Wednesday January 27th, 2016
African Union Headquarters, Addis Ababa, Ethiopia
African Arising from Financial and Economic Crisis to Realise the African Dream Through African Agenda 2063
By His Excellency Dr Anthony Mothae Maruping
Commissioner for Economic Affairs
African Union Commission
Sharp drop in demand for, and in the prices of, a wide range of commodities produced and exported by most African countries has had significant financial and economic adverse effects. Most African economies remain heavily commodity export dependent. Raising of interest rate by the United States has led to depreciation of currencies and so to an increase in dollar denominated external debt and inflationary pressures. The situation has been exacerbated by widespread and prolonged severe drought that has adversely affected agricultural production which constitutes a large share of GDP, employment and source of export earnings for most African countries. Rain-fed agriculture remains the backbone of many African economies. In places there are floods that have destroyed infrastructure, caused displacement of people and are leaving water borne diseases on their path. As a consequence most African economies are currently navigating through stormy and rocky straits.
The firm resilience that many African economies demonstrated during the global financial and economic crisis a few years ago is now being put to a much more rigorous test. Recent euphoria expressed in various mantras such as “Africa Arising” and “six out of ten fastest growing economies are in Africa” is now being put to the test in the face of the challenges posed by current circumstances. How can Africa rise up to the challenge?
Commodities prices dropped sharply and yet even with lower prices demand and therefore exports still declined due to sluggish performance in importing countries. Consequently foreign exchange earnings have slowed down. In addition there has been cut-backs on production leading to rising unemployment rates, falling profits and therefore dwindling incomes. Adverse business climate has slowed investment rates and profits have shrunk. Currency depreciation in a number of countries, due largely to the raising of interest rates in the United States, has augmented foreign currency denominated public debt. Inflation pressures are also mounting.
Severe drought, attributed to El Nino, has translated into very poor agricultural production (for export and domestic consumption); hydro-power generation has been struggling as a result of low levels of water flows in rivers and reservoirs; irrigation schemes as well as industrial production (in mining and manufacturing) have been disrupted to a large degree. Clean water in communities has become scarce.
In places there are floods which are destroying infrastructure, causing displacement of people, causing water borne diseases such as cholera and typhoid.
Drop in commodities prices, interest rate rise in USA, severe drought, floods, all have combined to cause harsh economic and social hardships on the continent. It has meant rising unemployment rates, worsening inequalities, sombre business climate, eroding of tax bases, low public revenue inflows, widening fiscal deficits and increased borrowing ending up with risky levels of indebtedness. External borrowing has been complicated by credit rating downgrades. Heavy domestic borrowing leads to mopping up of liquidity in the system making bank lending scarce. This is further adversely affecting production and therefore employment. High rate of population increase further adds to the pressure. This has led to many authorities resorting to deep public expenditure cuts involving necessary service delivery. The already meagre foreign exchange reserves are being heavily drawn down.
It must also be re-emphasized that persisting remnants of armed conflicts and acts of terror clearly continue to be developmental liability.
All these spell need for efficient and effective humanitarian interventions. Readiness in AU member states in the area of disaster management and mitigation is required. The current financial and economic crisis is putting a test to the effectiveness of the social safety nets that may have been put in place.
Prudent and skilful fiscal policies that include high quality public expenditure and meticulous management of debt, accompanied by complementary monetary policy measures should be among the first steps taken. Devising and activating stimulus packages is certainly among immediate responses, where they have not yet been put in place.
The point should be made, though, that it is certainly not all “gloom and doom” situation. Even in these dire circumstances some element of resilience are still showing but need to be strengthened.
AU member states should hasten to embrace the transformative African Agenda 2063 First Ten Year Implementation Plan (FTYIP). FTYIP offers the viable option of transformative approach as a way of building stronger resilience to external and internal shocks and accelerating inclusive, job creating and more equitable real economic growth. It seeks to strengthen productive capacities, accelerate diversification, bring about value addition on a broad spectrum of production and improve competitiveness.
Domestication of African Agenda 2063 is well under way with twenty three countries already visited. Member states are highly receptive and are busy integrating the tenets of FTYIP into National and regional strategic frameworks and action plans. Progress is being made on all twelve fast track (i.e. flagship) projects.
At this juncture it should be well noted that all seventeen Sustainable Development Goals of global Agenda 2030 are already imbedded in the twenty goals of AA2063. Therefore pursuing successful implementation of AA2063 is tantamount to addressing SDGs and meeting global obligations. The accountability framework that is being crafted accommodates monitoring and evaluation on both fronts.
While the support of partners will continue to be appreciated and participation of the private sector is encouraged, reliance will be on domestic resources mobilisation (DRM) in funding implementation of AA2063. Besides tax reforms and administration as well as other improvements needed to raise domestic resources in a significant way will require effective combatting of illicit financial flows (IFF).
AUC and UNECA, under the able leadership of H E former President Thabo Mbeki, have been seeking to devise modalities for combatting IFF. Stakeholder consultations have been held in Nairobi for Eastern and Southern regions and in Accra for West, North and Central regions. A Consortium comprising of AUC, UNECA and a cross section of other African organisations with expertise and competencies on various aspects or facets of IFF has been formed. The objective is to design specific modalities aimed at stopping IFF, as tasked by the AU Summit.
The outcome document of the Third International Conference on Financing for Development (FFD3) held in Addis Ababa, Ethiopia In July 2015, the Addis Ababa Action Agenda (AAAA) acknowledged African leadership in IFF and addressed in paragraphs 23 – 25. Africa has put the IFF challenge on the global platform. This was reinforced by AUC, UNCTAD and UNECA before a joint meeting of ECOSOC and the 2nd Committee of the General Assembly in late 2015.
African Agenda 2063 is the dependable way towards the Africa We Want: An Integrated, prosperous and peaceful Africa, Driven and Managed by Its own Citizens and Representing a Dynamic Force in the International Arena
