Preamble to Topics for the 2014 Combined Forum

1.      Cross Border Infrastructure Development: Opportunities and Constraints.

According to the World Bank, infrastructure has played a significant role in Africa’s recent economic turnaround, and will need to play an even greater role if the continent’s development targets are to be reached. However, African countries currently face significant deficits in their infrastructure requirements in sectors such as energy, roads and railways. Simulations by the World Bank suggest that if all African countries were to catch up with Mauritius and Korea in infrastructure, per capita economic growth in the region could increase by 2.2 and 2.6 percentage points per year respectively. Yet, the financing requirements for closing the infrastructure gaps are too large for some countries to meet on their own. Therefore, considering infrastructure development at a regional level is becoming a more attractive option. While the trans-boundary infrastructure development offers a great opportunity it is also prone to a number of constraints that countries need to be aware of.

This session is expected to expose executives to opportunities for cross border infrastructure development in Eastern and Southern Africa, the challenges that countries are confronted with and how these can be addressed. The discussions are expected to extend to how the Governments can jointly finance cross border infrastructure development and share the use of the regionally available physical infrastructure to stimulate growth and development. 

2.      Mobilising Domestic Institutional Savings to Catalyse Infrastructure Development

One of the key challenges that African countries face is the low level of domestic savings.  According to Aryeetey and Udry[1] gross domestic savings in Sub-Saharan Africa averaged only 8% in the 1980s compared to 23% for South East Asia and 35% for the newly industrialised countries. While the situation has somewhat improved, domestic savings in Africa remain too low to meet the region’s investment needs. It is, therefore, important for African countries to identify avenues for mobilizing savings.

This session will therefore focus on approaches that countries can use to attract increased savings through banking, insurance and the pensions sub-sectors. Practical lessons especially from countries that have succeeded in mobilising high levels of domestic savings will be shared.  

3.      Policies for attracting and managing Foreign Direct Investment.

Africa’s share of global foreign direct investment (FDI) projects has reached the highest level in a decade, according to Executing Growth, EY’s 2014 Africa Attractiveness Survey.

The report combines an analysis of international investment into Africa since 2003, with a 2014 survey of over 500 global business leaders about their views on the potential of the African market. The latest data shows that while there has been a decline in FDI project numbers from 774 in 2012 to 750 in 2013, primarily due to ongoing uncertainty in North Africa, they remain easily in excess of the pre-crisis average of 390 projects per year.

There is noticeable divide between FDI trends in North Africa versus Sub Saharan Africa (SSA). FDI projects in North Africa declined by nearly 30% and projects in SSA increased by 4.7%, thus reversing the decline of 2012. This further widened the gap between the two sub regions, with SSA’s share of FDI projects exceeding 80% for the first time.

While the UK remains the lead investor into the continent, intra-African investment continues to steadily rise. Investors are also looking beyond the more established markets of South Africa, Nigeria and Kenya to expand their operations, as well as moving into more consumer-related sectors as Africa’s middle class expands.

For the first time, this year’s survey shows that companies with a presence on the continent perceive Africa to be the most attractive investment destination in the world. In stark contrast, those with no business presence in Africa still view the continent as the world’s least attractive investment destination. 73% of companies already established in the region believe Africa’s attractiveness has improved over the past year versus 39% who are not established.

4.      Re-Orienting Public Expenditure Priorities.

Many countries in the region have made tremendous progress in implementing reforms to improve revenue collection with fairly impressive results. Looking at the last decade many countries have improved their revenue collection by sealing loopholes for revenue leakage and stream-lining tax exemption regimes. Nevertheless, the expenditure side of the fiscal accounts may not have had the same level of success or has a lot of room for improvement looking at several practical cases. For example, a number of governments still have huge subventions to support state owned enterprises that should be run as commercial entities.

Countries may therefore greatly benefit from public financial management reforms that re-orient resources towards growth enhancing activities.

5.      Sovereign International Bond Issuance

Many countries in the MEFMI region have started accessing the international bond markets for issuance of sovereign bonds. The international markets, however, present a completely different environment compared to the traditional sources of financing such as bilateral development partners and multilateral development institutions. The markets are full of uncertainties and risks that the borrowing countries need to be very well aware of. This presentation should therefore seek to highlight the key considerations for sovereign bond issuance, its key merits (if any) compared to multilateral and bilateral borrowing, and the pitfalls to be avoided especially by the first time issuers.