H.E Kofi Annan 10 March 2008 Dar es Salam Africa Must be Part of the Global Solution I am delighted to be back in Dar es Salam and to have this opportunity to contribute to vital discussions on the future of the continent. We meet in extraordinary times. We could be facing the economic equivalent of a tsunami. If not managed, it threatens to undo the progress in recent years across Africa progress which Tanzania exemplifies. Tanzania s commitment to democracy, and to using growth to tackle poverty and inequality, has delivered real results whether access to clean water, towards universal primary education, or on educating girls key Millennium Development Goals. I suspect our IMF co-hosts had little idea, when planning the meeting a year ago, how timely it would be. Then, the issue was the relevance and track record of international financial institutions. Now, it is what must be done to make them more effective, as part of a radical redesign of global governance. When the global meltdown was viewed as primarily financial, many thought that Africa might be spared. But this failed to recognise what globalization means, and how our economies, countries and fortunes are inter-connected. Africa is now on the front line. The IMF s 3.3% growth forecast may be revised downward again. The slump in demand, trade, commodity prices, foreign investment and remittances is having a devastating effect on revenues, growth and jobs. The cost of borrowing is up, access to credit down. And aid flows are likely to be reduced, just when they are most needed. The impact of climate change is ever more evident. Unpredictable weather patterns are placing extra pressures on agricultural productivity, water systems, natural resources, livestock and human health. Economic contraction, chronic poverty, malnutrition and environmental degradation could lead to a perfect storm of insecurity, instability and personal misery. Africa has every right to feel aggrieved, for at least three reasons. www.kofiannanfoundation.org 1
First, least developed countries could be the biggest casualties of a crisis they did not create. They are not responsible for the lack of oversight, institutional recklessness and perverse incentives that have triggered the financial crash. Their carbon footprint is tiny, yet they are most affected by climate change. Second, it comes just as Africa was getting into its stride. To paraphrase Dominique s comments last week, inflation, fiscal and current account deficits and debt have been going down, while trade, growth, and reserves have been going up. The numbers living in poverty were declining. Not long ago, Bob Zoellick talked about the prospect of African cheetahs, the equivalent of the Asian tigers. And contrary to the image of Africa, and despite too many glaring exceptions, in most countries democracy and accountability have strengthened. No less that 16 African countries have signed up to the Extractive Industries Transparency Initiative, Tanzania being the most recent. Progress is being achieved in the face of formidable obstacles, despite a legacy that makes it easier for African countries to communicate and trade with other continents than with each other. Third, the incredible sums found, at short notice, by industrialized countries. Trillions of dollars have been committed in the last few months for bail out and stimulus packages. This compares with a total of $100 billion a year in development aid. More than that has been spent on rescuing one US Company alone. This undermines the credibility of the claim that relatively modest sums cannot be found to support the fight against global poverty. The real issue is political will. Healthy western economies are good news for Africa. Efforts to restore growth and jobs are welcome. But while the crisis is so obviously global, political responses to it have remained doggedly national. Political leaders in the OECD and the big emerging economies are focused on the fallout in their own countries. There is a deeply worrying growth in protectionist sentiment. What does this mean for Africa? There is no point in feeling sorry for ourselves. Africa must set out a compelling three part message in upcoming international negotiations: - First, Africa can be part of the solution to the global economic crisis; www.kofiannanfoundation.org 2
- Second, African countries need immediate support; - And third, Africa must be fully represented in the evolving global architecture. Africa can be part of the solution by including it in a global stimulus plan. Its basis must be a continent wide pipeline of ready projects, focusing on clean energy, roads, rail, and port facilities. This will create jobs and stimulate economic activity, both in Africa and globally. It will help boost food security and provide the basis for stronger trading relations within the region. The World Bank has a key role here. Our second message is that Africa needs immediate support. It should go without saying that development strategies will be country led. But the globalised nature of the crisis is such that no country or region can cope on its own. A level playing field on trade, and the removal of subsidies that penalise Africa, is essential. In November, the G20 said the Doha Round would be restarted. We have to insist that this actually happens. Financial flows to Africa are plunging. Immediate measures are needed to allow