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Africa: Finance Ministers vs. Development Goals
AfricaFocus Bulletin
May 4, 2010 (100504)
(Reposted from sources cited below)
Editor's Note
"After two heated debates during the recent African ministers of
finance meeting in Malawi, national delegations from South Africa,
Rwanda and Egypt succeeded in deleting any reference to budgetary
targets for education, health, agriculture and water in the Common
Position on MDGs and the conference report and resolutions. Their
action brings into question the extent to which African finance
ministers are committed to continental integration, the Millennium
Development Goals (MDGs) and the declarations and resolutions of
their own heads of state." - Geoffrey Njora
The final ministerial statement, available along with other
documents from the meeting at http://www.uneca.org/cfm/2010/,
acknowledged mixed progress on achievement of the MDGs and stressed
the importance of growth that includes food security and the
creation of jobs. But, as indicated by commentator Njora, who was
present at the meeting, the ministers included no references to the
implications for African government budgets.
This AfricaFocus Bulletin contains Njora's commentary, as well as
excerpts from the December 2009 UN report on World Economic
Situation and Prospects 2010, which provides a convenient summary
of the economic situation in African countries.
For previous AfricaFocus Bulletins on economic issues, visit
http://www.africafocus.org/econexp.php
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African finance ministers dismiss development declarations
Geoffrey Njora
Pambazuka News, 2010-04-22, Issue 478
http://pambazuka.org/en/category/comment/63894
[Geoffrey Njora is a pan-African analyst who attended the meeting
of the finance ministers.]
The commitment of African finance ministers to continental
integration, the Millennium Development Goals (MDGs) and the
declarations of their own heads of state has come into question
after national delegations from South Africa, Rwanda and Egypt
succeeded in deleting any reference to budgetary targets for
education, health, agriculture and water in the report and
resolutions of the annual meeting of the African Union and Economic
Commission for the Africa Conference of Ministers of Finance,
Planning and Economic Development, which took place in Malawi at
the end of March. Geoffrey Njora explores the possible consequences
of their actions.
After two heated debates during the recent African ministers of
finance meeting in Malawi, national delegations from South Africa,
Rwanda and Egypt succeeded in deleting any reference to budgetary
targets for education, health, agriculture and water in the Common
Position on MDGs and the conference report and resolutions. Their
action brings into question the extent to which African finance
ministers are committed to continental integration, the Millennium
Development Goals (MDGs) and the declarations and resolutions of
their own heads of state.
The budgetary targets are embedded in a set of important
declarations and decisions adopted by Africa's 53 Presidents as far
back as 2000. The declarations and decisions include the Dakar
Framework for Action-Education For All: Meeting Our Collective
Commitments (2000), the Abuja Declaration on HIV/AIDS,
Tuberculosis, and Other Related Infectious Diseases (2001), the
Maputo Declaration on Agriculture and Food Security (2003) and
Sirte Declaration on Agriculture and Water (2008). Among other
strategies, these declarations and decisions commit governments to
devote up to 20 per cent of their budgets to education, 15 per cent
to health, 10 per cent to agriculture and 0.5 per cent to water and
sanitation.
The delegations were attending the 3rd Joint Annual Meeting of the
African Union and Economic Commission for Africa Conference of
Ministers of Finance, Planning and Economic Development in
Lilongwe, Malawi, held from 29-30 March. The ministers had met to
address progress towards the MDGs and in particular, realising food
security and employment among other issues.
2010 is a critical year for these issues. In September, African
presidents will join their counterparts to report against the
Millennium Development Goals in the UN General Assembly. African
governments will challenge the G20 to follow up G8 promises on
doubling aid to Africa and global trade reform in June, as well as
push for the delivery of US$30 billion promised for national
adaptation and mitigation efforts in Copenhagen last year. In this
context, the positions taken by the finance ministers completely
undermine African governments' attempts to hold their development
partners accountable for the promises reached.
In the heated debates, Cecil Noel, South Africa's chief finance
director set the tone for the debate that followed, stating, 'These
targets do not make any sense. I shall be asking my head of state
to propose a review of these targets in the AU Summit in Kampala in
July.' He proceeded, supported by Egypt's deputy minister Hany
Dimian to argue, 'The heads of states have made a colossal mistake.
These targets straightjacket the process of budgeting in our
countries.' Rwanda's finance minister John Rwangombwa concurred and
was swiftly followed by Zimbabwe and Egypt's call for the targets
to be abandoned. Mozambique's vice finance minister Pedro Couto
called for any reference to a 10 per cent budgetary target for
agricultural investment to be struck from the resolutions.
