With sub-Saharan Africa seeing its lowest growth rate in two decades amid low commodity prices, the World Bank is urging the continent to seize the moment to make change. Policy reform and economic diversification is the formula the bank hopes can help propel Africa out of its downward turn.
There are a growing number of reasons to be hopeful. Commodity and oil exporting countries such as Angola and Nigeria were hit hard by the fall in global commodity prices. Yet other noncommodity exporters including Tanzania, Ethiopia, Cote d’Ivoire and Senegal continue to record improved economic growth.
“The theme of urgency and accelerating the pace is critical in what we will be doing,” Makhtar Diop, World Bank’s vice president for Africa, told Devex, explaining the institution’s priorities and approach to eliminate poverty from the continent.
“What we want is to move into full-fledged programs that will enable us to diversify our economies and have the structural changes that are needed for Africa,” he said.
Diop explained that this would require investing in nontraditional commodity exporting sectors, boosting intra-Africa trade, building infrastructure needed to drive and sustain economic activities, and addressing the critical economic bottlenecks.
One of the most vital is energy access, he said. The institution plans to work with African countries to make energy more available and affordable, as a way of addressing the shortage of power supply on the continent. An improved power supply can help rebound growth rates, as more countries have the electricity needed to drive major business activities.
Improving the lives of people in rural areas is another priority, as are the continent’s youth. “What we would like to do is to make sure that the work of youth in Africa becomes more central in the design of our programs,” Diop told Devex. Here is Devex’s conversation with Diop, edited for length and clarity.
How is the World Bank’s approach to program implementation in the region changing over time?
What we are feeling now in 2017, more than ever, is a sense of urgency. There is a need to accelerate the pace of reform and the pace of unleashing the potential of African economies. Instead of thinking of moving the electricity access in a country from 14 percent to 17 percent in three years, we should be thinking much more ambitiously in moving it from 14 percent to 50 percent in the same timeframe. That is the only way we would be able to go back to a growth rate that is higher and allow African economies to be much more integrated in the world economy.
But one of the things that we have said in the past and that we need to do more of is to remove all the obstacles to intra-Africa trade. When we talk about a regional value chain, we need to think about how it will be possible to build some parts of a product in Nigeria and move it quickly to Cameroon and from Cameroon move it to another country where it will be assembled and exported to the rest of the world. That is what they did in Asia, and that is why they have succeeded in having this competitiveness in their economy.
In an article published by Brookings Institution, you made an open call to African countries to reform their policies and diversify their economies. How will the World Bank work with these countries to make that happen?
It will be important to make the viable proposition for policymakers to change things quickly. We know that politicians have a [cycle] of elections, and they need to prove their ability to improve the living conditions of their electorate and other objectives that they have set. The dialogue with policymakers is not just about the reforms but a win-win solution that would improve the well-being of the population.
More and more [of the] population in our countries are voting on the result. The democratic system in our countries is working better and better. Therefore if you don’t have a result, you will not be elected. Working on that will allow us to understand the constituents of politicians and adjust our process to be much agiler and move faster — sometimes instead of doing things sequentially, one after the other, [we should] work on parallel tracks so that we can get the same result at the same pace.
Considering the growing interest of other multilaterals on the continent — such as the Asian Infrastructure Investment Bank — does the World Bank see an increase in competition or will there be room for collaboration?
I don’t see any competition. The needs are so massive in Africa, and there is space for everybody who wants to work with African countries on their development objectives. I see a lot of complementarities [and] a lot of working together. But all that will happen at the leadership level of countries. Once they have clear objectives, clear ideas of what they want to do and make sure that us who are their partners — be it the Asian Development Bank, Africa Development Bank, or the World Bank — can deliver those results. The more we have clarity on the objective of the country, the more we have a commitment on what they want to do and clear steps, the better it would be for all partners of African countries to be able to deliver and support them in their development objectives.
During your keynote address at the Georgetown University African Business Conference, you mentioned how isolationism and protectionism can impact African countries. Could you elaborate?
We are all in a world where the level of uncertainty has increased, and a different type of uncertainty. We are used to the uncertainty linked to commodity price changes… [what] we have now is a bit more uncertainty at the political level, and the way some international relations will be organized. We are all waiting for the outcome of it.
What is sure is that by investing in fundamental things like education, agriculture and energy, and you are strengthening your institutions, whatever is the outcome of these discussions at the international level, you will still have your say and your word. In my view, I think that is what we need to understand in Africa and be extremely pragmatic.
That being said, we are all convinced — and history has shown — that trade is a major source of improving the welfare of the population in any part of the world. Therefore, anything that can be done to keep a high level of trade between countries will be substantial. In Africa, we have the opportunity to increase intra-African trade, which hasn’t been at a level that it should be. That would not only allow us to be stronger in competing with the rest of the world, but also make sure we reap the benefit of higher trade between African countries.
Public–private partnership dominated the business panel discussions during the Georgetown conference as well. Some argued that it would play a dominant role in funding development projects as global aid continues to get cut down. Is this feasible? What role do you see the World Bank playing to ensure an improved practice in the region?
It is feasible, and it is happening. About 15 to 20 years ago, there was still some debate whether the private sector should be allowed. This debate is becoming obsolete in most of the countries. People are accepting that the private sector is the engine of growth and should be contributing in sectors like energy. If you look at energy generation in Africa, it is becoming increasingly a business of the private sector. PPPs are being signed in Nigeria, in my country Senegal, in other parts of Africa.
What we would like to do is to increase the scale of those deals. Not just allow some countries to have the purchasing power agreement, but to have it generalize at a much faster pace. The theme of urgency and accelerating the pace is critical in what we will be doing. To do that we would like to harmonize the market — use assembles like ECOWAS [the Economic Community Of West African States] to harmonize the low regulation in those markets — so that you will have more people who can do this type of investment.
Secondly, increase the capacity in government to generate those projects. What we see is that most of the time people come with unsolicited bids to government and want to have a PPP. It is not the best way of doing things. What we would like to [see] is a country that identifies projects that they would like to have a PPP and have a strategy in the way they approach and present the projects to a financier. We would be working to increase the capacity in government to generate [projects] and to dialogue with the private sector for PPP, so that there is less probability of having those contracts revisited and renegotiated at a later time, because they would have been conceived and prepared well at the inception.
Investors are looking at the numbers and they see low economic growth. Africans in diasporas are saying, maybe this is not the right time to go back and invest on the continent. What are your messages of hope to Afro-pessimists and wary investors?
Get in the wagon, because if you don’t get in the wagon, you will be the last to come, and people are making money in Africa.
What is happening in the culture industry in Nigeria is quite impressive. Looking at the numbers and how fast it happened shows you that people are investing in some sectors — cultural industry, services, brick and mortar, food products — in various area. We have this slowdown in foreign direct investment because people invested less in the mining sector and oil because of the [fall] in commodity prices. But in other sectors, you will still see a level of investment, and we are thinking of how to help the diaspora who want to invest back home to find the right instrument in investing in those sectors. It is in the interest of institutional investors in OECD countries like insurance, reinsurance and pension funds to invest in Africa, because the returns they will get in investing in Africa — they will never get it recurrently by buying bonds on their market, because the return is much lower. For that, they need to have confidence that these investments are safe and secure.
Credit: Devex By Jennifer Ehidiamen