Category Archives: General

World Bank President Outlines Ambitious Vision For A Poverty-Free Globe At IDA Midterm Review

Dignitaries and leaders from around the globe convened in Zanzibar, Tanzania, today for the International Development Association (IDA) Midterm Review. This landmark event unveiled an extraordinary call to action and a visionary plan to eradicate global poverty while fostering sustainable development.

Two leaders, President Samia Suluhu Hassan of Tanzania and President Hussein Ali Mwinyi of Zanzibar, extended a welcome to attendees and expressed their heartfelt gratitude for the support provided during recent natural disasters in the region.

Addressing the audience, the President of the World Bank, whose identity remains undisclosed in the provided text, conveyed sincere condolences to the flood-affected communities. The President assured them of the World Bank’s steadfast commitment to assisting in the region’s recovery and reconstruction efforts.

Established with the mission of enhancing living standards and stimulating growth in developing nations, the International Development Association now confronts an intricate landscape marked by multifaceted poverty challenges, climate crises, food insecurity, fragility, ongoing pandemic recovery, and global conflicts.

In a compelling address, the President underscored the imperative of addressing these interconnected issues, emphasizing the unacceptable cost of inaction. With an estimated 1.1 billion young people in the Global South poised to enter the workforce within the next decade, the gap between job creation and demand looms large.

One conspicuous impediment to progress is the pervasive lack of reliable electricity access, affecting approximately 600 million people in Africa, with 36 million residing in Tanzania alone. The President firmly asserted that this glaring disparity cannot be allowed to persist.

The President articulated an ambitious vision for the World Bank: to create a world free of poverty while safeguarding the environment. This vision necessitates an expansion of the World Bank’s role and the scope of IDA itself.

A call to action resounded throughout the conference, with an impassioned plea to transition from projects to platforms, replicate successful initiatives, and foster seamless collaboration. A case in point was shared about a Nigerian town where IDA funding had facilitated a mini-grid system, bringing electricity to the community and resulting in a cascade of benefits, from heightened productivity for farmers to improved healthcare access.

The President’s announcement of a $5 billion commitment from IDA to provide reliable, affordable, and renewable electricity to 100 million Africans by 2030 underscores the magnitude of ambition required to confront these challenges head-on.

Nonetheless, the President candidly acknowledged that such aspirations come at a price. The current limits of concessional resources necessitate a substantial increase in funding. A plea was made for donors, shareholders, and philanthropies to unite in this fight and ensure that the next replenishment of IDA becomes the most substantial in history.

Reforms are imperative for enhanced efficiency and impact. The President called for simplifying processes, standardizing application procedures, and alleviating the bureaucratic burden on governments.

Furthermore, there was a push to shift the focus from measuring inputs to measuring outcomes. The President stressed the importance of concentrating on the tangible impact of development initiatives, such as girls’ education, job creation, and environmental conservation.

The President’s stirring address concluded with a poignant reminder of the World Bank’s origins and the collective goodwill, wisdom, and sincerity required to address today’s global challenges. Over the next two days, attendees will reflect on IDA’s journey and renew their commitment to its founding principles.

The IDA Midterm Review sets the stage for a future where poverty is not an insurmountable barrier but a challenge met with unwavering determination. The world eagerly anticipates the transformative results that this visionary leadership promises to deliver.

Source:  Today News Africa, 6th December 2023

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AIF 2023 builds formidable powerhouse around investments in Africa

This year’s Africa Investment Forum attracted significantly  increased investment to the continent.

The Africa Investment Forum (AIF) 2023 has lived up to its name, with investment promises amounting to $34.82bn made over the three-day Market Days event held in Marrakech, Morocco, in November. It was attended by financiers, investors, pension funds, policy makers, private equity firms and governments.

The pledged investments are across several sectors of the continent’s economy. As always, infrastructure was a main feature of discussions.

Kenya secured $300m for building new power lines, for example. Tanzania secured a $5.9bn investment in the country’s new Mtwara-Mbamba Bay standard-gauge railway project. It also received funding for the Mangapwani II Integrated Hub Port project in Zanzibar, which forms part of the government’s drive to develop its blue economy.

Power was also a top draw, with a focus on green energy projects. Huge power deficits across many countries and the drive for net zero carbon emissions have lent momentum to renewable energy rollout in Africa, including in the continent’s two biggest economies – Nigeria and South Africa.

Also on the table were deals in health and creative industries and agriculture. Side events included regional transport corridors and a Mayors’ Forum on leveraging cities and municipalities to unleash growth and development. This included mayors and governors from Lagos, Nairobi, Addis Ababa, Abidjan and ministerial representation from Rwanda.

The event hosted the launch of the private sector-focused Alliance for Special Agro-Industrial Processing Zones. This drew a commitment of $3bn towards development of these zones across the continent made by the AfDB, Afreximbank, the Islamic Development Bank and other partners.