Ironically, the declaration is known as the Maputo Declaration.
Agriculture ministers adopted it in a meeting chaired by Mozambique
in 2003 in Maputo.
Delegations from Nigeria, Kenya, Ghana, Malawi and Cote D'Ivoire
argued for their retention in the drafts prepared by the AU
Commission and Economic Commission for Africa. Addis-based
ambassador Nkoyo Toyo warned against delegations dismissing
decisions. She referred to their historical importance as standing
commitments and cited a number of countries that have raised their
budgetary allocations. The Nigerian head of delegation further
noted, 'I worry about the precedence we are setting where we make
commitments and drop them when it is expedient.' Kenya's national
planning permanent secretary Edward Sambili reminded the
delegations that the targets are aspirational in nature. He further
pointed to the 38 per cent that Kenya currently allocates to the
four sectors as evidence that it is possible to reach these
targets.
Attempts by the meeting's Malawian chairperson Hon Ken Kandodo and
AUC chairperson Jean Ping to remind the finance ministers that the
ministers did not have the power to change these presidential
commitments fell on deaf ears. Accordingly, without the consensus
needed, the references to the budgetary targets were struck first
from the resolutions, then the Common Position on the MDGs and
finally the report of the ministers conference.
There are many consequences that could flow from this. Firstly,
this could indicate an abandonment of the bold financing that has
gone into reversing vulnerability to food insecurity, disease and
denial of access to education. According to NGO The African
Monitor, it is these targets that have inspired the improvements in
small-scale farming, primary education enrolment rates and falling
HIV/AIDS infection rates. In 2009, they noted that despite this
progress, 44 countries continue to import 25 per cent of their food
needs, and that retention of girls in education and the overall
quality of education is still weak. Huge inequities exist between
urban and rural, rich and poor and most people living positively
with HIV/AIDS do not have access to life saving medicines.
Secondly, how will Africa now have the integrity to hold the G8 and
international community to the commitments that they have made to
contribute 0.7 per cent of their gross national product and double
development assistance to Africa? Should presidents backtrack on
these commitments in Kampala, will African Union president Bingu wa
Mutharika be able to stand before the G20 in June and the UN
General Assembly in September and remind the international
community of their obligations? I think not.
Thirdly, the dismissive nature with which the finance ministers
have treated these targets begs the question of whether the
Millennium Development Goals and all the other decisions taken
under the auspices of the African Union will go the same way. This
path would further damage the credibility of Africa's leaders in
the eyes of those African citizens who feel their leaders lack
political will, are unaccountable and completely self-interested.
For these citizens, it is one more reason to dismiss Africa's
leadership.
Lest you the reader be one of them, consider that behind these
declarations and decisions are a number of research consultancies,
numerous meetings of African ministers of education, agriculture,
water and sanitation and health, at least five summits of
Addis-based ambassadors, ministers of foreign affairs and heads of
states and their delegations. At a conservative figure, this could
have run into US$10 million over the last ten years. Got your
attention? I think so.
World Economic Situation and Prospects 2010
United Nations, December 2009
http://www.un.org/esa/policy/wess/wesp.html
The world economy is on the mend. After a sharp, broad and
synchronized global downturn in late 2008 and early 2009, an
increasing number of countries have registered positive quarterly
growth of gross domestic product (GDP), along with a notable
recovery in international trade and global industrial production.
World equity markets have also rebounded and risk premiums on
borrowing have fallen. World gross product (WGP) is
estimated to fall by 2.2 per cent for 2009, the first actual
contraction since the Second World War. Premised on a continued
supportive policy stance worldwide, a mild growth of 2.4 per cent
is forecast in the baseline scenario for 2010. According to this
scenario, the level of world economic activity will be 7 per cent
below where it might have been had pre-crisis growth continued.
The report cautions that despite these more encouraging headline
figures, the recovery is uneven and conditions for sustained
growth remain fragile. Credit conditions are still tight in major
developed economies, where many major financial institutions need
to continue the process of deleveraging and cleansing their
balance-sheets. The rebound in domestic demand remains tentative
at best in many economies and is far from self-sustaining. Much
of the rebound in the real economy is due to the strong fiscal
stimulus provided by Governments in a large number of developed
and developing countries and to the restocking of inventories by
industries worldwide. Consumption and investment demand remain
weak, however, as unemployment and underemployment rates continue
to rise and output gaps remain wide in most countries. In the
outlook, the global economic recovery is expected to remain
sluggish, employment prospects will remain bleak and inflation
will stay low.
