The charismatic Dr Ngozi Okonjo-Iweala gave a presentation at my alumni university, the London School of Economics, last Tuesday, 13th September 2009. Her presentation was on ‘Looking beyond the Crisis: Challenges and Opportunities for Africa’ - a rather typical presentation title, but quite refreshing ideas from her side.
Her presentation gave a brief overview of the economic developments taking place across the continent since 1995, citing remarkable growth rates, reductions in armed conflicts, increased regulatory reforms and more transparent elections.
However, over the last three to four years, the continent has been struck with what Dr Ngozi referred to as the crises of the four ‘F’s’ – Fuel, Food, Financial which has led to a new crisis - the Fertiliser crisis.
During the presentation, she kept stressing the importance of stimulating growth by creating jobs. The World Bank are predicting a rise in average real GDP growth rates to 4.5% across the continent in 2010, however, jobs will lag behind.
Dr Ngozi then proceeded to talk through what she saw as the eight main challenges facing the continent in the years ahead, many of which have been cited before. These are:
· The role of government and its accountability
· The sustainability of public debt
· Economic volatility
· Corruption
· Political stability
· Climate change
· Augmenting Energy resources
· Accelerating ‘job-creating’ growth
The opportunities that she laid out however, were more unique. These included:
1. Promoting labour intensive manufacturing to spark technological innovation and competition. China will be driving this manufacturing growth and Africa should be looking to partner with China and India to service their industries rather than be undercut by Chinese and Indian goods.
2. Investing in the full agricultural value chain, from raw products to processed goods. Only 40% of Africa’s productive land is currently being cultivated. She cited the need to bring more female entrepreneurs into this sector as women largely comprise the agricultural workforce.
3. Climate change is a challenge, but also an opportunity. Currently, Africa uses only 8% of its renewable energy resources compared to 30% in Latin America. Investing in sustainable agriculture and clean technology can supply Africa with a new revenue source. The World Bank has just launched the World Development Report 2010 on Tuesday (22 September), which focuses on Development and Climate Change.
4. Repatriate embezzled resources and stem the outflow of financial and natural resources from Africa. This opportunity is off the back of the G20 financial summit pledging to put an end of tax havens and the OECD anti-corruption programme and convention.
The question and answer session raised a few interesting ideas as well, such as the need to implement strong tax reforms so that a government’s revenue doesn’t rely solely on exploiting natural resources. However, the main obstacles to this, and obstacles that Dr Ngozi faced when she was the Nigerian Minister of Finance, was the difficulty of tax administration and the narrow tax base, with many people still in the informal sector. She recommended that government should incentivise the set up of small and medium sized enterprises by placing a 0% or subsidised tax regime on these businesses for the first few years, and then slowly introducing a taxation system which provides them with resources and assistance.
The issue of regional integration also cropped up. Dr Ngozi was an advocate of regional bodies like COMESA and SADC but stressed that they could still do more. She was supportive of common currencies but stated that national currencies and economies need to have the correct systems to manage exogenous shocks first.
She summed up by stating that to prevent another financial crisis like the one we have just experienced, the world must establish multiple poles of growth. America was once the main growth centre and China and India are emerging. But more are needed. Dr Ngozi is confident that Africa can be the source of successful and strong growth centres.
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