1

Presentation at the African Development Bank,Tunis, 27 May 2005

Our Common Interest

Report of the Commission for Africa

Sir Nicholas Stern,Ex-director of Policy and Research at the CFAHead of Government Economic Services, UK

2

Structure of presentation

I. Introducing the Commission for Africa

II. Understanding Causes

III. The Framework for Action

IV. Financing Strategy

V. Where Will the Money Come From ?

VI. Conclusion

3

I. Introducing the Commission for Africa

• Focus on how international community can give strong / practical support to African governments and initiatives, to AU and NEPAD.

• Future of Africa will be shaped by Africa.• Partnership: with Africa in the lead and based on common humanity,

solidarity and mutual respect.• Commission will inform more developed G8 response to NEPAD, building

on ‘initial response’ of Kananaskis (G8 Summit 2002).• 17 Commissioners, of whom 9 African.• Based on extensive consultation in Africa and elsewhere and on detailed

examination of evidence.• A political as well as analytical process oriented towards action.

Task is to recommend to G8, EU and other rich countries a strong programme of action that will provide a powerful impetus in support

of successful African development

4

Why Act ?

• Common humanity and solidarity demand that we all work together to overcome poverty in Africa.

• At the UN Millennium Summit, the world took on a clear obligation to act, agreeing specific deadlines for reducing poverty and promoting human development.

• Responsibility to help Africa overcome legacy of colonialism and Cold War tensions.

• Self interest – an Africa in turmoil and desolation will have grave consequences for the rest of the world, in terms of:

– Unstable supplies (particularly oil and raw materials)

– Movement of people

– Disease

– Conflict and terrorism

5

Why Act Now ?• The immense scale of the suffering in Africa – much of it

avoidable – should compel the world to act now:– On current trends, Africa will miss most of the MDGs.

• Delay is magnifying the crisis that Africa and the world will have to face in the years ahead:– Economic marginalisation an ever-greater problem to overcome.– Extreme poverty harms future generations.– Irreversible damage to the natural environment.

• Democracy has spread and Africa has new political leaders, many committed to reform. Backing now from international community could make difference to whether they succeed.

• Build on UA and NEPAD progress– AU non-indifference replacing OAU non-interference.

THE RISKS FROM DELAY FAR OUTWEIGH THE RISKS FROM ACTING STRONGLY AND SWIFTLY

6

SSA only region to grow poorer over past decades..

Sub-Saharan Africa only region with lower life expectancy in 2002 compared to 1980 (impact of HIV and Aids)

Figure 2.3 GDP per capita in Developing Regions

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003

GD

P p

er c

apita

, P

PP

(co

nsta

nt 1

995

inte

rnat

iona

l $)

East Asia & Pacific

South Asia

sub-Saharan Africa

7

II. Understanding CausesPolitical• Weak Governance• Civil Conflict

Structural and Geographical • Weak Investment Climate• Primary Commodity Dependence and Shocks Prone• High Transport Costs and other Colonial legacies• Late entry into manufacturing

Technological and Environmental• Low Productivity Agriculture• Climate Change and the fragile African environment

Human• Impact of insufficient health and education systems• Pressures of population growth and urbanisation

8

Political Causes: Weak Governance

..but signs of advance (also UNECA report, APRM,...)

Figure 2.4 Governance Quality in Developing Countries, Measured by Country Policy and Institutional Assessment (CPIA) scores

2.96

3.22

3.49

3.20

3.39

3.19

3.35

3.60

3.41

3.68

2.5

2.7

2.9

3.1

3.3

3.5

3.7

sub-Saharan Africa East Asia & Pacific Latin America & Carribean Middle East & North Africa South Asia

Sca

le fr

om 1

to 6

1999 2003

9

Political Causes: Civil Conflict• 31 out of 43 SSA countries (excluding island states) suffered from civil conflict

during the 1980’s and 1990’s: crushes development.

