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A new chapter is being opened as far as the relationship between Africa and the World Bank is concerned, and that makes a marked departure from what prevailed from the 1980s to recent times.
The lender is moving away from pushing down the throats of African countries very bitter prescriptions, which were seen not to contain enough active ingredients to offer the needed cure to the world’s poorest continent.
The lender is ditching its Washington-based decision-making and is opting for a platform where the key issues will be tackled through increased participation. This is a piece of good news, especially when Africa over the years has had to bear the brunt of some of these policies of the Bank.
The cost of implementing some recommendations such as the Structural Adjustment Programme in the mid-80s were so painful that it has served as a constant reminder of a difficult and painful relationship with the Bank.
Thankfully, all this appears to be history as Africa stands to gain from the new approach by the World Bank regarding investment priorities. It is expected to provide Africa with the opportunity to rate its priorities and channel resources to critical areas such as infrastructure development.
Previously, the Bank came up with uniform programmes for regions with little appreciation of the diversity in terms of resource endowment, governance and state of development.
"Africa has undergone tremendous changes over the last decade and our engagement need to be in line with the new realities, hence the attempt to seize this unprecedented opportunity and adjust strategy to best support Africa's development challenges," said Shantayanan Devarajan, the chief economist of the World Bank's Africa Region.
He added: "Africa is increasingly opting for home-grown solutions to its challenges and the World Bank is cognisant of these new realities, hence the need to consider how to be most effective in supporting the progress taking place."
Dr. Ngozi Okong-Iweala, Managing Director of the World Bank Group, has taken the argument a notch higher. She told BT in a recent interview that Africa has gone past the era of being tagged a continent of Third-World countries.
Dr. Okong-Iweala, herself an African, says: “People should look at us as a pole of growth. Africa should not only be seen as a continent with a cup in hand always looking for aid, but a continent where some of the countries are doing so well they can be seen as middle-income countries.
“Africa has come of age, and we do not just need aid but investments. It is now an active member of the new multipolar global economy. Old concepts of the Third-World no longer apply in the new multipolar global economy.”
Africa, over the past decade, changed dramatically and has risen in importance as a potential global economic growth pole.
“This is the time to invest in Africa,” Shanta said, crediting the region’s economic rebound to the pursuit by African governments of the difficult but extremely rewarding reforms that had propelled Africa’s average annual growth rates to between five to six percent during the decade ending 2008.
“This is the moment to invest in Africa. We are seeing some rapid growth. Africa is on the brink of a take-off.
“Although Africa was the hardest hit by the crisis, its recovery has been so remarkable that we could be at the beginning of what history will describe as Africa’s decade,” he said.
Over the period between 1995 and 2005, 22 non-oil producing African countries were growing at an average four percent. Inflation rates were cut in half across the region. Only two African countries posted inflation rates of above 15 percent in 2005, compared to 13 countries in 1995. Foreign development assistance had increased significantly. Private capital flows had peaked at US$53 billion and remittances had reached US$20 billion.
“Growth during that decade was not only broadly shared, but it was contributing heavily to an annual poverty reduction rate of one percentage point; meaning Africa’s rate of cutting poverty was falling faster than India’s,” Shanta explained.
The global financial crisis halted this steady pick-up in growth. The continent’s GDP growth fell four percentage points from 5.7 percent to 1.7 percent last year. An estimated 7 to 10 million more Africans were driven into poverty and an estimated 30,000 to 50,000 children died before their first birthday due to the crisis.
Remittances and revenue from tourism nose-dived, hurting countries like Lesotho (dependent on remittances for 20 percent of its GDP) and The Gambia (reliant on tourism for 30 percent of its GDP)
It could have been worse, Shanta remarked, applauding African leaders for not letting the political momentum for reforms slip just because the pay-off in growth, jobs and poverty reduction had dried up.
He noted that governments across the region combined a series of policies to mitigate the crisis. In countries like Ghana, which had a pre-crisis budget deficit worth 14 percent of its GDP, the country remarkably adopted policies to curb the deficit even as the crisis raged. Nigeria, for instance, turned the crisis into an opportunity to accelerate reforms—reducing subsidies to the gasoline sector and reforming other aspects of its petroleum sector.
In countries like Tanzania and Zambia, which had the fiscal space created by the boom of the preceding years, modest stimulus packages and support to stressed banks were implemented. Showing a stronger commitment to the fiscal discipline, Tanzania’s bailout of banks imposed a strict cut-off date of two years for repayment, contrary to the more lavish programmes implemented in many Western countries, including the United States and the United Kingdom.
The Bank’s new strategy is expected to be realised through ongoing consultations undertaken by the World Bank with governments, development institutions, the private sector, scholars, think-tanks and other NGOs across the continent.
Since 2005, the institution and its affiliates have engaged Africa on the basis of the African Action Plan (AAP), giving weight to aid and grants for projects.
This approach has failed to recognise the use of internally generated resources.
However, the rising demand for primary commodities and improved global commodity prices, have allowed a number of African countries to use internally generated resources to finance budgets.
For instance, Kenya is financing 95 percent of its domestic budget from internal revenue and local borrowing, a shift from the past where the budget was largely financed through aid and grants.
"African economies have been growing at over five percent a year over a decade, with the growth being widespread as 22 non-oil-exporting countries sustained better-than-four-percent growth - leading to the fastest decline in poverty levels, high primary school enrolment and increased usage of mobile telephony for communication and financial transactions," said Obiageli Ezekwesili, the Bank's Vice President for Africa.
In 2002, donors at Monterrey, Mexico, pledged to increase aid to Africa, committing to provide 0.25 percent of their annual revenue. The 2005 G-8 Summit at Gleneagles, Scotland, renewed the commitment of the world's richest nations to support Africa's development and signalled an intention to move beyond the Monterrey pledges.
At Gleneagles, the G-8 agreed to mobilise 100 percent cancellation of debt owed to International Development Association (IDA), the International Monetary Fund (IMF), and the African Development Bank (AfDB) by the Heavily Indebted Poor Countries (HIPCs) - the majority of which are in Africa.
At present, 14 completion-point HIPC countries in Africa are eligible for relief under the G-8 proposal, and the number will increase as more of its 32 HIPC countries qualify. Strong macro-economic policies such as prudent fiscal and monetary policies have strengthened these economies, enabling them to weather the recent financial crisis.
"While the global crises hit the continent badly through reduced global demand for commodities, falling commodity prices and decline in remittances, African policymakers have continued to pursue prudent macroeconomic policies and growth is expected to rebound to a forecast five per cent this year," said Ms Ezekwesili.
The conversations are the beginning of a process of listening and learning that will eventually lead to a renewed World Bank strategy for Africa. But they are also conversations about Africa’s future, because the possibility of leveraging recent growth performance to tackle the continents entrenched development challenges is well within Africa’s grasp. Now is the time for action.
PULL - QUOTE
African economies have been growing at over five percent a year over a decade, with the growth being widespread as 22 non-oil-exporting countries sustained better-than-four-percent growth - leading to the fastest decline in poverty levels, high primary school enrolment and increased usage of mobile telephony for communication and financial transactions, said Obiageli Ezekwesili, the Bank's Vice President for Africa.
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