African economies, which were on the verge of turning the corner following more than a decade of faster and steadier economic growth, now desperately need new funding to mitigate contagion from the global financial crisis, the World Bank said recently.
“We call on rich countries to keep Africa in mind as they design programs to help their economies weather the financial crisis,” the World Bank’s Vice-President for the Africa Region, Obiageli Ezekwesili, said during a video press conference from Addis Ababa, Ethiopia, where she was attending the African Union summit.
Connected via video to journalists in 21 other African capitals, Ezekwesili said it was crucial for wealthier nations not to focus on “insular” domestic responses to the crisis. She reiterated a call made earlier by World Bank President Robert Zoellick for donor countries to devote 0.7 percent of the amount of their stimulus packages to a Vulnerability Fund for Africa.
She explained that the Fund would direct spending to projects that are urgently needed to avert the growing unemployment, now building across Africa, as a result of the closure of mining operations, the suspension or cancellation of projects in sectors hardest-hit by a reversal of private capital flows, and tighter public budgets, the fall in commodity prices, and the shrinking of revenue from tourism and remittances.
The Fund would also finance safety net programs, attending to the basic needs of the poorest of the poor: health, education, school feeding projects, basic inputs for farmers, etc. It would help sustain the flow of credit to small and medium-sized enterprises, which are the engines of growth, job and wealth creation.
The Fund, which the World Bank is asking the G20 summit expected to hold in London next April 2 to help set up, would support investments in infrastructure projects that can build a foundation for future productivity and growth in Africa and other poor countries.
To sustain support for aid and the kind of fresh funding proposed under the Vulnerability Fund, Ezekwesili urged African governments to stay the course of public sector reforms; helping to build more capable states; train and retain competent civil servants who demonstrate integrity and tackle inefficiencies in state bureaucracies.
She called on African governments to improve the efficiency of public expenditures, pointing to the need to scrap subsidies that benefit those Africans who do not need them, for those that are better targeted in favor of the poor. A staggering one half of Africa’s US$40 billion annual financing gap for much-needed infrastructure could be closed by improving the efficiency in the way the public service functions.
She urged resource-rich countries, to improve adherence to transparency and accountability mechanisms; to ensure that revenue from natural resources are invested in sustainable poverty alleviation programs; to promote pro-poor growth and to diversify their economies beyond non-renewable sources of wealth.
“Countries like Zambia and other mineral-rich African nations must articulate a development strategy and make policy choices that would guarantee prosperity for ‘a Zambia without copper’,” the World Bank Vice President said, in reply to a question from a Lusaka-based journalist. She said citizens’ groups, the media and parliaments must all play more active roles in holding governments and donors accountable.
“The citizens of Africa are the continent’s most valuable asset,” Ezekwesili said, stressing the importance of tertiary education in building Africa’s skills to compete in a truly globalized economy.
She said education, innovation and the technological leap-frogging offered by ICTs (information and communications technology) would help those African economies that invest in them to build the knowledge economy of the future.
“Those who can pay should pay but governments should provide scholarships and other forms of assistance to ensure that poor students who deserve to can attend university,” Ezekwesili said, in response to a question on tertiary education in Tanzania.
She acknowledged the need for governments to stick only to those things they do best – allowing space for the private sector to thrive in what businesses do.
“Governments cannot abandon their regulatory role, especially when it comes to ensuring that their financial sectors work efficiently,” Ezekwesili said.
Some analysts have blamed ineffective regulatory mechanisms for the current global financial crisis.
Initially underestimated, contagion from what started as a crisis in the US subprime mortgage sector, poses a real threat of rolling back gains in poverty alleviation in Africa that had been fuelled by healthy growth rates ranging from 5.9 percent to 8.1 percent for about 65 percent of Africa’s population during 1997-2007.
Although still fragile, that growth had clearly broken with a past marked by the economic collapse of the decade 1975-1985 and the stagnation experienced in 1985-1995. Ensuring that Africa also benefits from initiatives to stimulate economies in the North would help restore that growth and return Africa and the world to a path of prosperity.