BUT• Experiences vary - with peace, tremendous progress can be made.• AU non-indifference

Figure 2.5 Growth in selected sub-Saharan African countries

0

50

100

150

200

250

1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

GD

P, P

PP,

con

stan

t 19

95 in

tern

atio

nal $

(r

esca

led

to 1

982=

100)

Congo DR

Mozambique

Uganda

10

Structural Causes: Transport CostsHistory has generated 48 SSA countries with on average 14.5 million people and infrastructure focussed on exporting primary products to Europe...

BUT.. NEPAD and Regional Economic Communities action plans (e.g. STAP) – with ADB support

Figure 2.6 Transport Costs in sub-Saharan Africa and Asia

0

100

200

300

400

500

600

700

800

900

Local Regional National International

dolla

rs p

er t

on p

er k

ilom

etre

Typical Sub Saharan African countries

Typical Asian countries

11

Environmental and Technological Causes: Low Agricultural Productivity

• In 2000, the % of cropland that was irrigated was ten times higher in South Asia than in sub-Saharan Africa (40% vs 4%).

BUT.. Le CAADP of NEPAD

% change 1979-81 to 1995-97

-5

5

15

25

35

45

55

65

Percent Croplandirrigated

Fertiliser Consumption Food Production Cereal Yield

Africa

Latin America

South Asia

12

Human Causes: The Burden of Disease

- Malaria kills between 1.1 and 2.7 million people each year, of whom about 1 million are children under 5 years in Africa.

HIV Prevalence rate at end of 2003 (% of adult population)

0.1%0.6%

7.5%

0.6%

2.3%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

East Asia South Asia Sub-SaharanAfrica

Latin America Carribean

13

III. The Framework for Action

• The Foundations: Governance and Peace & Security.– Chapter 4: Governance and Capacity Building

– Chapter 5: The Need for Peace and Security

• Investment and Opportunity.– Chapter 6: Leaving No-One Out: Investing in People

– Chapter 7: Going for Growth and Poverty Reduction

– Chapter 8: More Trade and Fairer Trade

• Financing and Implementation.– Chapter 9: Where will the Money come from: Resources

– Chapter 10: Making it Happen

A BIG PUSH IS NEEDED: A STRONG, INTEGRATED AND EFFECTIVE PACKAGE

If the problems facing Africa are interlocking, so must be the recommendations and actions to overcome them

14

Chapter 7: Going for Growth and Poverty Reduction

African countries to achieve and sustain growth rates of seven per cent by 2010

• Promoting Growth: $10bn a year for infrastructure up to 2010, and, subject to review, $20bn by 2015. Also support for NEPAD Investment Climate Facility. And package to promote agriculture.

• Promoting Participation of Poor People in Growth: Africa Enterprise Challenge Fund to promote small enterprises. Also measures to promote youth employment.

• Role of Business: Call for action by business in support of Report’s recommendations. Measures to encourage pro-poor investments.

15

Chapter 7: Support Africa’s infrastructure development and the role of the ADB

• The Commission’s report suggests two possibilities for the administration of a facility to manage the extra funds proposed:

1. “House an infrastructure facility at the ADB. This arrangement could be assisted by private sector participation in fund management and a Review Panel to examine large projects.”

2. “Spread the funds across the ADB, the World Bank, the EIB, IFC, bilateral agencies and others, within a framework of enhanced co-ordination. It would be important that the ADB has a role in co-ordinating such a framework.”

• The Commission for Africa welcomes the first meeting of the “Infrastructure Consortium for Africa” that took place in London on the 5th of May and the leading role of the ADB in that event.

16

Chapter 8: More Trade and Fairer Trade

Challenge is 2-fold: limited capacity to trade & limited market access.

• Support African-owned strategies to build Africa’s capacity to trade.

• Improved market access through dismantling developed country trade barriers (Doha).

• Transitional support required to help Africa adjust to a new trading regime. Unrestricted access and preferences should be extended to all low-income countries.

17

Chapter 9: Resources - Aid

• Double aid over the next 3-5 years (see further).• Improving radically the quality of aid:

– Strengthen the processes of accountability to citizens in aid-recipient countries.

– Allocate aid to countries where poverty is deepest and where aid can best be used.

