Africa is changing in ways that challenge traditional stereotypes. It is a continent of nearly one billion consumers and its economy is projected to grow by nearly 6% over the next five years. But not only is it a place of growing economic opportunities, it is also improving transparency in both public and private sectors and increasing democratization. Its relationships with the rest of the world are also changing. These are no longer just one-way relationships where aid is given and received, but are increasingly based on mutual investment and trade opportunities, and more equal partnerships.
Africa is part of the solution to global challenges. However, at the same time it continues to face its own great challenges; the continent and its people need to grow more food, translate high growth rates into economic and social development for all, and its governments need to demonstrate they have their citizens’ interests at heart.
The French presidency of the G20 offers an historic opportunity to support and promote Africa’s development. President Sarkozy has put development high on the agenda, with food security, infrastructure and social protection as priorities. He has promised to implement an innovative finance mechanism for development in the G20 framework by the end of the year. In June for the first time the G20 convened a ministerial level meeting on agriculture, mainly focused on food security and food price volatility. Another first will be the G20 development, a joint meeting of the ministries of Finance and Development in late September. As France has also been in charge of the G8 this year it has aimed to streamline the two processes as much as possible and argued that development should be more of a G20 priority, including emerging donors, than of the G8. The G20 has an historic responsibility and unique opportunity to take on global leadership for development.
ONE calls on the G20 to show leadership and make a difference in the following areas:
Accountability should be paramount across all these areas.
Investing in agriculture is one of the best ways to reduce poverty in Africa. Agriculture represents around 30% of GDP across the continent and two-thirds of Africans depend on farming for their incomes. When connected to markets, small-holder farmers can generate an income, send their children to school and help lift their community out of poverty in the long-term. This multiplier effect is why investments in agriculture are estimated to be two to four times as effective in reducing poverty as growth generated from other sectors.
This is particularly important as food prices reach historic highs again and more than 13 million people are in crisis in the Horn of Africa. Nearly two years after the G8 L’Aquila Summit, donors have yet to clarify how and when they will meet their commitments, let alone address the mounting challenges underlying rapidly escalating food prices. According to the World Bank an estimated 44 million people have been pushed into poverty since June 2010 by rising food prices. There has also been a surge in large scale land deals and investments in recent years, often from outside the continent. Limited transparency around these ‘land grabs’ raises concerns about local people’s land rights.
At the same time, the private sector is a key component needed to improve food security by creating employment opportunities and reducing barriers to agricultural trade. However, relative to other sectors, agriculture presents greater barriers to private sector investment because diverse landscapes, poor infrastructure, low population density and weak markets mean that returns may be comparatively lower. To unleash the enormous potential for African agriculture, attracting private investment will require policies and regulations that improve the business climate; expanded and improved infrastructure for transportation, telecommunications, energy and water; and innovative risk management mechanisms.
To harness agriculture for Africa’s development, the G20 should:
Increase Resources for Agriculture and Food Security
Curb Food Price Volatility
Prevent “Land Grabs”
Improve agricultural risk management of poor countries
Enable private sector investment
Sustainable and inclusive development depends on good governance. Without effective and transparent leadership that is accountable to its citizens, business will not thrive, civil society cannot flourish and resources for development—both domestic and external—are less likely to be used effectively. This is especially important in the extractive industries, a sector which generates the largest revenues in Africa – more than nine times the value of international aid. However, resource-rich countries in Africa have for too long been characterized by weak financial and political institutions, leading to corruption and mismanagement. Transparency is the first step to tackling the problem. This empowers investors and civil society with the information they need to promote accountability and make wise business decisions. The Extractives Industry Transparency Initiative (EITI) helps build civil society capacity to hold their governments to account in resource rich developing nations and the Natural Resource Charter provides a broader framework for generating broader sustainable development outcomes. This systematic application of transparency principles is also being extended to other sectors important for Africa’s growth. For example the Construction Sector Transparency Initiative improves the efficiency of publically funded construction projects, which are liable to mismanagement, waste and corruption.
However, while guidelines and initiatives have a crucial role to play, ultimately it is legislation and ratification of agreed international conventions which ensure a level playing field. A model for this in the extractives sector is contained within the US Dodd-Frank Act passed in July 2010. Citizens also need to access and use this information and broadening access to the internet can facilitate this.
To promote good governance and transparency in support of Africa’s development, the G20 should:
Increase transparency in the management of natural resources
Implement and build on the Action Plan of the G20 Anti-Corruption Working Group
When global leaders endorsed the MDGs in 2000, they acknowledged that a substantial amount of additional resources would be required to meet the ambitious targets, in addition to improvement of the quality of development assistance. At the 2005 G8 Summit in Gleneagles, the G7 and other donors agreed to double development assistance to Africa by 2010 . While some countries met these targets, the majority has not and there is a significant shortfall between the increases promised in 2005 and delivered by the end of 2010.
