Opening Statement African Monetary and Economic Sovereignty Conference By Abdalla Hamdok, Former PM of Sudan and Alt. Chair of CoDA Board
9 -11 October, 2024
Excellencies
Distinguished Participants
Ladies and Gentlemen
It gives me great pleasure on behalf of CODA and IDEAs to welcome you all to this conference on African Monetary and Economic Sovereignty. I would like to thank the AUC for hosting our meeting. I would also like to thank the Ethiopian Government and people for their generous hospitality.
Our meeting today is taking place at a time when my country Sudan a founding member of the OAU is facing one the most serious and catastrophic humanitarian crisis in the World. We do appreciate all the efforts of the regional and international partners and friends in supporting the Sudanese people during these challenging times. We hope working together we can reach a solution that will put an end to these crises and bring lasting peace to the people of Sudan.
There is no doubt we are in a turbulent phase in global affairs which calls for a proper understanding of what is going on and for Africa to determine what it needs to do to survive the turbulence and indeed thrive in a new world. It is therefore important to bring the best of academics and policy makers from across Africa and the rest of the world to deliberate on this important matter.
Indeed, CoDA’s strength lies in convening policy dialogues of this nature. It is through continuous exchange of views and constructive collaboration that the ideas which Africa needs for its economic development can be generated, disseminated, and acted upon. It is also why CoDA’s partnership with the International Development Economics Associates (IDEAs), a network of progressive thinkers from around the world is an important one.
This conference is timely and relevant, and we have expectations for positive and workable outcomes to help inform Africa’s engagements at global forums. We are experiencing changing geopolitical dynamics and an emerging multipolar world which is characterized by outright conflict involving nuclear powers, changing economic strength of nations, restive populations, and lack of state restraint.
We are therefore, required to re-think global arrangements which came about after the end of the second world war. Many of the political and economic arrangements put in place then are no longer fit for purpose. Most notable in this regard are the peace and security architecture and the global financial architecture. At the same time, the world faces a climate and sustainability crisis which compels us to re-think the entire production paradigms.
In Africa, the situation is fraught with complexities. We were not at the table at the inception of the United Nations and the Bretton Woods system whose workings have always placed us at a disadvantage. We are stuck in a dilemma of preferring wholesale change while having to work within the system because of global power dynamics and the need to accommodate other interests. If we take the ultimate objective of structural transformation as given the two main challenges facing Africa today are related to inadequate financial resources for development and a looming debt crisis.
These are very much features of the international financial system and the global tax regime as their effects combine to cause African countries to face continuous illiquidity and fiscal deficits. Economic growth is reliant on the ability to pay for investments, but we struggle to find the resources to underpin growth because of illicit financial flows and continuous search for foreign exchange to pay for vital imports. These are the origins of the periodic debt crises that African countries face as they scramble to meet their domestic and international obligations. In addition, the arrangements we have, such as the currencies we rely on for transactions and trade reflect the reality of economic power and the interests of colonial powers.
Africa’s options are clear as it faces staggering development challenges requiring increasing financial needs. It has been estimated for instance that Africa faces a post-COVID financing gap of over $432 billion with close to 50 million people at risk of extreme poverty. We must find solutions at the domestic level while at the same time seeking better workings of the global financial system.
Our priority of course is to improve domestic resource mobilization so as to reduce dependence on official development assistance while at the same time ensuring predictability in the resources needed for development. Success in this regard would of course require increasing fiscal capacity through growth, improving tax administration, stemming illicit financial flows in its commercial, criminal, and corrupt forms, and working with the international community to improve transparency and eliminate financial secrecy jurisdictions.
Illicit financial flows (IFF) from Africa, two thirds of which are commercial, also contribute to restricting fiscal space in the continent. Updated figures building on the work of the High-Level Panel on Illicit Financial Flows from Africa show that Africa loses at least $80 billion per annum from illicit financial flows. This is more than double the amount of Official Development Assistance given to African countries.
Also crucial is the need to avert a generalized debt crises in the continent. Africa’s debt build-up has had a deep and sustained impact on member countries’ fiscal space and development prospects. Public debt in Africa has doubled since 2010 growing from 32.7% of GDP in that year to 65% of GDP by 2022.
Amidst these financial and fiscal challenges, African countries must continue to service their debt, but they continue to face difficulties using the Common Framework for Debt Treatment (CF) which is the official global approach. These difficulties are linked to the changed global landscape including the greater importance of private creditors and the emergence of China as a major official creditor. This has meant that the arrangements put in place to manage the debt crisis of the 1990s are no longer workable. If rising debt vulnerabilities are not quickly and properly addressed, Africa could face a widespread and far-reaching sovereign debt crisis.
The good news is that Africa now has the opportunity to contribute to making the required changes. Apart from the success of the Organization of African Unity in bringing about decolonization and ending apartheid, we now have the African Union and the African Continental Free Trade Area to bring about integration and increase bargaining strength with the rest of the world. Irrespective of teething problems the admission of the African Union into the G20 must be welcomed and our role is to come up with the ideas and strategic thinking to help the continent make the best use of this opportunity.
Moreover, we can also influence the direction of the green transition through our exposure to strong sunlight and ownership of strategic minerals. Elon Musk, for instance argued recently that the sun can meet all the world’s energy needs. Similarly, Africa controls significant amounts of strategic minerals like cobalt, platinum, manganese, chromite, bauxite, graphite, and vanadium to mention but a few. We must therefore insist on value addition within the continent.
Let me then mention some of the issues this conference should address in greater details to contribute to the fairer world we would like to see.
- We should make proposals to ensure successful negotiation of a UN Tax Convention to ensure a fair allocation of taxing rights to African countries and that we have voice in the process.
- Contribute to developing proposals on how African countries can best work with external partners to avert generalized debt crisis in the continent that takes account of the need for resources to achieve the Sustainable Development Goals.
- Formulate proposals for the reform of the international financial architecture that takes account of Africa’s needs especially climate financing, structural transformation and foreign exchange liquidity and which gives it voice in global financial matters.
- Continue insisting on a just transition and local value addition in the context of climate and sustainable development policies.
It is imperative that this African Monetary and Economic Sovereignty Conference come up with innovative means of tackling these challenges. We do not have the political might nor the economic power to make wholesale changes no matter how pressing and necessary. We should therefore deploy policy and analytical insights to help Africa steer a steady progressive course in this rapidly changing world. I look forward to a stimulating exchange of views and positive outcome with workable recommendations.
I thank you for your kind attention.