Meeting of a Group of African Finance Ministers to Deliberate on the Africa Commission Consultation Documentation held on November 23rd, 2004 at the Nicon Hilton Hotel, Abuja

INTRODUCTION

At the invitation of the Honorable Minister of Finance, Nigeria, Dr. Ngozi Okonjo-Iweala, the Finance Ministers of: Burkina Faso, H.E. Jean-Baptists Compaore; Ghana. H.E. Yaw Osafo-Maafo; Rwanda, H.E. Donald Kaberuka; and representatives of Cameroon, Mr. Daniel Lamere Njankouo, Permanent Secretary of the Ministry of Finance, Cameroon, met to review and deliberate on the Africa Commission Draft Consultation document with a view to making an input into the work of the Commission for Africa.

The Commission for Africa is an initiative of the United Kingdom in its impending capacity as Chair of the both the G8 and the European Union

OBSERVATIONS

Ministers noted that the document was comprehensive and most of the relevant issues were covered. The Ministers also noted that the work of the Commission is still “in progres. They further observed that the work should complement the NEPAD and African Unions Agenda for African development.

In view of the limited resources and competing needs for Africa’s development, the Ministers emphasized the need to prioritize the various areas of attention and assistance required from both African government’s themselves and their development partners. Infrastructure, Agriculture, Science, Technology and related Tertiary Education were considered top priorities towards realizing Africa’s development aspirations, especially with a vision towards the future. In addition a focus on these areas would provide the critical backbone to realizing the Millennium Development Goals given that improvements in health, education and poverty levels would prove extremely difficult without sharper focus on these areas.

Priority Area 1
Infrastructure
Ministers noted the critical role of a good system of infrastructure in promoting economic growth and development. It was recognized that the post-independence model of infrastructural development with differing standards across different countries and little attention to maintenance has not adequately served the continent. Consequently, the Ministers agreed on a new approach towards infrastructure development in Africa that would encompass uniform standards, a maintenance culture and linkages between countries in a synchronized program. Ministers emphasized the need to harmonize their infrastructural policies as this would promote regional linkages, ensuring consistency and coherence in development.

Ministers agreed that the African continent must be positioned to become the next preferred destination for the global movement of jobs. As Asia has been to the world in the last couple of decades, so too can the African continent build its institutions and capacity to attract investment. This can only occur if basic infrastructure and other favorable conditions are in place. The Commission’s work must therefore give infrastructure pride of place especially modalities for the delivery of infrastructural services.

Priority Area 2
Science and Technology
The future of the continent’s economic development would depend heavily on the competitiveness of its economies. The issue of science and technology as a driver of the process should therefore take center stage.

ICT must be the driving force behind the modernization of African economies. Similarly, science and technology would improve productivity and growth needed to create jobs and reduce poverty. In a related context, Ministers underscored the need for Africa to take steps to revamp its’ tertiary institutions and build centers of excellence, especially in the areas of science and information technology given that present and future economic development is increasingly based on a knowledge economy.

Priority Area 3

Agriculture
The Ministers noted that agricultural development is key to the continent’s future, there is ample scope for increased food production in Africa and there is no reason why the continent cannot feed itself. The current level of production can be further enhanced with the application of modern techniques. At a minimum, they emphasized that the objective should be to achieve food security for the continent. They also emphasized the need to use the sector as a springboard for increased processing of primary products. In this regard, the Ministers underscored the need for value addition in agricultural production to promote local employment and growth opportunities within the various economies.

Financing and Debt Relief

Debt has become an impediment to Africa’s development and there is therefore a need to fundamentally address the way debt is analyzed. The present methodologies, especially the so called debt sustainability analysis are woefully inadequate because they fail to take into account the particularities of the African economies, especially external shocks, domestic debt, pensions and other arrears, and a fragile revenue base. There is the need to look deeper at these methodologies and involve African development practitioners more with their development and their application.

Debt relief should be legitimately seen as a form of financing on par with new money. In some cases, countries would need both, in others one or the other may suffice.

In this regard, development partners and African countries should undertake the full implementation of the HIPC agenda such that HIPC countries get full debt relief and regain the capacity to focus on the growth and development agenda as well as the MDGs.

Ministers noted that there are non-HIPC low income African countries with heavy debt burdens whose case seems to have fallen through the cracks. Ministers urged the Africa Commission to develop an initiative for these countries and/or as necessary, look at their situation on a case by case basis for debt relief.

Ministers noted that resource flows must be predictable for the scaling up of spending. If expenditures are increased on the basis of grants, then there must be binding agreements between donors and grant recipients for predictability to be maintained. Further developing this, Ministers agreed that the IDA horizon of 3 years is not enough, emphasizing that a window of 5 years was more realistic for planning purposes. Financing mechanisms should not be tied to the budget cycles of donor governments.

Ministers acknowledged the ongoing debate on grants versus concessional loans for low income, particularly HIPC, countries. They recommended the categorization of countries according to development prospects and economic performance and their access to a combination of grants and credits on a sliding scale based on the above two performance and prospects criteria.

Ministers also emphasized the need to commence the implementation of the IFF with a “coalition of countries that are willing”. The frontloading component of the IFF is extremely critical for the predictability of resources. Other financial mechanisms, such as the proposed tax on international financial flows, would also be welcome and could be explored down the line.

The Ministers urged an increased role of the IFC and MIGA, in collaboration with IDA, to support SME development that is so critical in African countries.

Ministers also recognized the neighborhood effect of countries like Nigeria, South Africa, Ethiopia, the Democratic Republic of Congo and Sudan, and the importance of taking into consideration the economic and political stabilization impact of these countries on the continent.
What African Countries Need to Do

African countries have not been active participants in the analysis of their own issues and problems, or in the development of methodologies to solve them. They must therefore play a more active role in the development agenda by defining the issues in question, participating in defining the framework for analysis, and undertaking the analysis.

African countries have a duty to continue to promote transparency, good governance and accountability. This is truly the only way forward.

Ministers agreed on the need to increase domestic savings and to therefore focus on improving countries revenue base. This would include the identification and closing of tax and customs loopholes and the elimination of leakages. There were lessons to be learned, one from the other, in improving tax and customs administration. Moreover, there is a need to improve expenditure management.

Ministers agreed that if Africans demand predictability of resource flows from partners then they must develop coherent and predictable policies themselves. Regional policies must go beyond the creation of new institutions and foster effective regional integration and inter-country cooperation. Emphasis was also placed on the need to move beyond personality based policy implementation to sustainable institutional building that guarantees policy stability.

Ministers agreed that it would be important to set up institutional mechanisms for exchanging and sharing of experiences among African countries.

Ministers agreed that they should take the lead in donor coordination ensuring the harmonization of donor policies with country strategies.

They should also focus on the need to reduce the cost of doing business in Africa by providing an enabling environment for private sector to thrive, to ensure competitiveness.

Ministers agreed that in demanding additional resources, there is the need to be realistic in measuring absorptive capacity, differentiating within budgets, sectors with greater ability to absorb additional resource flows.

In conclusion, the Ministers hoped the Africa Commission would take their views and recommendations into account in crafting the Commission Report.

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