an agreement to process another producers raw materials.
Open cast mining operations in the southern African nation would now be subjected to a 20 percent mineral royalty as a final tax.
The tax system in Africa’s second largest copper producer has been in the spotlight amid a simmering row over VAT refunds.
Zambia has been withholding $600 million in VAT refunds owed to mining firms after companies failed to produce import certificates from destination countries.
The finance ministry has since said it plans to waive the requirement because it is impractical, but no refunds have been made yet.
The government wanted “an amicable resolution” to the VAT spat, Chikwanda said.
Zambia had produced 448,673 tonnes of copper in the first eight months of 2014, which was about 50,000 tonnes lower than what the country produced in the corresponding period of 2013.
“The lower outturn was largely on account of a significant fall in output recorded at one of the major mines due to a temporary suspension mining operations as a result of operational challenges,” he said.
Despite these operational constraints, Zambia’s full-year 2014 copper production was projected to be marginally higher than the 2013 output of about 790.000 tonnes, he said.
Mining companies operating in Zambia include Canada’s First Quantum Minerals, London-listed Vedanta Resources, Glencore and Barrick Gold.