UNECA's Gatete on debt, Africa's fight for a fairer financial order

Africa is demanding the reform of the international financial architecture, with many government leaders suggesting that the current system is unfair to countries on the continent. In an exclusive interview with The New Times’ Senior Business Editor Julius Bizimungu, the Executive Secretary of the UN Economic Commission for Africa (UNECA) Claver Gatete said that much as the global reforms are important, Africa must pursue its own reforms that align with its interests. Below are excerpts: The interview has been edited for clarity and brevity. The UN Economic Commission for Africa convened the inaugural African Development Impact Forum. What do you hope to achieve with this gathering? We are an organisation that covers the whole continent, providing technical support to member countries. We also convene stakeholders, conduct research, and serve as a think tank. As we move from one country to another, we see a common theme. It is unemployment. It is becoming very serious. As we try to find solutions, we established the Africa Business Forum, where we bring together business stakeholders, financial institutions, entrepreneurs, and others to discuss challenges. One of the issues we found is that sometimes we don’t connect the dots. People have good ideas, but they are not linked to those who can provide the necessary resources. Sometimes the investment environment is lacking or not connected to a person’s ideas. In other cases, there is research available, but it is not connected to innovation. So we wanted to close that gap—from innovation to research, to partnerships, financing, and a conducive environment for doing business at the national, regional, or continental level. That’s why we came up with the Africa Development Impact Forum. To hear from people with good ideas, support them with research, and connect them with those who can help implement and scale those ideas. What matters is implementation. If you get implementation right, you can scale ideas and create jobs in a more sustainable way, rather than leaving innovators on their own. That’s why we need to work with governments, entrepreneurs, development partners, and financiers to support young people’s ideas and turn them into scalable solutions. Africa is among the fastest-growing regions in the world. One would think that this economic growth would translate into job creation, yet that pace remains slow. What is the missing lever? Indeed, 12 out of the 20 fastest-growing economies globally are in Africa. When we talk about growth, we are looking at economic activity. But growth does not necessarily mean that the resources being generated are reaching everyone. That’s why inclusivity matters. It’s not enough for large companies and organisations to make money. We need to ask: How are they creating employment? How are SMEs participating in this growth? When you examine income distribution, participation of SMEs, quality job creation, and the role of technology companies in creating high-end jobs, you begin asking, growth for whom? Looking at growth alone is not sufficient. We need to understand who benefits from that growth. Once we identify the gaps, governments can step in with policies that ensure broader participation and more equitable income distribution. That’s how poverty is addressed. When more people benefit from growth, their well-being improves. At ECA, we focus on both growth and poverty. We examine multidimensional poverty, income distribution, and participation in economic activity. This gives us a fuller picture and allows us to advise countries on what improvements are needed based on their specific circumstances. You mentioned SMEs, and across the continent they create the majority of jobs, yet they still struggle to access financing and support. Why? It often comes down to policy decisions. Take Rwanda as an example. There was a time when accessing credit was very difficult, especially for women and young people who lacked collateral. The government responded by creating the Business Development Fund (BDF). It started under the Development Bank of Rwanda before becoming independent. The government provided guarantees, particularly for women and young entrepreneurs. But it wasn’t just about guarantees. There was also training and support to help entrepreneurs develop viable projects. As a result, many people were able to start businesses. Some of these grew into SMEs that employed two, five, or more people. The more businesses you have, the more income distribution and job creation occur across society. That solution was initiated by the government, including strong support from the President. It created opportunities that otherwise would not have existed. Without that support, many young people and women would have remained job seekers rather than becoming job creators. We are at a moment of significant geopolitical and economic turbulence. How has ECA’s mandate evolved in helping member states navigate these crises? Crises are not new. We experienced the energy crises of the 1970s, the financial crisis of 2008–2009, the Arab Spring, Ebola, COVID-19, the war in Ukraine, climate change impacts, and more recently tensions in the Middle East. What we are seeing is that shocks are becoming more frequent and more severe. Climate change alone is costing African countries up to 5% of GDP annually. In countries like Mozambique, the cost can reach 15% of GDP because of cyclones. These shocks affect fuel prices, fertilizer, food imports, supply chains, and trade. They create inflation and strain economies. When these crises hit, many African countries were already fiscally constrained. Public debt levels were high, reserves were limited, and many countries lacked adequate buffers. In response, ECA partnered with the African Development Bank, the African Union Commission, and UNDP to study the impacts and recommend actions at both national and continental levels. One key lesson is that we need to accelerate implementation of the African Continental Free Trade Area (AfCFTA). These crises have also created opportunities. For example, we are seeing greater investment in refining petroleum products and producing fertilizer within Africa. The Dangote refinery in Nigeria is producing 650,000 barrels per day and plans to expand. Countries such as Ghana, Angola, and Tanzania are investing in refining capacity. On fertilizer production, Nigeria, Morocco, and Ethiopia are making major investments. Ethiopia alone has invested about $4 billion in a fertilizer plant expected to be operational by next year. These investments were accelerated by the realisation that Africa cannot continue depending entirely on imports. We also need better infrastructure, energy systems, pipelines, transport networks, and regional power pools. The goal is to create regional value chains in critical minerals, agriculture, pharmaceuticals, and other sectors. That’s how industries and jobs are created. Trade within Africa used to be around 14–15%. Today it is above 17%, and implementing AfCFTA fully will be crucial for future growth. African countries have been pushing for reform of the global financial architecture. Where does ECA stand in this debate? We believe reforms are needed in debt restructuring frameworks, governance structures, concessional financing mechanisms, and SDR allocations. Today’s debt landscape is much more complex. It’s no longer just traditional lenders. Countries now owe money to China, India, Arab funds, private creditors, and others. The existing debt restructuring framework struggles to accommodate this reality. We are also advocating for the rechanneling of SDRs through regional development banks such as the African Development Bank. These institutions could leverage those resources several times over and expand affordable financing for African countries. At the same time, Africa must pursue its own reforms. We have significant resources in pension funds, sovereign wealth funds, insurance funds, and foreign reserves. Much of that capital is invested outside the continent. We need mechanisms that mobilize these resources for African development. Domestic resource mobilization is equally important. We need stronger tax systems, greater digitization, broader tax bases, and better investment incentives. Africa’s tax-to-GDP ratio averages about 16%, compared to around 34% in Europe. There is substantial room for improvement. We also need stronger capital markets. Governments alone cannot finance development. The private sector requires access to long-term capital through stock exchanges and financial markets. Credit ratings remain a challenge. Yet, many argue that creating an African credit rating agency won’t change investor perceptions overnight. That’s true. Building credibility takes time. But we currently have 19 African countries that have never been rated since independence. That is a serious issue. The purpose of an African credit rating agency is not to replace existing agencies. It is to complement them. We are also engaging with the major international rating agencies to encourage greater transparency and better methodologies. Understanding a country requires understanding its economic, political, and governance context. That is difficult if assessments are conducted remotely without sufficient local engagement. At the same time, many countries, including China and Japan, have developed their own rating agencies. There is no reason Africa cannot do the same. What matters is fair, transparent, and credible assessment. A diversity of rating agencies can provide more balanced perspectives and help investors make informed decisions. Ultimately, our objective is to improve confidence, attract investment, and support Africa’s development.

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UNECA's Gatete on debt, Africa's fight for a fairer financial order