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Only a regional approach can deliver fast development

Claver Gatete takes over the leadership of the United Nations’ Economic Commission for Africa (ECA) at a pivotal juncture, as we approach the halfway stage of the UN Sustainable Development Goals (SDGs) and as Africa enters the second decade of its development blueprint Agenda 2063.

The long shadow of Covid-19 still hangs over the global economy with countries around the world, but especially in Africa, trying to recover from the supply chain shocks, sky-high inflation and the subsequent interest rate hikes. Adding to the current instability is the war in Ukraine – arguably a symptom of a re-ordering in the 70-year old rules-based, neoliberal order that had, seemingly, been entrenched in the wake of the last major disruption, the Second World War.

Into the mix comes the latest, harrowing manifestation of the long running conflict in the Middle East and its potential to spill over with incalculable consequences for the world. The need for finance Also on the table is the stark fact what while Western countries, especially in America and Europe, have been able to run large deficits and inject large amounts of cash to kick-start growth, those in Africa and the wider developing world continue to be bogged down by a lack of concessional or affordable financing.

To add to their woes they also face existential threats from climate-related events, hence the urgent demand for a greater say in the global economic and political structures that do not serve them fairly. This is the maelstrom that Gatete steps into as executive secretary of the UN agency, which wasspecifically set up to “promote the economic and social development of its member states, foster intraregional integration, and promote international cooperation for Africa’s development”.

In pursuit of this mandate, the Commission offers advice to member states, helps to strengthen macroeconomic policy and supports efforts towards regional and sub-regional integration. Perhaps the best summary of what the ECA has been responsible for was provided by the late Professor Adebayo Adedeji, the celebrated former head of the organisation, in his presentation – History and Prospects for Regional Integration in Africa” in 2002. He said that the ECA had been involved in “the establishment of virtually all the major existing African regional integration arrangements (ARIA) namely, the Economic Community of West African States (ECOWAS, 1975), the Preferential Trade Area for Eastern and Southern Africa (PTA, 1981) which was subsequently transformed into COMESA, the Central African Economic Community (CAEC, 1983) and the African Economic Community (AEC, 1991)”.

When we met Gatete in Victoria Falls, Zimbabwe, he offered a practical assessment of what the ECA’s role should be during this dramatic moment in the history of the continent. Its more routine task is to support macroeconomic management, which he explains includes fiscal management, supporting the real productive sectors and fostering a balance between payments and monetary policy.

“Everything you do has an implication on the monetary side. Whatever decision you take definitely has an implication because if you have to accumulate more debt or more deficit, it has implications. So we help countries to manage their own macroeconomic situation, because that’s what is going to actually stabilise the country,” he says.

More broadly, the ECA is active in the formulation and implementation of the African Union’s Agenda 2063: The Africa We Want, which the continental body calls its “blueprint and master plan for transforming Africa into the global powerhouse of the future”.

“We are combining that vision with the Sustainable Development Goals, which Africa is part of,” Gatete says. “What we are looking at is how to do things differently so that we can be more useful. How can we support our countries to implement? And we are also supporting some of the regions through the eight regional economic communities,” he says.

Financial architecture not fit for purpose

Gatete is well versed in handling the challenges that African countries face. He previously served as governor of the National Bank of Rwanda, then as Rwanda’s minister of finance and economic planning and later as minister of infrastructure. Internationally, he has represented his country at the Court of St James as the ambassador to the United Kingdom (and at the same time to Ireland and Iceland) and in New York as its permanent representative at the United Nations. With a background in policymaking and diplomacy, he will need the mix of skills to tackle the slate of challenges that is his in-tray at the ECA.

Whatever plans he has, however, must be backed by money, and that is one area in which African countries are profoundly stretched. Between the extra finance needed to deal with the full extent of the Covid-19 fall out – and at least for some, poor fiscal management – the majority of African finance ministers are confronted with dire outlooks, including heavy debt repayments crowding out investments in social services and infrastructure. Part of this can be attributed to African countries being unable to shake off the label of bearing a “high risk premium”. This imposes on them higher costs when they borrow, if they are able to.

“Twenty two of our countries are not rated and others are rated poorly, so they cannot get money from the international markets,” Gatete observes. Resolving this imbalance must be of a piece with broader reforms to the global financial architecture, which the ECA is fully behind. “The issue of financing and the reform of the global financial architecture is where we come together with the ministers of finance and the African Union to think through a common position on these institutions, that have been there since 1945 but are no longer fit for purpose,” he argues.

The current framework, he says, was devised to suit the purposes of the few countries that had “a seat at the table” in the immediate post-World War 2 period. It meant that the Paris Club collective was virtually the only lender of note. That is no longer the case.

“There are many more countries in the game now. We have China, India and Turkey. We have the Arab funds. And we have those issuing bonds – private sector people. Now the problem is how do you bring all of them together to one table to solve the problem of a heavily indebted country?”

The idea that the current system is no longer fit for purpose is gaining momentum – and not just in the Global South. It is matched by the slew of solutions that are being brought forward to address the issue. Among these is the Bridgetown Initiative, named for the Barbadian capital where it was first mooted. Another comes from the G20, which is looking into raising the $3 trillion needed by 2030, including reallocating IMF Special Drawing Rights in favour of developing nations that need it the most. However, the $650bn this could free up, Gatete says, may not be nearly enough.

