The past three years, characterized by global shocks, have been eye-opening economically for African governments in terms of building resilient but sustainable mechanisms for development. In an exclusive interview with The New Times’ Alice Kagina, the Executive Secretary of the UN Economic Commission of Africa, Claver Gatete talks about the need to restructure global credit facilities for Africa’s development, the implementation of AfCFTA and the imperativeness of eco-friendly industrialization on the continent. Below are excerpts. It’s been two months since you were appointed to the UNECA office, what are the most pressing areas of work you found at the institution? Usually, the mandate of UNECA is to support African countries to develop both economically and socially and to achieve that, we work with African Union Commission to implement the Agenda 2063. AUC just finished the 10-year plan, and now we are going into the second-year plan of another 10 years. So, within that, we ensure that we support all African countries to domesticate the agenda and help them integrate it into the national policies and programs. Our mandate is to also support regional economic communities to harmonize into one common market with common external tariff and remove all other barriers to trade, hence, becoming building blocks to African Continental Free Trade Area. To implement the trade agreement, we are assisting the 49 member countries and five regional economic blocks to develop their own strategies of implementation, especially creating synergy for value chains to develop as a region. Besides that, we are also providing capacity-building support to countries with informed research for economic management in areas like fiscal and monetary side, productive sector, and balance of payments, among others, along with consolidating external partnerships among UN agencies for harmonization of support. There has been a constant call for the imperativeness of industrialization on the continent. What picture are nations painting when it comes to taking this on? First of all, for a long time, African countries were not industrialized, we were only exporting raw materials, and what we are campaigning for is to make sure that all the countries can add value to any product they produce, which means developing eco-friendly industries in terms of inputs and energy solutions. Secondly, futuristic industries require the use of technology, this means taking advantage of machine learning, artificial intelligence, and others that can help in terms of increasing productivity and efficiency. With AfCFTA taking shape, we need to build infrastructure like rail, roads, energy, and create jobs for many people, including the youth and women who are coming up with innovations. While the biggest hurdle now is resources, we are working with governments and development partners, as well as private sector to champion this agenda, however, it is necessary to de-risk these projects to attract the needed private sector investments. Talking about AfCFTA, what will it take for the private sector to start reaping the benefits of this agreement? First of all, what we need and have been doing is to put the right infrastructure in place, and by that, I mean transport, energy, and other requirements that need to be tackled at a regional level to mobilize resources together. Secondly, we need to harmonize the common market by removing tariff and non-tariff barriers for the free movement of goods and people to be able to do business from one country to another. These and many more, are what governments are addressing to create an environment for the private sector to invest in. However, we don’t have to wait until everything is in order, the private sector has been participating in the actualization and taking opportunities in this big market. It is important that as a continent, we increase trade among ourselves more than the outside world. Linked to that is the Single African Air Transport Market which is seemingly taking long to move towards implementation. Has there been any progress so far? African airline business is young but there has been progress over the past few years, if you look at RwandAir, Ethiopian Airlines, and others that are making good progress right now, the only hiccup was the Covid-19 pandemic which affected airline business across the world. But essentially, we need to make the right investments in our airlines, you can have a market but lack products. Again, it is not about passengers only but also cargo, which makes this a demanding business that takes time to see results. We also need to improve the infrastructure, but also promote good management in this air transport business, which is also another area which is a bit complicated. Still, it requires bringing in the capacity necessary to make sure that you can take on routes and make money. African governments have been advocating for the restructuring of multilateral credit facilities. In actual sense, what exactly needs to be changed and why? When Covid-19 hit in 2020, it was the first time we had three shocks back-to-back, and countries had to borrow to save lives, not for production. Climate change effects were felt significantly and energy crisis drove up inflation. Developing countries became heavily indebted, borrowing for investment, but at the same time, to save lives. Now, that triggered a problem of our countries’ dependency on international development banks for concessional loans and because of low sovereign ratings, many countries couldn’t go to international markets to raise money which would be very expensive. Just to give an example, being heavily indebted means you are paying the loan in hard currency using your local currency through the central bank, and it draws down the reserve money, then you don't have enough capacity to intervene in the market to provide dollars or euros or pounds to commercial banks, which also becomes expensive for the private sector to get money, hurting economies. This also translates into your currency losing value, and you find that you’re paying more money than you would have, then add it to imported inflation. Many countries are in this situation; some have debts as high as their current expenditures or higher than the budget allocated to education, health, or other sectors. Now, it triggered the whole debate of how we finance our development, hence, the need to reform those institutions to increase concessional resources. The formula for Special Drawing Rights approved by the International Monetary Fund, is 650 billion to be distributed to all member countries but the money is being distributed depending on your shareholding. The entire African continent only receives 34 billion, four percent of the total money. Yet Africa needs it most, other rich countries don't even need this money. We need this money, which is not even coming from their budget, to leverage private sector resources and lend it to countries that need it most in concessional terms. There is also about $2 trillion in capital guarantee in 15 top development banks that were never utilized which can be accessed through SDR. We can use part of this money to solve some of our problems while we are discussing the reform of the international financial architecture and then that would give us breathing space. But we end up in discussions. There's no common agreement. We need an African position and that's why ECA is working with African Union and other partners to come up with a common position and be able to put it on the global table in terms of negotiations. You were once at the helm of different institutions in Rwanda including finance ministry and the central bank. With your economic expertise, what are your recommendations for responding to economic issues in the country? Under the given circumstances, they have been doing a fantastic job in the management of the economy. The innovations of putting in place a recovery fund, and attracting private sector resources are unique from any other African country. The monetary policy is also well managed and as ECA we give technical and capacity-building support at macro-economic level to accelerate economic development. I would need extensive details to give any particular recommendations at the moment.
