Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration.

Event

Jul 17, 2023 - 16:30 - Jul 21, 2023 - 16:30

Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration.

“Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity.”

17 - 21 July 2023

Nairobi, Kenya

The African Union Commission is organising the Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration convened under the theme, “Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity.”

About the Specialized Technical Committee On Finance, Monetary Affairs, Economic Planning And Integration.
The African Union Commission Specialised Technical Committees (STC) on Finance, Monetary Affairs, Economic Planning and Integration is the leading Conference for African ministers responsible for finance, economy, planning, integration and economic development, and central bank governors, to discuss matters about the development of Africa. This STC is also charged with following up on implementation of the integration agenda for the continent.

The AU Commission led by the Department of Economic Development, Trade, Tourism, Industry, Mining (ETTIM), is organizing th Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration convened under the theme, “Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity.” . The theme is relevant in driving the realization of

Africa’s Agenda 2063, particularly, “Aspiration 1” which seeks a prosperous Africa based on inclusive growth and sustainable development.

Thematic focus of the STC.

The global economy is hit by a string of devastating shocks in since the start of the COVID-19 pandemic in 2020. With the combined effects of the security threats, mainly driven by the Russia-Ukraine conflict and the effects of climate change, global growth is projected to fall from an estimated 3.4 percent in 2022 to 2.9 percent in 2023, then rise to 3.1 percent in 2024 (IMF, 2023). Global economic crisis has caused a growth crisis in African economies with a deep effect on key drivers of growth, especially production and trade flows, capital inflows and natural resource sector. Africa’s estimated average growth of real gross domestic product (GDP) slowed from 4.8 percent in 2021 to 3.8 per-cent in 2022— and is projected to stabilize at 4 percent over 2023–24 (AfDB, 2023).

However, this projected 4 percent growth rate appears to be optimistic as the combined and persistent effects of the pandemic, the Russia-Ukraine war and climate change continue to pose unprecedented threats to the global economy in general and African economies in particular. Whatever the scenario, growth remains below the 7 to 10 percent target essential to achieve the vision and aspirations of Agenda 2063 in a bid to catch up with the rest of the world, generate jobs, and lessen inequalities and poverty.

The major concern is that the deterioration of global growth perspective continues to affect Africa’s economy and degenerate into a development crisis derailing the decades hard-won gains in poverty reduction and inequalities (AU/OECD, 2022).
To achieve Africa’s transformation, there is a consensus on the need for structural reforms anchored on the implementation of good economic policies aimed at harnessing the huge developmental potential of a vast continent home of 18 percent of the global population. In the most positive of scenarios, estimates suggest that Africa’s GDP could increase to over US$15 trillion in 2060, from a base of US$1.7 trillion in 2010 (AfDB, 2010).
The African Continental Free Trade Area (AfCFTA) serves as a framework to boost investments in strategic sectors in agriculture, industry and services. It is also offering an opportunity to develop intra-African trade through regional value chains (AUC/OECD, 2022; ITC/AUC/EU, 2022). The start of trading under the AfCFTA on 1 January 2021 represent a huge opportunity to boost investment to achieve sustainable and inclusive growth.
The STC overall theme: “Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity” will provide an opportunity for African countries, to ensure sustainable recovery through a balance between short-term crises responses actions and long-term strategies aimed at addressing structural constraints to reinvigorate growth and accelerate development. Building on the recommendations made by earlier editions, the 6th STC will offer a conducive platform for policymakers to identify and establish specific policy alternatives and recommendations that will promote investment, sustainable growth, and shared prosperity.

1. Africa’s macroeconomic and financial conditions in a turbulent environment

A. Africa’s limited structural transformation and erratic decades growth

In the early years of the twenty-first century and despite a turbulent global economic environment, Africa has posted a 4.6 per cent growth rate, with some of its countries experiencing an average growth rates in excess of 7 per cent. This unprecedented growth episode was fuelled by high commodity prices, increased domestic demand due to high investment in infrastructure and energy, improved economic governance and management, but with limited structural transformation and investments in key sectors in agriculture, industry and services. The COVID-19 pandemic revealed Africa’s vulnerability as the continent entered its first recession a half a century with a – 2.1 per cent growth rate (AUC/OECD 2021) and gross domestic product (GDP) growth decrease in 41 of the African 55 countries in 2020 (IMF, 2020). The crisis has affected Africa’s growth through various external and domestic channels (AUC/OECD, 2021).

Assessment of the recent quality of Africa’s growth reveals a limited structural transformation process underpinned by low investments in strategic sectors such as agriculture, industry and services. Aware of the need for a sustainable structural transformation process anchored on a coherent and inclusive industrialization strategy, African Union Heads of State and government renewed their commitment to accelerate productive transformation in Niamey, Niger in November 2022.

