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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, 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

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African finance ministers dismiss development declarations

Geoffrey Njora

Pambazuka News, 2010-04-22, Issue 478

[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

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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