The Forum also included some non-traditional discussions. One was about the role of sport in boosting economic development. The newly elected President of Rugby Africa, Ghana’s Herbert Mensah, highlighted the opportunity. “To invest in rugby across Africa is to invest in a continent of 1.3bn people, utilising the sport as a catalyst for both economic development and empowerment of the youth.”

‘Speed dating’ for investors

Organised by the African Development Bank (AfDB), the Africa Investment Forum, held under the theme “Unlocking African value chains”, is now in its fifth year. It was launched in South Africa in 2018 as an innovative marketplace. It was hosted this year in Marrakech, under the high patronage of King Mohammed VI.

Dedicated to advancing projects to bankable stages, raising capital, and accelerating the financial closure of deals, it has sometimes been described as “speed dating” for investors. The three-day global event drew over 1,000 delegates from more than 60 countries.

AfDB Group President and Chairperson of the AIF, Dr Akinwumi Adesina, said “We are building a formidable powerhouse around investments in Africa that will have transformative impacts on the lives of people. That is the bottom line of the Africa Investment Forum: investing to improve lives.”

Adesina highlighted the success of the AIF which, since 2018, has drawn 16,500 participants and generated nearly $143bn in investment interest, including securing $15.5bn for the Abidjan-Lagos highway corridor and $3.6bn for the East Africa railway corridor.

Its founding partners are the AfDB Group, Africa50, Afreximbank, the Africa Finance Corporation, the Development Bank of Southern Africa, the European Investment Bank, the Islamic Development Bank and the Trade and Development Bank.

Among delegates were several African heads of state and government, including Comoros President Azali Assoumani, President Samia Suluhu Hassan of Tanzania; President Julius Maada Bio of Sierra Leone; and Rwanda’s Prime Minister Eduoard Ngirente, also joined by the Prime Minister of Barbados, Mia Mottley.

Adesina observed that despite insalubrious global economic conditions, African countries had exhibited resilience, even growing faster than the global average.

“African economies witnessed a real GDP growth of 3.8% in 2022, higher than the world average of 3.5%. Five of the six pre-pandemic top-performing African countries are projected to be back in the league of the world’s 10 fastest-growing economies for 2023-2024.”

He said his optimism is based on the data. Africa, he noted, is expected to have a population of 2.5bn by 2050, accounting for 25% of the global labour force, making it a key player in the global economy.

The continent is expected to grow to $3.4 trillion as a result of the African Continental Free Trade Area, with the agricultural market worth $1 trillion by 2030.

He pointed out that the continent is critical to the green energy transition, being home to many of the minerals needed for the production of electric vehicles. “Africa accounts for the largest source of the ‘green metals’ for the development of electric vehicles, including platinum (70%), cobalt (52%), manganese (46%), bauxite (25%), and graphite (21%).”

The King calls on the private sector

In opening remarks read on his behalf by Omar Kabbaj, an advisor to the king and president emeritus of the AfDB, King Mohammed VI noted that the complex economic issues facing the continent, exacerbated by geopolitical tensions and climate change, had been further complicated by challenging fiscal conditions.

He urged greater private sector investment and participation in African countries. “State budgets alone cannot cover all the investment needed, especially in high-potential, job-intensive sectors.”

The King observed that while infrastructure development is a barrier to development in Africa, he emphasised what can be done, using the example of Morocco.

The Kingdom of Morocco now has 4.1 GW of installed renewable electricity generating capacity, and is continuing to roll out its strategy to increase the share of renewable energy to over 52% of its national electricity mix by 2030. The Tanger Med port complex has helped position the kingdom as one of the top 20 logistics hubs in the world.

The importance of being derisked

Speakers raised the issue of the unrealistically high perceptions of risk in Africa, which affects the flow of capital into the continent and pushes up costs of finance. It has also deterred the deployment of assets under management from pension funds and other institutions for infrastructure and other investments.

Investors and institutions based in Africa or already doing business here believe the risk is overstated and does not match the reality on the ground. The AfDB aims to change this by derisking investment, improving information about opportunities in Africa and pushing for, and supporting, more bankable projects. The founding members of the AIF weighed in with some of their views.

The CEO of the Islamic Trade Finance Corporation, Eng. Hani Salem Sonbol, said that Africa was a land of boundless possibilities and a dynamic engine of growth.

Admassu Tadesse, Trade and Development Bank group president emeritus and group MD, said the TDB Group was pleased to see the AIF continuing to attract diverse financiers and institutional investors for greater engagements on investments and co-financing opportunities.

European Investment Bank vice-president Ambroise Fayolle restated the importance of a strong, innovative and resilient private sector and added, “We are happy to see how the creativity and vision of African innovators is making an impact, particularly in the area of technology.”

Africa Finance Corporation president and CEO Samaila Zubairu said collaboration through strategic partnerships such as the AIF was critical to unlocking opportunities in Africa’s rich and diverse value chains. The CEO of the Development Bank of Southern Africa, Boitumelo Mosako, praised the utility of the event in providing a platform for engagement with partners on transactions.

