African Ministers of Finance, Economic Planning, and Integration and Central Bank Governors have adopted rich recommendations that would enable the continent realise the vision to have regional value chains that boost intra-African trade and enhance Africa’s share of global trade. The recommendations reinforce the need for improved business and investment climate especially for micro, small and medium-sized enterprises (SMEs) to promote innovation through start-ups, investing in innovative business models and production revolution that diversify Africa’s exports through sustainable value chains. At the just concluded Ministerial and Governors meeting of the Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration meeting, convened to focus on “Developing integrated and complementary value chains for sustainable recovery and reinforcing operationalization of the AfCFTA”, the Ministers and Governors also deliberated on effective ways to strengthen domestic resource mobilization through continental capital markets, functional African financial institutions, and conclusively addressing the illicit financial flows to accumulate resources to be utilized in accelerating the continental socio-economic transformation under development blueprint of Agenda 2063.

The STC whose participants included the Ministries of Finance, Economic Planning, and Integration; Central Banks; experts from the African Union Commission, Organs and Specialized Institutions and Agencies; Regional Economic Communities; Regional and international development institutions; stakeholders from the private sector and civil societies, in their five-day meeting, also deliberated issues on reviewing the tax policies aligned to sealing the loopholes in the digital economy and the need for member states to align their business regulatory and investment climate for accelerated industrialization and SMEs integration in the regional and global value chains that essentially boost Intra-African Trade and strengthening the “Made in Africa” concept. Issues on investing on critical cross-border infrastructure; synergies in public private partnerships; resource mobilization and financial inclusion; continental payments regulatory frameworks; knowledge transfer and information sharing; ratification, domestication and implementation of regional policies, were also deliberated to enhance the harmonization of the continental macroeconomic climate.

H.E. Ken Ofori-Atta, Ghana’s Minister for Finance and the Chairperson of the STC on Finance, Monetary Affairs, Economic Planning and Integration, emphasised on the urgency to reform the global financial architecture which creates structural inequities and exacerbates Africa’s economic situation. He called for the fully and timeously implementation of the recommendations from the STC meeting, placing prominence on Domestic Resource Mobilisation and the need to explore innovative sources of financing development. “We owe it a duty to take Africa out of this deadly pandemic as well as revitalize and transform our economies to build back better and provide opportunities for all to significantly improve the welfare of the people. We need to double our efforts at developing and implementing complementary and integrated value chains characterized by digitalization, win-win Public Private Partnerships, and enhanced capacity building to support the recovery process and the operationalization of the AfCFTA”, he noted.

Africa’s debt levels are escalating, currently projected at 70% of GDP in 2021, with the fiscal deficit at 8.7% of the GDP. Most African states have since resorted to acquisition of new external debts and seeking international financial assistance through debt moratorium to address the fiscal deficit. Although Africa has benefited from the G20 Debt Service Suspension Initiative (DSSI), some Member States are still under pressure to maintain debt service payments to prevent financial market stigmatization associated with debt relief, while some are on the verge of debt distress, and others already defaulting. The meeting therefore called for the allocation of the SDRs for Africa to increase from 5% to 25%-30% that will directly provide additional financing to African economies; and the establishment of an international coalition focused on restructuring the global financial architecture capable of effectively responding to global challenges as the current global financial architecture does not respond to Africa's transformation needs.

The Deputy Chairperson of the African Union Commission, H.E. Dr. Monique Nsanzabaganwa, while addressing the meeting, observed that developing African Regional Value Chains, Digital Trade, and Investment Facilitation, to Building Productive Capacities are central to achieving the structural economic transformation of Africa as envisaged in Agenda 2063. She also highlighted the direct and indirect effect of the COVID-19 pandemic on Africa’s performance in various economic and social sectors and emphasized on the need for Africa to strive in mobilizing resources to finance its own development. “Circumstances dictate that we cannot continue heavily relying on external aid and resources. In this connection, Africa must develop internal capabilities to innovate as well as push to consolidate tax bases by shoring up domestic taxes, increasing tax transparency and eliminating illicit financial flows from Africa; all of which continue to jeopardize our developmental efforts.” She stated.

The Deputy Chairperson further noted that effective implementation of the AfCFTA will enhance revenue collection and boost resource envelopes. In addition, she emphasized on the need to implement adequate flanking measures through financing and other monetary instruments, to accompany the AfCFTA implementation. Read the full speech here.

Amb. Albert Muchanga, the African Union Commissioner for Economic Development, Trade, Industry and Mining, had similarly outlined the reversal of the positive trend in economic growth that Africa has experienced over the past twenty-five years evidenced by the low trade volumes; plummeting of commodity prices and the slow recovery in some sectors; capital flight and other factors that led the continent to the recession in 2020, a trend that had last been experienced in 1995. The Commissioner also noted the COVID-19 pandemic exposed further, how Africa's heavy dependence on imports of both final and intermediate pharmaceutical products had put the continent in a perilous position. Africa’s import dependence also extends to food with the food import bill averaging around US$35 billion and projected to rise to $110 billion by 2025. COVID-19 has exacerbated food insecurity on the continent as supply chains were disrupted, resulting in steep rises in food prices, which the Commissioner underlined are basic indicators of the need to boost intra-Africa trade through the development of continental and regional value chains. “Facilitating the participation of MSMEs in continental and regional value chains would also open up greater opportunities for a generation of decent employment, so crucial, given that Africa, with a median age of 19 years, is very much a young continent. The African Continental Free Trade Area is currently our biggest development programme. Through it, we stand to increase intra-African trade and investments. We also stand to attain faster structural transformation and export diversification. With all these possibilities, we stand to boost production through the development of continental and regional value and supply chains”, he stated. Read the full speech here.

For more details, visit- https://au.int/en/stc-finance-2021

NOTE TO EDITORS.

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.