Another proposal is to apply the $1.2 trillion in unused guarantee funds that 15 multilateral financial institutions hold to current challenges that need im – mediate attention, such as climate change. The need for collective action Gatete says the unifying thread is the need for collective action.

“It all revolves around how to make sure that the government participates, the private sector participates and the international financial institutions also participate in the solution,” he notes.

The ECA’s role will be to work with African countries to arrive at a common position and coordinate their advocacy. African countries, Gatete insists, need cheap, long-term finance to fund their development. Currently, some of the faster-growing countries have had to issue expensive bonds, which end up compromising their fiscal health and their ability to achieve the SDGs. What would the re-purposed institutions look like?

“We don’t necessarily know what the future World Bank or multilateral development banks will look like – but we’ve identified the problems at least in terms of what’s not working,” Gatete reflects.

The ECA, he says, intends to play a convening role, honing common positions and advocating for their adoption. Philanthropic organisations, such as those set up by high-net-worth individuals, are also playing a role in the continent’s quest for social and economic gains. Critics claim this could be unwelcome interference, and that such organisations are accountable only to their benefactors. Gatete differs.

“How can you be worried about someone who is bringing in money? I think that’s another additional contribution which is very, very useful. They are supporting many areas that matter to our own continent. They are putting money in health, which we need. They are putting money in agriculture. They are putting money in education. They are putting money in all areas that we need. So it’s a very wonderful addition.”

The important thing, he says, is for African principals – countries and agencies such as the ECA – to work with them to ensure that the money goes where it is most needed, and that it is aligned to a common African agenda. Gatete also wants to crowd in the private sector which, given a conducive environment, can make the right investments to deliver services, growth and jobs. Along with stakeholders such as the African Development Bank, African Export-Import Bank and the African Union Development Agency’s New Partnership for Africa Development programme (AUDA-NEPAD), governments must work to derisk projects so that private capital will be encouraged to come in.

“We must work together, as a team, and also with the private sector, in terms of these investments because it is not only governments that will invest. We need to assist the private sector so they can also get the long-term resources they need to invest in longterm projects,” he says.

As an example of this multi-stakeholder approach, he points to Zimbabwe and its neighbour Zambia.

“We are trying to work with them to see how we can create an agro-processing zone where we can bring in the private sector; government can invest in infrastructure; we can do other de-risking that is required and then the private sector can come and establish their own companies for processing rather than exporting unprocessed products. And then all the farmers around will be able to produce for them.”

Regional approach is key

And it doesn’t just stop there.

“How do we do that for the beef sector, where they can export everywhere? How do we do it for the critical minerals so we can create that kind of area and add value? That way they can create jobs. That way the money remains in Africa and development is at a higher speed because it’s regional in nature; it benefits many countries, not just one country.

A regional approach, it is obvious from our conversation, will be a key part of Gatete’s modus operandi.

“Absolutely,” he affirms. We can no longer work at the country level alone. We need each other. Other countries are actually merging to become bigger, to become larger markets. “In other continents, trade between themselves is above 60%. For us, it never exceeds 15% and even that, when you look closely, is mostly unfinished goods. We have the resources on the continent and we also have the capacity to add value. We just need to make sure we work together. And now, we even have a framework to help us – the African Continental Free Trade Area. Let us break all the barriers so that we can have one market. Let’s add value. Every head of state, every leader has said it many, many times,” he recalls.

Thinking regionally, Gatete says, is also a lesson from his time at the top of policymaking in Rwanda, one of Africa’s celebrated development success stories. Investors want scale and that is often impossible for one country to deliver, meaning that consolidating projects becomes very important.

“If I’m building a railroad, I would want Rwanda, Kenya, Tanzania, Uganda, the whole region, so that your investment will give you scale in terms of profits. And if you are doing energy, it should be a regional energy project, like the one for Tanzania, Burundi and Rwanda, or for DRC, Burundi and Rwanda, or the one between Kenya, Uganda and other countries. In terms of rail projects, you have the northern corridor projects from Kenya to South Sudan to Ethiopia. In energy, there is the energy power pool in West Africa.”

These are not merely examples of what has worked but a demonstration of the necessity of cross-border agreement and coordination. It is also the prism through which Gatete views technology, an increasingly vital factor of growth. Technology, he says is necessary to all the SDGs and will determine how much Africa is able to achieve. At the moment, however, only 40% of Africa is connected to the internet and Gatete says the immediate need is not only to boost access but to ensure that where connectivity is available, it is utilised for optimum impact. That is where the regional view once again comes into focus. There are many innovations that are taking place on the continent of Africa.

“How do we document these and if they work in one country, how do we mobilise resources to replicate them in another country so we can have some quick wins? If there are countries that have digitised their tax collection, for example, can we have another country go and learn from them? The whole idea is that we want the development to happen, and happen fast.”

How can he remain optimistic with a bulging in-tray and competing needs?

“I have never been more hopeful that the future belongs to Africa!” he declared. His tenure at the helm of the ECA may have something to do with how history will come to judge that view.

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