Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala
By Ndubuisi Francis
Coordinating Minister for the Economy and Minister of Finance, Dr. Ngozi Okonjo-Iweala has reviewed developments in Africa, challenging Nigeria and others to maintain good economic policies, and consolidate on good governance in the light of the continent’s recent economic resurgence.
Okonjo-Iweala, who was the guest lecturer at the 2nd John A. Kufuor Foundation Good Governance Series Lecture in Accra, Ghana, Saturday, noted that since 2004, Africa has grown faster than all other regions of the world, with the exception of South East Asia, adding it is still being forecast that the continent would continue to record sustained growth at a robust rate while the developed world moves along in global economic uncertainty.
The minister whose lecture dwelt on “What African Can Do to Claim the 21st Century”, declared that in the eyes of many in the global community, the continent has already begun to claim the 21st century as growth in Africa has been robust, averaging about 4.7 per cent in the first decade of the century, compared with a growth of 2.5 per cent for the rest of the global economy.
“All over the international press, there is now talk of an “African economic resurgence”, “a new scramble for Africa.
“I recently met with some institutional Investors in Boston, and it is clear that they are now looking very seriously at Africa. And the news goes on: the London FTSE just launched a pan-Africa index (excluding South Africa) for fund managers who want to diversify their portfolios.
“The Africa Development Bank now estimates that since the 1980s, about 34 per cent of Africans have entered the middle class! The Economist magazine - which did not seem to like Africa much in the past - now praises the continent,” she said.
Just this week, they reported a story about Africa’s growing IT industry, and how all the big technology giants such as IBM and Google are looking to Africa as the next growth frontier! Ghana is also in the news, as the Ghana Stock Exchange “has climbed more than 17 per cent” in the past year.
“I am not saying everything is perfect on the continent yet. Far from it! But so far, Africa has definitely kicked off this 21st century on a very strong not! The big question is how do we sustain the continent’s recent economic resurgence?” The minister queried.
She challenged Nigeria and other countries on the continent to sustain the recent economic growth, consolidate good governance, especially by improving transparency and accountability, building strong institutions and consolidating fledgling democracies.
The minister recalled that the continent’s recent economic growth was heralded by some painful economic reforms in the 90s, adding: There were some simple, things which we did - such as, prudent economic management, “getting prices right”, removing government interference, and allowing the private sector to grow. We must continue with these policies and reforms.”
“Whether you look at the macroeconomic indicators or the structural reform measures, it is clear that Africa’s economies have come a long way already this century. Sovereign debts have shrunk. And this is creating fiscal space for critical expenditures. By the late 1990s, African countries had high levels of debt, with countries such as Zambia owing more than 235% of GDP; Cote d’Ivoire - 109%; Ghana 123%; Nigeria 72%. Today the region’s debt ratio has now declined to about 32% of GDP.
“Let us not forget how this happened. Many of the countries in our region benefited from debt relief initiatives such as HIPC. For Ghana, upon reaching HIPC completion in 2004, the country’s external was reduced by $3.5 billion (in nominal terms), saving about $230 million annually in debt servicing costs. In Nigeria, we had the largest external debt burden in the region of about $36 billion - of which $30 billion was to the Paris Club.
“But I was pleased that during my previous tenure as Finance Minister, we managed to wipe out the $30 billion debt with an outright cancellation of $18 billion in return for paying the $6 billion we owed in arrears and using another $6 billion to buy back the part of our debt not cancelled outright. This debt relief exercise was the second largest debt deal in the history of the Paris Club! It was unprecedented for a low income country. And it has saved Nigeria a lot of money in debt service payments,” she said.
On good governance, the minister noted that while the continent has come a long way from the turbulence of the 1980s and 1990s, stressing that many African countries are now multiparty democracies.
According to her, there are still problems with organising elections, advocating that a lot of work needed to be done to tackle corruption in government procurement, develop transparent judicial systems, and to build a vibrant civil society.
“The other key issue which is also not discussed is how to minimise political corruption from infecting our democracies. No one wants to discuss this big problem of how we finance the democratic process? How do we finance election campaigns and political parties? And where do the resources come from? In many developing countries, what we are beginning to observe is this close relationship between politics and business.
“Businesses provide the financial support to get their politicians elected. And then in turn, they get substantial favours which help them to recoup some of their investments. Some of these favours can be very “distortionary” for the economy. It can mean granting tariff protection to a few friends, but which can be to the detriment of the majority of the population.
“We really need an urgent review of this approach to financing democratic elections - which is cleaner and more transparent! Why can’t Africa lead the way in this endeavour and avoid the mistakes of the Western countries wealthy individuals and groups may be able to buy influence by making large donations...,” she said.
The pointed out that the continent needed to urgently address challenges associated with unemployment, acute infrastructure deficit as well work at real regional and sub-regional integration.