Sub-Saharan Africa's economies will begin to recover from last year's coronavirus shock and grow again this year. But a predicted 3.4 percent growth rate will fall behind that of the rest of the world, says the International Monetary Fund (IMF).
In its six-monthly economic outlook for the region, published on Thursday, the agency attributes its expectation of a slow recovery to a slow delivery of vaccines to Africa and the lack of resources to stimulate economies.
"Many advanced economies have secured enough vaccine doses to cover their own populations many times over and are looking to the second half of the year with a renewed sense of hope," the IMF says.
"In Africa, however, with limited purchasing power and few options, many countries will be struggling to simply vaccinate their essential frontline workers this year, and few will achieve widespread availability before 2023."
Similarly, the agency says advanced economies are being helped to recover from the coronavirus pandemic by "trillions in fiscal stimulus and continued accommodation by central banks". But this is not an option in sub-Saharan Africa: "If anything, most entered the second wave [of the pandemic] with depleted fiscal and monetary buffers."
Increased exports, higher commodity prices and a recovery in private consumption and investment are expected to reverse last year's average contraction in the region's economies of 1.9 percent.
"However, per capita output is not expected to return to 2019 levels until after 2022 – in many countries, per capita incomes will not return to pre-crisis levels before 2025," the IMF predicts.
It adds that the region's low-income countries will need U.S. $245 billion between 2021 and 2025 to help recover lost ground, while the whole of sub-Saharan Africa will need $425 billion.
Looking back over the last year, the director of the IMF’s African Department Abebe Aemro Selassie said that although the contraction was not as bad as had been feared, 2020 was still the worst on record.
"The pandemic has had a devastating impact on the region’s economy," he said. "The number of extreme poor in sub-Saharan Africa is projected to have increased by more than 32 million. The 'learning loss' has been enormous, with students missing 67 days of instruction, more than four times the level in advanced economies."
Calling for more to be done to help defeat the virus in Africa, Selassie said in most countries the cost of vaccinating 60 percent of the population would need an increase in health spending of 50 percent.
"For the international community, ensuring vaccine coverage for sub-Saharan Africa is a global public good. Restrictions on the dissemination of vaccines or medical equipment should be avoided, multilateral facilities such as Covax should be fully funded, and excess doses in wealthy countries should be redistributed quickly."
The IMF nevertheless strikes a note of optimism in promoting previous prescriptions for future growth.
"Despite scarring from the crisis," the executive summary of the IMF outlook says, "sub-Saharan Africa’s potential is still undeniable, and the need for bold and transformative reforms is more urgent than ever – these include revenue mobilization, digitalization, trade integration, competition, transparency and governance, and climate-change mitigation."
Source: Allafrica.com
There is a huge shortfall in the investment needed to achieve the Sustainable Development Goals by 2030 and the private sector has a crucial role to play in plugging it.
Most discussions around achieving the UN’s Sustainable Development Goals (SDGs) focus on the strategies of governments and NGOs, for example asking how they can improve girls’ participation in education or expand measures to tackle greenhouse gas emissions.
Yet with the private sector responsible for most global investment, business has also had a historic role to play in achieving the SDGs. Mechanisms are being put in place to spur private investment in sustainable projects and initiatives as corporations increasingly accept the link between “people, planet and profit”.
There is a huge gap between the investment needed to achieve the SDGs by 2030 and the amount committed to date. According to the United Nations Conference on Trade and Development (UNCTAD), achieving the SDGs will require $3.9 trillion/year of public and private investment in developing countries alone, while the level currently stands at just $1.4 trillion/year.
The big challenge is tapping into the vast sums invested in capital and debt markets. Pension funds, insurance companies, sovereign wealth funds and bond markets collectively hold more than $120 trillion in assets.
Cultural change, above all else, is required to persuade investors that it is in their own interests to target the goals, and there is increasing data to back up the assertion that sustainable investing is good for profits. For instance, UNCTAD research found companies that seek to address climate change enjoy 18% average higher returns on investment than those that do not.
According to the Global Sustainable Investment Alliance, $30.7 trillion in assets under management currently target sustainable development. Yet although an increasing number of investment funds publicly support the SDGs, few provide comprehensive measurements and data to back up their methods.
All too often, such statements are used for marketing purposes rather than as concrete investment plans – an SDG form of “greenwashing”, where companies use environmental terms and slogans to promote green credentials, while clinging stubbornly to old business models.