The report also highlights a number of risks and
uncertainties to the outlook, including a premature exit from the
stimulus measures and a hard landing of the dollar due to the
renewed widening of the global imbalances. In terms of policy
measures, the report recommends continued fiscal stimulus
measures in the short run, a continued focus on the rebalancing
of economic growth in a number of respects, better policy
coordination, strengthened global governance and more decisive
reforms of the global financial system.
Africa: signs of recovery, but concerns remain
There seems to be a growing sentiment in Africa that the worst of
the economic and financial crisis has passed as signs of recovery
begin to appear. The future of many mineral and oil exporters in
the region looks brighter than in early 2009 as the prices and
the demand for these commodities rebounded sharply at the end of
the first quarter and general economic activities started to
resume.
However, economic growth in almost all African countries will
remain well below potential. Aggregate growth in Africa is
estimated to be 1.6 per cent in 2009, down from an average of
about 5.7 per cent during the period 2002-2008. Average GDP per
capita for the region contracted by 0.7 per cent in 2009. The
richer African countries faced stronger declines in per capita
income than low-income countries owing to greater economic
linkages with the rest of the world (figure IV.8). As all groups
registered a growth of GDP per capita below 3 per cent, which is
considered the minimum rate for achieving a meaningful reduction
in poverty, 2009 marked an unfortunate reversal and offset part
of the hard-earned social and economic gains that had been made
in reducing both poverty and the large gap which still separates
Africa from its Millennium Development Goals (MDGs). In addition,
considerable economic difficulties remain, as seen in the two
largest sub-Saharan African economies. In South Africa,
manufacturing activities and the labour market remain depressed.
In Nigeria, the banking system is experiencing severe distress.
More worrisome, hunger levels have soared in the Horn of Africa
and in East Africa, owing to prolonged droughts and are
exacerbated by increased insecurity in some countries.
At the subregional level, Southern Africa contracted by 1.7 per
cent in 2009, the worst regional performance on the continent.
South Africa recorded its first recession since the collapse of
the apartheid regime. This slowdown also spilled over to its
neighbours, particularly Lesotho, Swaziland and Namibia. West
Africa grew by 2.4 per cent in 2009. Nigeria, the second-largest
sub-Saharan economy, grew by 1.9 per cent, as declines in the
industrial sector and crude oil production were offset by
increases in agriculture. Meanwhile, other food exporters of the
region proved to be quite resilient as the demand and prices for
commodities like cocoa, coffee and bananas remained robust. North
Africa, with an average growth of 3.5 per cent in 2009, was also
more resilient, owing to robust domestic consumption and
excellent harvests in Algeria and Morocco. In Morocco, the
unemployment rate even decreased from 9.6 to 8.0 per cent between
the first and second quarters of 2009. East Africa recorded the
highest subregional growth rate in 2009: owing to the dynamism in
Ethiopia and in the five member countries of the East African
Community, it expanded by 3.8 per cent. However, the significance
of such a positive headline figure appears questionable in view
of severe problems in satisfying the basic needs of a large
number of those countries' citizens. More specifically, prolonged
droughts and variations in rainfall, accentuated in some cases by
conflicts and political turmoil, continue to have a devastating
impact on a region where more than 20 million people are affected
by severe hunger.
Unemployment and underemployment remain a major concern in
Africa, especially among women and youth. Moreover, Africa has a
very high rate of vulnerable employment,9 which is expected to
rise from 73 to 78 per cent in sub-Saharan Africa and from 37 to
42 per cent in North Africa between 2008 and 2009.
Weighted average inflation decreased to 8.1 per cent in 2009 as
food and oil prices declined from their peak in 2008, although
subregional levels remain diverse. In the Communaute financiere
africaine (CFA) zone, inflation is forecast at approximately 4
per cent in 2009. In North and Southern Africa, it is expected to
be about 6 and 8 per cent, respectively, while it is likely to
remain at about 15 per cent in East Africa. In the outlook, as
prices are expected either to decline slightly further or to
remain stable at their October 2009 level, inflation is forecast
to be about 6 per cent in 2010. However, food prices will likely
soar in many East African countries as the food crisis affecting
their populations intensifies.