Alain Ebobissé, Africa50 CEO, said: “Once again, this year, the Africa Investment Forum has been a testament to the founding partners’ dedication to initiating projects that tap into Africa’s rich potential across diverse sectors.”

Source:  African Business, 9th November 2023

 

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Reimagining economic growth in Africa: Turning diversity into opportunity

Africa is home to the world’s youngest and fastest-growing population, burgeoning cities, and bold innovations in everything from fintech to clean energy. With its population expected to nearly double to 2.5 billion people by 2050, the continent presents myriad opportunities for robust, inclusive growth that harness its rich natural resources and abundant human potential to increase prosperity not only in Africa but around the world.

These strengths and assets present a chance for the continent to vastly improve its productivity and reverse the economic deceleration it endured from 2010 to 2019. GDP growth fell 35 percent over that period—and then the COVID-19 pandemic took hold, followed by the Russian invasion of Ukraine. Those events set off shifts that are still working their way through the global economy. Today, 60 percent of Africa’s population lives in poverty, the result of per capita income growth that has averaged just 1.1 percent a year for the past several decades.

Yet the continent-wide statistics obscure successes in many of its constituent countries that can serve as models to establish productivity as the foundation of Africa’s economic growth. Over the past decade, certain countries, cities, sectors, and companies have been beacons of innovation, productivity, and growth—there is no “one Africa.” In those beacons lie lessons and innovations that can reinvigorate the African economy. Our new research indicates that abundant growth and development are still possible in Africa, still happening—and, more than ever, vital for the welfare of the world.

Africa’s real GDP per capita has grown only 1.1% annually since 1990.
Real GDP per capita

Africa’s growth has downshifted since 2010 after a promising opening to the millennium

 

 

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World Bank: Developing countries on path to debt crisis and lost decade

Only quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions will prevent a lost decade for poorer countries, says the World Bank.

 

Developing countries are on a “path to crisis” and face another “lost decade” unless more support from creditors is forthcoming, says the World Bank.

Developing nations spent a record $443.5bn to service their external public and publicly guaranteed debt in 2022, the World Bank’s 50th International Debt Report shows. Debt-service payments – which include principal and interest – increased by 5% over the previous year for all developing countries as global interest rates remain at four-decade highs.

This week, African Business reported that Ethiopia could became the latest African nation to default on its debt after missing a bond payment. It would join Ghana and Zambia’s as Africa’s latest debt defaulters.

“Record debt levels and high interest rates have set many countries on a path to crisis,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president.

“Every quarter that interest rates stay high results in more developing countries becoming distressed – and facing the difficult choice of servicing their public debts or investing in public health, education, and infrastructure.

“The situation warrants quick and coordinated action by debtor governments, private and official creditors, and multilateral financial institutions – more transparency, better debt sustainability tools, and swifter restructuring arrangements. The alternative is another lost decade.’’

The report says that interest payments consume an increasingly large share of low-income countries’ expenditure, and more than a third of their external debt involves variable interest rates that could rise suddenly.

“Many of these countries face an additional burden: the accumulated principal, interest, and fees they incurred for the privilege of debt-service suspension under the G-20’s Debt Service Suspension Initiative. The stronger US dollar is adding to their difficulties, making it even more expensive for countries to make payments. Under the circumstances, a further rise in interest rates or a sharp drop in export earnings could push them over the edge,” the Bank writes.

The trends were reflected in debt servicing costs accumulated by countries eligible to borrow from the World Bank’s International Development Association (IDA), which supports the poorest nations. The 75 eligible countries paid a record $88.9bn in debt servicing costs in 2022.

Over the past decade, interest payments by these countries have quadrupled to an all-time high of $23.6bn in 2022. Overall debt-servicing costs for the 24 poorest countries are expected to balloon in 2023 and 2024 by as much as 39%, the report finds.

The report notes that IDA-eligible countries have spent the last decade adding to their debt at a pace that exceeds their economic growth, which the Bank says is “a red flag for their prospects in the coming years”.

From 2012 through 2022, IDA-eligible countries increased their external debt by 134%, outstripping the 53% increase they achieved in their gross national income.

Financing options dwindle

As debt-servicing costs have climbed, new financing options for developing countries have dwindled. In 2022, new external loan commitments to public and publicly guaranteed entities in these countries dropped by 23% to $371bn, the lowest level in a decade.

Private creditors largely abstained from developing countries, receiving $185bn more in principal repayments than they disbursed in loans. That marked the first time since 2015 that private creditors have received more funds than they put into developing countries.

New bonds issued by all developing countries in international markets dropped by more than half from 2021 to 2022, and issuances by low-income countries fell by more than three-quarters. New bond issuance by IDA-eligible countries fell by more than three-quarters to $3.1bn.

Source: African Business, 14th December 2023

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