In September 2019, the UN Development Programme (UNDP) published a new set of standards for private equity fund managers seeking to support the SDGs. Developed by SDG Impact, a UNDP initiative, it seeks to mobilise another 5% of global assets under management, which equates to $6 trillion a year. Crucially, the detailed standards include measurements for determining the impact of investments, the kind of objective assessment that is badly needed.
At the launch, SDG Impact director Elizabeth Boggs-Davidsen said: “Private sector enthusiasm for the SDGs is strong and growing but translating interest into action has been challenging. A big part of the SDG story is scale. We need to significantly speed up implementation to make progress by the goals’ target date of 2030.”
Companies can increasingly tap into development finance, philanthropic funds, development-focused private equity and in some cases public finance to develop projects that support the SDGs.
Blended finance instruments are one of the key emerging methods for attracting private sector investment into SDG-aligned projects, programmes and markets. Blended finance is defined as the strategic use of development finance for the mobilization of additional finance towards sustainable development in developing countries, while providing financial returns to investors.
Blended finance has proved particularly popular in renewable energy, health and sustainable land use. The Organization for Economic Cooperation and Development (OECD), a club of rich world countries, has promoted the approach.
Development finance, which can be provided in the form of guarantees or direct investment, mobilized $205.2bn in private capital for development between 2012 and 2018. The trend has been steadily climbing upwards, with $49bn generated in 2018, yet much more is still required to bridge the SDG financing gap.
The process can also encourage private companies to place their corporate social and environmental responsibility programmes at the heart of their operations rather than being treated as an unwanted obligation.
Private sector investment can also help the SDGs to tackle poverty and hunger by creating good quality jobs. SDG 8: Decent Work and Economic Growth was specifically crafted with the goal of encouraging fair treatment for workers, a benefit not only to the employed but to investors who benefit from a more productive workforce.
Private sector firms can create change by ensuring fair access to employment, training and opportunities for promotion to women and others who have been historically disadvantaged in the workplace. Workplace inequalities remain widespread in Africa. For every $1 earned by men in manufacturing, services and trade in Africa, women earn just 70 cents. Research by the UNDP released in 2018 found that only 22 countries in sub-Saharan Africa meet or exceed the International Labour Organization standard of 14 weeks’ paid maternity leave.
Big corporations have a responsibility to take the lead by putting policies in place to change this. According to 2018 research by McKinsey, there are more than 400 African companies with revenue in excess of $1bn. However, many are currently failing to maximize the potential of their workforce. Ensuring equality of opportunity means that private companies can make the most of all the talents available to them.
Commercial changes are making it possible for the private sector to develop projects that directly help fulfil one or more of the goals. For instance, rapidly falling solar and wind power capital costs and rising turbine and solar module efficiencies have already made renewable energy more affordable than traditional fossil fuel-powered thermal power plants.
The technologies have taken off most quickly in African countries where governments are prepared to offer support, such as South Africa, Egypt and Morocco. Falling costs are likely to trigger a renewable energy revolution across much of sub-Saharan Africa over the next decade in support of multiple SDGs, including Goal 7: Access to Affordable and Clean Energy; Goal 11: Sustainable Cities and Communities; Goal 12: Responsible Consumption and Production; and Goal 13: Climate Action.
The examples of public and private initiative are numerous. French firm Urbasolar announced in March that it is developing a 30 MW solar plant near the town of Pâ in Burkina Faso, with all output supplied to the national power utility Société National d’Électricité du Burkina Faso (SONABEL). The Emerging Africa Infrastructure Fund (EAIF) has agreed to lend Urbasolar 80% of the €35.4m ($42.2m) development costs.
Speaking at the time of the announcement, Paromita Chatterjee, an investment director at EAIF’s managers, Ninety-One, summed up the benefits of such projects for achieving the SDGs: “Harnessing Burkina Faso’s sunshine to improve its future prospects will bring many benefits to the country and make an important contribution to fighting global warming. This project is a perfect example of how EAIF’s public private partnership model can have lasting economic, social and environmental impacts while mobilizing private capital and enterprise to create new infrastructure.”
Governments play a key role in enabling such investment by creating attractive investment environments and encouraging state-owned companies to support private sector developers.
Source: African Business.
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