Africa to access a large increase in financial assistance. Failure to compensate for loss of revenues to maintain essential public services could result in extraordinary human suffering. Infant mortality, school attendance, nutrition levels and disease prevalence are all at stake. As ever, it will be women and children who are most vulnerable. Specific proposals need to include: - A dramatic increase in concessional lending and temporary financial support; - Renewed commitment to international cooperation on strengthening tax systems, fiscal cooperation, and ending illicit financial flows; - A proposal on how OECD countries can reduce the cost and therefore increase the volume of remittances from the Diaspora; - Agreement on how Africa can access new sources of finance and technology to mitigate and, critically, to adapt to climate change; - Serious commitment to increasing efficiency and investment in the drive for food security; and - Insistence that G8 and OECD promises on aid flows be met. www.kofiannanfoundation.org 3
Reneging on promises would be a breach of trust just when global solidarity is most needed. This was my message to the hosts of the G8, whom I met two weeks ago. The risk that some countries will not be able to cope is real. So we also need a continental safety net to support those sliding into trouble. This needs to include partnership with the UN to identify and meet urgent priorities. The AfDB, the African Union, the Economic Commission for Africa, along with sub regional bodies, are playing a vital role. But this is not enough. We do not have fiscal surplus countries like China and Japan in the neighbourhood, though both are playing increasingly important role in Africa. Africa, more than any other region, could benefit from the technical support, policy advice and financial resources that the Bretton Woods institutions have to offer. Here, we should be frank. Many developing countries have not always been happy with the role that the Bank and the Fund have played over the last decades. Policy conditionality and macro-economic and fiscal prescriptions have been controversial, and often resented. Their impact on growth and human development is also disputed. Ultimately, at issue is the political legitimacy of the IFIs. This must be addressed in a way that accommodates both the weight of large emerging economies, but also the needs of the least developed countries. A timetable for reform is now needed, embracing governance, staffing and modus operandi. At a time when the world is re-writing the rule book and embarked on fiscal expansion, the IMF needs to develop a new lending model. The linkage between access to concessional loans and policy reforms needs to be rejigged. So our third message should be that Africa must be fully represented in the global architecture, including negotiations on regulation of the global financial system. It is good not enough being occasional guests at exclusive Club meetings. Clearly, plans to reform the IFIs must not hold up action to address immediate priorities. More resources, and a fast-track approval system, are needed to allow countries to access support from the IMF and the ADB. There are many ways in which their resource base can be increased, whether through borrowing, the issue of Special Drawing Rights, or by other means. So we face a big agenda: to ensure that Africa is part of a global stimulus plan, to get immediate and adequate support, including to prevent suffering, and to reform the global architecture. For our agenda to be credible, Africa must live up to its own commitments. www.kofiannanfoundation.org 4
These are enshrined in the Constitutive Act of the AU and numerous other agreements, including the Convention of Corruption, the Monterrey Consensus, and the Rome and Paris Declarations. They include commitments to good governance, respect for human rights, the rule of law, aid effectiveness, transparency and accountability. Insisting that partners keep their promises, if we don t keep ours, won t work. More importantly, citizens deserve good governance and accountability. The private sector needs an enabling environment to start businesses, get permits, rent property, access services and have recourse to the law. Success in implementing commitments on governance pays high dividends. I am convinced that the ability of a country to withstand and respond to external shocks, financial, economic or climatic, depends on it. Let me conclude by saying, as one wit put it, You never want a serious crisis to go to waste. We now have a once-in-a-generation opportunity to reshape the international architecture in a fairer and more effective way. This is the soundest basis for a strong partnership between Africa and the IFIs to meet human development and growth challenges. Thanks to our Central Bank Governors and Finance ministers who met in Tunis, and the meeting of the Committee of Ten in Cape Town in January, we are well advanced in terms of shaping the Africa agenda. The upcoming G-20 meeting must be grasped, not least as it will include a number of leaders, including Presidents Hu and Lula, and Prime Ministers Singh and Brown, who want Africa as a partner. We now need to market specific proposals, including from this meeting, that they can support. The world will benefit, and so will Africa. I wish you well in your discussions. Ends www.kofiannanfoundation.org 5