Many G20 members beyond the G8 are now significant donors. The OECD Development Assistance Committee (DAC) estimates that non-G8 members contribute an estimated US$12-14 billion dollars each year . Because most of these new donors do not report their ODA figures to DAC, few details are known about their investments or their impact and effectiveness. Non-DAC members should report their development assistance spending annually to the DAC in a standardized, transparent manner. Quality of aid flows is equally important, and the upcoming Fourth High Level Forum on Aid Effectiveness in South Korea offers an opportunity for countries to reaffirm or in the case of new donors adopt commitments to improving how aid is spent and the outcomes it can achieve.
Increased domestic resources are also essential for development and African governments have pledged to increase their own investments in key sectors. However in 2008, just ten of 45 African countries sampled were meeting their Maputo commitments to invest 10% of their national budget in agriculture, while in 2006 only six countries were meeting the Abuja commitment to allocate 15% of their national budget towards health .
Beyond these financial flows there is an acknowledged need that additional resources for development will be needed and a number of innovative financing mechanisms have been proposed. They have already played a role in recent years. From 2000-2008, innovative financing mechanisms generated over US $57bn, or 4.5% of total gross ODA . A further untapped source of finance could come from a largely diaspora funded Africa bond providing capital for regional infrastructure projects. Some of these instruments would engage the private sector more in global development; a strategic fit with the “Seoul Development Consensus”. To mobilize more resources for development and ensure they are well used in support of Africa’s development, the G20 should:
Support domestic resource mobilization
Implement innovative finance for development
The G20 Seoul Development Consensus outlines policies that could promote growth in Africa. To be most effective at reducing poverty, economic growth however needs to be geared in a way that makes it as equitable and inclusive as possible.
In addition to isolating the poorest from economic growth and its benefits, high inequality within a society can have substantial economic costs for said society  and offset the benefits of further economic growth. Policies that simply focus on promoting average growth rates, without targeting or compensating for inequality, may actually exacerbate poverty - especially in countries with high existing inequalities. For economic growth to best alleviate poverty it is the quality and dispersion of the growth, as well as the intensity, that matters. Without recognition of this fact there is an exceptionally strong possibility that poverty reduction will not be achieved.
One sector which is key for driving pro-poor growth and in which the G20 could make a difference is infrastructure. A lack of access to transport, energy, sanitation and irrigation infrastructure decreases economic activity, reducing output by as much as 40%. Investment in infrastructure is however badly lacking in sub-Saharan Africa: Recent estimates by the African Development Bank (AfDB) put the annual infrastructure deficit of the region at over $45 billion. 70% of the population has no access to electricity, 95% of agriculture is without irrigation and the majority of the rural population is not served by roads to market. SSA is still missing the basic infrastructure required for human development, market generation and poverty alleviation. Poor people too often pay heavily in time and money to access vital services such as sanitation, healthcare and education – tying achievement of the Millennium Development Goals closely to infrastructure access.
Africa only accounts for 3.3% of world trade. Increasing trade within the continent and externally could promote economic growth and poverty reduction if poor people have the opportunity to participate in that trade. Africa still faces numerous internal trade barriers: a lack of regional infrastructure, high transport costs, high tariffs for goods in which it has a comparative advantage, agricultural subsidies in developed nations, onerous and differing rules to qualify for preference schemes (such as rules of origin) and weak supply side capacity. Regionally, countries have not fully implemented agreements to reduce trade barriers and promote greater economic and physical integration. The development of regional infrastructure will be particularly important for this.
To ensure growth support Africa’s development and poverty alleviation, the G20 should:
Support pro-poor infrastructure
Monitor inclusive growth
1. To double their collective development assistance to Africa, the G8 committed to increasing their current spending to reach $25 billion annually by 2010 ($22.6 billion in constant 2009 prices).
2. OECD-DAC. http://www.oecd.org/dataoecd/58/24/45361474.pdf
3. OECD and UN-ECA. 2010 Mutual Review of Development Effectiveness. http://www.oecd.org/document/48/0,3746,en_37489563_37489442_42169968_1_1_1_1,00.html
4. World Bank, "Innovative Development Finance", by Navin Girishankar. This figure includes local currency bond issuance so is not just donor supported IF
5. Ramcharan R (2010) “Inequality is Untenable” Finance and Development, Sep 2010, pp.24-25, IMF, Washington DC.