B. Deteriorating financial conditions

Africa’s financial conditions have gradually deteriorated with the combined effects of the COVID-19 pandemic, the conflicts and climate change. These crises pose unprecedented threat to financing Africa’s development by creating new risks and exacerbating pre-existing vulnerabilities. But before the crisis, the amount of financing per capita decreased over 2010-18 for both domestic revenues and external financial flows, by 18% and 5%, respectively. Between 2019 and 2020, the ratio of tax to gross domestic product (GDP) decreased by about 10% in at least 22 African countries; total national savings dropped by 18%, remittances by a fourth and foreign direct investment by 40%. Despite renewed commitment by donor countries, official development assistance remains below their pre-crisis levels as their capacity depend on economic trends. These negative shocks are increasing fiscal expenditure to support a sustainable health and economic recovery. As a result, Africa’s debt will soar to about 70% of GDP in current US dollars, with debt exceeding 100% of GDP in at least seven countries.

2. Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity: An agenda for investment

A. Africa’s sustainable financing gap can be bridged

At about 7% of the continent’s gross domestic product (GDP), Africa’s sustainable financing gap is small in comparison to its financial resources and to those available worldwide. This gap between the financing needed to achieve the Sustainable Development Goals and the availability of financial resources averaged USD 194 billion annually for 2015-21.

With unique assets, African countries represent the world’s investment frontier Africa has enjoyed high growth supported by investment, but the continent needs more transformative, sustainable growth. Since the turn of the 21st century, Africa has boasted the world’s second-highest rate of economic growth after developing Asia.

B. The growth of intra-African investment can support job creation and regional integration

The entry into force of the African Continental Free Trade Area (AfCFTA) in January 2021 opens up new opportunities for integrating into regional value chains by expanding access to markets, inputs, technology and investment. The AfCFTA aims to boost intra-African trade by connecting 1.4 billion people and a combined GDP of over USD 4.3 trillion.

3. Key actions for preserving and strengthening the foundations of growth for shared prosperity.

A. Structural and productive transformation

Regional processing offers opportunities for adding value to Africa’s agricultural and raw materials and for increasing backward participation in global value chains. Processed and semi-processed goods accounted for 79% of intra-African exports in 2019, compared to 41% of Africa’s exports to other destinations. Exploiting regional complementarities creates new competitive advantages for African countries. The integration of markets provides the critical mass of consumers, skills, suppliers and other resources needed to develop and scale up knowledge-intensive sectors such as automotive and pharmaceutical value chains. Combining key natural resources available across African countries can create unique competitive advantages in high value-added activities such as battery production.

Regional markets are more conducive to the development and discovery of new productive capabilities. The physical, cultural and institutional proximity and access to existing networks of contact reduce the costs for African firms to experiment in regional and continental markets. Intra-regional exports by African firms are 4.5 times more diverse than their exports outside of Africa (AUC/OECD, 2019).

B. Human capital

Africa’s biggest asset for structural and productive transformation will be its growing population of increasingly bettereducated youth. Governments will need to invest in building the infrastructure needed to enable the development of appropriate skills. This includes basic infrastructure, such as reliable and affordable power supply, transport infrastructure, and postal address systems—as well as digital infrastructure, such as high-speed internet, mobile virtual networks, and interoperable systems.

C. Infrastructure and energy

Upgrading transport infrastructure and logistics remains key for cross-border investments. Limited transport infrastructure, fragmented regulations and delays at border posts continue to weigh on investment projects that rely on imports and exports. Programmes such as the Programme for Infrastructure Development in Africa (PIDA) can mobilise investments and contribute to the upgrading of current infrastructure networks.

Regional development corridors and cross-border special economic zones (SEZs) can offer “quick wins” to attract regional sustainable investments. Development corridors represent important ways of addressing the infrastructure deficits on the continent, but they should undergo detailed multi-dimensional assessments to provide fully sustainable outcomes.

D. The digital transformation can facilitate regional value chains but heightens the risk of exclusion and inequality

COVID-19 is accelerating Africa’s digital transformation as explained in AUC/OECD (2021). Several African governments are emphasising the digital transformation as a critical component of their COVID-19 recovery plans (The AU Digital Transformation Strategy for Africa 2020-2030 is also essential to give African countries a stronger advantage in shaping global data governance.

E. Developmental states

The state in Africa has a crucial role to play in facing various current and emerging development challenges. Diversification of production and exports is an important element of transformation. Africa’s states have three major development tasks for achieving economic transformation: planning the process, formulating appropriate policies and implementing the plans and policies.