– Channel more aid through grants, to avoid debt build-up.– Aid to be untied, predictable, harmonised, and aligned to the

decision-making processes of recipient countries.– Use of policy conditionality to be reduced.

• For poor countries in sub-Saharan Africa which need it, the objective must be 100 per cent debt cancellation as soon as possible. This must be part of a financing package for these countries to achieve the MDGs.

18

Chapter 9: Shocks Facility and the role of the ADB

“ A number of options might be considered for a facility covering shocks, so as to initiate the required structured response internationally, and in which the IMF should play a key signalling and advisory role. One option worth considering is a special facility within the ADB. Potentially, this might allow more effective implementation and for closer monitoring to take place within Africa. Complementarities with other activities within the ADB would also be strengthened” (p.315)

Recommendation:

Through a new facility, donors should help African countries to address problems caused by commodity-related shocks and natural disasters.

19

Chapter 10: Delivering and Implementing

• Strengthening institutions, both inside and outside Africa, so that they are capable of delivery:

– Incl. reorienting IFI’s for them to give higher priority to Africa and to be more accountable both to clients and shareholders.

• Ensuring a stronger African influence in multilateral organisations.

• In recipient countries, government & donors to set up monitoring groups to assess the quality of donor assistance and co-ordination.

• Putting in place effective independent mechanisms to monitor and report on progress on implementation.

20

Chapter 10: Delivering and Implementing – the role of the African Development Bank

“Shareholders of the African Development Bank should aim to make the African Development Bank the pre-eminent financing institution in Africa within 10 years. Proposals should be put forward by the new president within six months of taking office. Shareholders should provide strong support for their implementation (p.373)”

21

IV. Financing Strategy

•This is a comprehensive package. Action must be taken across a broad and coherent front.• Additional annual public expenditure needed to implement each item of the Commission’s package in full is USD75 bn.• Implementation to be realised in two stages:

First Stage: 2006-2010 (in US$ billion)*Additional public expenditure, by 2010 37.5Total financing needed 37.5 Domestic resources** 12.5 Extra aid (double 2004 volume) 25.0

Second Stage: 2010-2015

Table 9.2b : Costings of the Commission's Recommendations - Taking Account of Constraints of Absorptive Capacity

The Commission recommends proceeding to a second stage (2010-2015) of similar expansion based on an assessment of experience of the first stage

22

The big push..• ..does not mean an un-coordinated wave of initiatives,

taken all at once.• ..does not argue that each initiative will fail unless

everything else is done at once.• ..is not based on donors and recipients doing twice as

much while following the same patterns as before.BUT IS..• ..based on:

i. Radical change in the way donors deliver assistance.ii. A continued, and expanded, strong improvement in

governance in African countries.• ..built on experience and designed to learn along the way.

Priorities for action depend on circumstances of each region, country & sector and will emerge from Africa-led processes plus better functioning, rather than new, institutions and processes.

23

Commission’s analysis and recommendations address absorptive capacity issues

• We recommend a strong, but measured 2-stage approach, where in the first stage, only half of the Commission’s full package would be implemented.

• We have shown aid effectiveness is stronger where (i) policy environments are better and/or improving and (ii) aid delivery is of good quality:

– e.g. Mobutu’s Zaire, satisfied neither condition

• Further increases in aid would be subject to a review which assessed:

– Improvements in governance (chapters 4,5,6,7).

– Improvements in the quality of aid (chapter 9).

Both have improved but both could go much further.

24

V. Where Will the Money Come From ?

• Donor countries should immediately commit to their fair share of the additional US$25 billion p.a. necessary for Africa.

• Ways of financing the doubling of aid should include the immediate launch of the International Finance Facility.

• Rich countries should aim to spend 0.7 per cent of their annual income on aid, with plans specified for meeting this target.

• Further work to be undertaken to develop workable proposals for specific international levies to raise additional finance.

25

A Time for Action – Real Opportunity for Change

• Crisis of world poverty is in Africa.• Foundations for success are there but fragile.• Strong, coherent, integrated action now can make

the difference.• Way forward must be a partnership.• Africa can be strong and prosperous.

VI. Conclusion