Tunis was, for three days, the destination of African ministers, finance specialists and bankers, for a Summit with the international financial crisis looming. Banks and financial institutions were not affected by the financial tsunami which raged over most international financial quarters. But should Africa just wait for what the others will decide for her ? This is what we discussed with Louis Kasakende, Chief Economist of the Group of the African Development Bank (ADB). Interview….
Could you give us an idea about the most important decisions made at the Summit of the African finance ministers ?
Two conference took place during the Summit. A conference was dedicated to the African Finance Ministers and the second gathered economists. The ministers conference ran over one day, with as a result the publication of a press release. During this conference, many documents and files were presented and discussed . These documents relate to the main topics of globalisation, institutions and economic development in Africa. The participants expressed their different positions relating to the different topics. We were not expecting a decision that would be addressed to the politicians who participated to the Summit, all the more within the present context. But we expect the research done by the politicians, in collaboration with the economists, will present a starting point to inform their collaborators about the agenda for the reinforcement of their macro-economic management contexts in their respective countries. Concerning the ministers, they are only focused on the financial crisis, with the objective of better understanding it , to better apprehend the ways in which it affected Africa, its transmission chains, the best post-policies to alleviate its impact and also to send a message to the international community aiming at getting the voice of the continent listened to concerning the measures to take to cope with this international crisis.
What is then the message that you, economists, addressed to the politicians to cope with this crisis, in order to find concrete solution on field ?
We prepared three briefings. The first one concerns the impact of the crisis on Africa, the second one gives details on the implications and on the operators of the African Development Bank in this context of crisis. Concerning the impact of the crisis on the African continent, we presented to them the transmission chains, and explained to them that this crisis could spread through the capital accounts for those who integrated the international capital markets, and we demonstrated that there is evidence that this is happening now. On the other hand, the countries having received credit lines from international capital markets should realise that these lines are disappearing because of the credit crisis. The countries having received portfolio flows are also threatened. We demonstrated to them that there are now sufficient proofs that the international investors are withdrawing, which intensifies the market volatility. The question is how to meet this as African countries. We do not propose to intensify control as a solution, the president of the ADB Donald Kaberuka reminded, but it would be better to rethink it and reinforce the functioning of the markets, and reinforce regulations within these markets, identify the existing bad regulatory mechanisms and try to put an end to them. The president of the ADB added that we are focusing on the regulation of the banking sector, while we should spread this regulation to other sectors mainly non-banking ones. There is also the message to the international community, saying that if you want to have high level discussions, you should also listen to the needs of Africa. What we would like the international community to do is first to reinforce the IMF (International Monetary Fund), so that it can effectively help those who are really affected by the crisis and it is not only the occidental countries who suffer from the crisis, but also the African countries. The IMF should then be there to lend attention to these countries in Africa. We also sent a message to the international community to boost world economy, as this is the only way to limit the impact on Africa. The ministers also sent a message, saying that they should not wait for boosting the world economy to try to dynamise their own economic growth and stimulate their own forces so as to alleviate the impact of the crisis.
The African continent has just undergone two crises. The first concerns the hydrocarbons and the second was a food crisis. Isn’t there a contradiction here since Africa has always been considered as the world reserve of raw materials and natural resources? How can we balance what Africa is offering to the world and what it is receiving?
I will put this in its context. Africa benefits of the increase in raw material export rates, but many other countries exported manufactured products. We also benefited from the continent integration within the global trade environment. I am not saying that African countries were exporting without any advantages, they did take advantage. If we consider for example the last decade, the integration of this global trade environment and growth of the consumption goods prices were major boosters of growth in Africa. Second, the financial integration, the world capital market presented a financing source and of support to investments in the African private sector, which also contributed to growth. I would also like to mention that the integration to the global environment offered an assistance to growth throughout the continent. So Africa did benefit. The problem resides in the way and risks around this integration to the global environment, and we should find solutions to limit this risk.
What the tools at the disposal of the ADB to pressure the African governments so as to improve integration between the sectors, private and public, in Africa in order to contribute to the creation of wealth and jobs ?
During the past 15 or 20 years, the governments in the African countries withdrew and left space to the private sector. In most countries, the private sector has been able to grow and improve. The public sector is rather focused on preparing the way to the private sector through infrastructure improvement, drinkable water, electricity and the regulation of the financial institutions and their reinforcement. There is enough space and we can do a lot better to improve the business climate in the African countries and we must focus more in order to realize and widen this co-operation space between the public and private sectors.