F. The contribution of the private sector to ensuring sustainable growth

Private sector engagement is essential to harbour the sustainability goals of Africa. It advances institutions that uphold the rule of law, promotes education, creates jobs and economic opportunities, and helps to alleviate social pressures. As a significant contributor to the national income and the main employer and creator of jobs, the private sector is one of the most important players in economic development. In low- to middle-income nations, it accounts for 90% of employment (including official and informal), delivers important goods and services, boosts tax collections, and promotes the efficient movement of capital (Avis W. R, 2016).

Therefore, it is imperative that AU Member States to create frameworks and policies that support and stimulate the expansion of MSMEs to develop sustainable growth on the continent.

G. Environment sustainability

In order to create a prosperous Africa based on equitable growth and sustainable development, Africa's Agenda 2063: The Africa We Want places a strong focus on the

need to establish "environmentally sustainable and climate resilient economies and communities" (AU, 2013).

OBJECTIVES AND EXPECTED OUTCOMES OF THE STC

The above analysis supports the need for a high-level policy dialogue aimed at articulating an Agenda for Investment, Sustainable Growth and Shared Prosperity in Africa. It is in this context that the Sixth STC Finance, Monetary Affairs, Economic Planning and Integration is being organized under the theme “Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity”. The STC will be organized in Nairobi, Kenya from 17 to 21 July 2023.

The objectives of the STC are to:

▪ Ensure a meeting of the minds by policymakers about the drivers and key success factors for inclusive and sustainable development in the post-crisis’s era;
▪ Provide a platform for policymakers to articulate concrete proposals to catalyse implementation of sound structural transformation policies aimed at unlocking Africa’s development potential;
▪ Frame concrete policy options and actions for an inclusive sustainable growth to generate quality employment opportunities.

Expected outcomes

Upon conclusion, the STC will:

▪ Well-articulated report on the key actions needed to accelerate structural transformation, inclusive and sustainable development in Africa through a new investment strategy;
▪ Enhanced understanding and appreciation of the institutional and policy frameworks necessary to effectively pursue inclusive and sustainable development in Africa;
▪ A Ministerial Declaration articulating the policy options and actions required at national, regional and continental levels with a view to achieving inclusive and sustainable development in Africa.

FORMAT OF THE STC CONFERENCE

The STC will discuss various development issues for Africa and provide guidance for the work of the Commission. Among the key features of the STC are high-level policy dialogue, panel sessions, round-table discussions and parallel events on development issues.

Plenary sessions will comprise discussions on the theme of the STC followed by focused discussions on key statutory issues.

Experts and Ministerial policy dialogue on the theme of the STC: “Africa Beyond Crisis: Charting an Agenda for Investment, Sustainable Growth and Shared Prosperity”.

The Experts and Ministerial policy dialogue on the theme of the STC will brainstorm on how to ensure that Africa’s builds back better for to achieve sustainable growth and shared prosperity through a new agenda for investment in the framework of the AfCFTA towards Agenda 2063. Specific issues to be discussed will include the design and implementation of effective structural transformation strategies and policies that: support job creation; enhance productive capacities; address the needs of the vulnerable (including through the design of fiscally sustainable social protection programmes); facilitate transition to a green economy; and ultimately promote intergenerational equity.

PARTICIPATION AT THE STC.

Participants and delegates to the STC will include Ministers and representatives from member States, Regional Economic Communities, United Nations agencies, pan-African financial institutions, African academic and research institutions, development partners and other intergovernmental organizations. Invitations will be extended to other cooperating partners, non-governmental organizations and the private sector.

Resource and Reference Materials.

For further information:

Dr. Patrick NDZANA OLOMO, Ag. Head Economic Policy and Sustainable Development, Department of Economic Affairs| African Union Commission | E-mail: olomop@africa-union.org

Press Release References

Latest Africa’s Dynamic Development Report provides evidence-based analysis on investment landscape for sustainable development.

African countries must embark on innovative investment strategies to achieve inclusive growth and sustainable development: AU STC Finance.

Inclusive growth and sustainable development: AU Commissioner Amb. Muchanga outlines what Africa must do.

Speech References

Statement by H.E. Amb. Albert Muchanga, African Union Commissioner for Economic Development, Trade, Tourism, Industry, and Minerals

Statement by Enoch Obeng Darko, Ministry of Finance, Ghana and Outgoing Chairperson of the Specialized Technical Committee on Finance, Monetary Affairs, Economic Planning and Integration. Experts Meeting

Welcome Remarks by H.E. Prof. Njuguna Ndung'u Cabinet Secretary, The National Treasury & Economic Planning of the Republic Kenya. Read on his behalf by Joseph Kiprono.

Statement by Dr. Hanan Morsy, Deputy Executive Secretary and Chief Economist United Nations Economic Commission for Africa (ECA)