Many of Africa's biggest central banks have reduced their main
interest rates by between 3 and 5 percentage points since the
last quarter of 2008. While most African countries' financial
systems have not been adversely affected by the crisis, the
Central Bank of Nigeria injected $2.6 billion into five troubled
banks in August 2009 before injecting an additional $1.3 billion
into four other banks at the beginning of October.
Due to prudent management of public finances during periods of
robust growth, many African countries entered the current crisis
in a better fiscal position than in past crises. Some countries,
such as Egypt, Mauritius, Nigeria and South Africa, embarked on
fiscal stimulus packages, primarily in infrastructure.
Nevertheless, the economic crisis has strained budgets in the
region. With the exception of Ghana and a few other countries,
almost all African countries experienced a deterioration of their
fiscal balances in 2009. In oil-importing middle-income countries
(MICs), this decline can be mainly explained by increased
government expenditure, while in most of the energy-exporting
MICs, the main factor was the decline in government revenues. The
crisis also forced most of the major oil exporters to switch from
fiscal surplus to deficit this year. While most of their
Governments entered the crisis in strong budget positions after
the prices of their exports skyrocketed in 2008, some of these
countries, such as Angola, Chad and Nigeria, revised their
budgets downwards for 2009 after oil prices fell below $40 per
barrel (pb). Nevertheless, near-term prospects look brighter as
oil prices have rebounded to $70-$80 pb, and this may be
reflected in the upcoming budgets.
Regarding trade, aggregate exports declined faster than imports
owing to the sharp drop in the prices of oil and minerals. Hence,
the aggregate African trade and current-account balances, which
are mainly determined by the price of oil, switched into deficit
in 2009 and will probably remain so in 2010. However, this
aggregate picture contrasts dramatically with some
country-specific situations. For instance, South Africa's trade
balance moved into surplus in the second quarter of 2009
following a sharp decline in its volume of merchandise imports.
Preliminary data suggest that FDI flows to Africa declined in
2009, following five years of uninterrupted growth.
Natural-resource producers, which attract a large share of the
region's inflows, suffered particularly as some projects were
interrupted. Rwanda, whose FDI went up sharply during the first
half of 2009, constitutes one of the few exceptions.
In comparing the average monthly levels for African currencies
between January and September 2009 with the 2008 average, all
African currencies had depreciated vis- -vis the dollar as that
currency had recorded a significant rebound in the second half of
2008 and early 2009 owing to flight-to-safety effects (see
chapter I). While the average depreciation had been about 10 per
cent up until September 2009, the currencies of the Democratic
Republic of the Congo, Ghana, Seychelles and Zambia had
depreciated by more than 30 per cent.
The global economic crisis and adverse weather shocks have
undoubtedly complicated efforts to restructure those African
economies that continue to rely heavily on agriculture and
commodity exports. However, while significant threats to
political stability persist in several countries, modest progress
has been observed in terms of improvements in economic governance
and public sector management.10 This progress may have helped
some African countries to mitigate the worst social and economic
consequences of the global crisis. Moreover, several African
countries have continued to implement long-term reforms to
improve their business environment and investment climate,
despite the challenges presented by the crisis.
While African countries have taken a number of initiatives to
lessen the impact of the economic downturn, their recovery will
mainly depend on the revival of the global economy. Moreover,
many African countries are expected to remain below their growth
potential during the next few years, as the economic crisis will
have long-lasting effects. As global demand recovers, Africa is
projected to grow by 4.3 per cent in 2010. In addition, African
countries are expected to benefit from plans to boost domestic
demand and from a gradual recovery in FDI and other private
flows.
However, numerous downside risks to economic growth remain. A key
structural element relates to the continued high dependence of
most African economies on primary commodity exports, which are
subject to strong fluctuations in demand and prices. Other
downside risks include the possibility of prolonged global
recession, failure of donors to meet aid commitments, fragility
of domestic financial sectors, limited access to foreign
borrowing, erratic weather conditions and political instability
in some countries. To mitigate these risks, Africa needs to make
greater efforts, with the help of donors and international
financial institutions, to implement long-term reforms and
strategies in order to reduce vulnerability to external shocks,
improve mechanisms of transparent and effective public
administration, strengthen private sector development and promote
investment, employment generation and poverty reduction.
AfricaFocus Bulletin is an independent electronic publication
providing reposted commentary and analysis on African issues,
with a particular focus on U.S. and international policies.
AfricaFocus Bulletin is edited by William Minter.
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