On the Hunt for Solutions

Infrastructure challenges, safeguarding sustainable growth and balancing African revenue and investment were just a few of the topics covered at the MEFMI Annual Combined Forum. Here, we report on a day of dialogue, debate and discussion

Africa’s is a story replete with opportunities, progress and ongoing challenges. Perhaps this is inevitable. The sheer size and diversity of the continent means that there will always be good news and bad, some progress and some regression. In recent years, however, there is little doubt that African countries have made huge steps forward. Democratization, economic growth and (slowly) improving infrastructure are all testament to a continent on the rise. But there is always scope for improvement.

Leaders from across Eastern and Southern Africa used MEFMI’s recent Annual Combined Forum to consider the role of governments in spurring African economic take-off. MEFMI’s role is to enhance dialogue and cross-border coordination, enabling senior representatives from each of the 13 MEFMI countries to converge at one location to share information and ideas. Finance ministers, permanent secretaries and central bank governors are all key economic leaders. With much in common, there is much to discuss — and so it proved in Washington DC.

The Forum was officially opened by Hon. Maria Kiwanuka, Uganda’s Minister of Finance, Planning and Economic Development, whohighlighted the critical importance of collaboration between the public and private sectors to strengthen economic growth. “As policy-makers, we are faced with the daunting task of reviving private sector-led growth and creating jobs in the short term, while at the same time working toward longer term sustainability and inclusive growth,” she said.“Amid this puzzle, however, is the fact that governments’ efforts in stimulating private sector-led growth and job creation require clear and visible efforts of the private sector.”

The Minister went on to cite the huge numbers of young people joining the labor force annually as the biggest challenge that the MEFMI region is currently facing. “We have to help the private sector to create jobs,” she said. “We cannot create the jobs ourselves. Private sector participation becomes long-lasting if the environment is conducive. The challenge for us, then, as policy-makers, is to create an enabling environment in each of our countries.”

Cracking the code: creating new jobs, infrastructure and revenue
Jobs! Today, few words hold such resonance across the public and private sectors and so it was fitting that the first presentation of the Forum addressed this important subject. Africa’s unemployment challenge has been well-documented: despite being the world’s second-fastest growing region in the last decade, 50% of the continent’s youth are unemployed and an additional 60 million jobs are needed by 2020 in order to keep pace with demographic shifts. It is quite a challenge, and one that will only be solved by the public and private sectors working together, said Rohan Malik, EY’s Emerging Markets Leader for Government & Public Sector.

He drew on the experiences of successful job creation initiatives in India to help explain what needs to be done. “It’s not one magic wand or silver bullet but actually a series of small things around improving the business climate, skills development and a focus on infrastructure,all done in an integrated manner,” he said. Malik then went on to identify three critical success factors for job creation: make it easier for doing business, focus on key sectors of the economy — in Africa this means agriculture, manufacturing, hospitality, energy — and prioritize skills development and access to finance for women and youth in Africa.

Infrastructure, too, is of critical importance in safeguarding sustainable growth. African governments, like their counterparts around the world, are seeking new ways to fund their infrastructure requirements. Faced with the need to spend US$90b a year over the next decade to bridge this deficit, there is little doubt of the urgency of the task. EY’s Global Infrastructure Leader, Bill Banks, said that governments are increasingly working with private sector partners to facilitate new investment, with Public Private Partnerships (PPPs) increasingly proliferating as a result. Although PPPs do not represent a “catch-all” solution, Banks said that their advantages outweigh the risks. “A significant investment is required but a lot of these projects are actually nation building and so should spur further economic growth,” he said. “Governments and the private sector need to be involved to help facilitate that investment, which would be transformational on many levels.”

Given the intensity of the demands on their resources, African governments also need to maximize their revenues. A critical component of this is designing a tax system that raises revenue in both the long and short term, without harming the business environment or making it harder to secure investment. EY’s Keith Engel, Tax Policy Leader for Africa, identified some common policy mistakes. Such errors include implementing designs that worked well internationally without understanding that country’s individual dynamics, as well as over-simplifying (or not understanding) modern business processes. This means there is an overriding need for government policy coordination. “Government Treasury Departments in Africa cannot go it alone,” he added. “National plans can succeed but they must have widespread support and be maintained over the long term.”