Obiageli Ezekwesili discusses the rise of Africa as a frontier market, the prospects for growth in coming years, the emergence of new players in African economies, and the World Bank's most innovative projects in the region.
JENDAYI FRAZER: It is with great honor and pleasure that I introduce our speaker to the Africa Roundtable, Ms. Obi Ezekwesili, or Obiageli Ezekwesili, who is a VP for the World Bank's Africa Region since 2007, in which she oversees 47 countries, 1,600 staff, and in 2010 was responsible for $11.5 billion in new lending projects in Sub-Saharan Africa and 1.15 billion U.S. dollars in grants.
Prior to coming to the World Bank, Obi was the minister of education of the government of Nigeria from 2006 to 2007. And prior to that, she was minister of solid minerals development from 2005, 2006. She has also been in the private sector at Deloitte & Touche as an auditor, management and financial services consultant. She was a founding director of Transparency International and the director for their Africa branch from 1994 to 1999, and chairperson of the Nigerian Extractive Industries Transparency Initiative in 2004.
There are many more positions that Obi has held. And you can see some of those in the written bio.
She is a chartered accountant. She received her master's in international law and diplomacy from the University of Lagos, her master's in public policy and administration from Harvard University at the Kennedy School of Government where Obi and I met, as well as her bachelor's degree from the University of Nigeria.
She will be speaking, having worn many different hats, so I know that we're going to have an outstanding dialogue today, working in the private sector, in the public sector for international financial institutions and for international civil society.
And so, Obi, we really look forward to your remarks and the dialogue following. Over to you.
OBIGELI EZEKWESILI: Thank you.
Is this on? Yes.
Well, thank you very much, Jendayi. This is a long way back from 2000. My famous story with Jendayi was how in 2000 we, having done a course of study called "Crafting U.S.-African Foreign Policy," hardly did we realize that that work together was going to be implemented by you, so to speak. Because you know, a lot of what we were talking about concerning Africa, U.S. foreign policy, ultimately became what you had to use in shaping your period in the Bush administration.
And I do want to acknowledge the great work that you did during your time as assistant secretary for Africa, and for the partnership that we had. And it was strong enough and did result in some tangible good across the continent.
I want to thank you all for the opportunity of addressing you this afternoon. And I do want to say that we are in a world that using the word "precarious" is almost an understatement considering that we frankly do not know what this evening would bring in terms of the uncertainties that we all have to manage. Whether they be countries or they be (friends ?) or they be communities or even the individual citizen, managing uncertainty and risk has become an important subject of life.
That being the case, when recently the bank did our economic update and came with the sense that it is less (cheery ?) than anyone would hope since the last time that our focus came out. It pointed to the fact that we are in waters that will remain very difficult to manage for a long time.
However, the prospect of optimism in the light of all of these is what drives me to the importance of the conversation around the place of Africa as a continent within these global uncertainties that we must manage.
Let us focus for the global economy got revised downward, and we basically say that we're going to face slower pace of expansion, 2.5 percent in rate of growth globally. Europe appears to have entered a recession. And the euro forecast is seeing to -- leads to a contraction to about 0.3 percent for the year 2012.
In the same vein, the forecast for developing countries, which used to really be the good news in most of the forecast in the past, is that it has slowed, and it's also facing its own serious challenges of managing the global contraction. The forecast is that it will be 5.4 percent and 6 percent in 2012, 2013, respectively. This is of course down from the 6 percent and 6.3 percent barely less than a year ago in our forecasting.
The 2012 annual meeting of the World Economic Forum picks up on these very precarious contexts within which global growth is being observed. And the topic says "the great transformation." It's amazing how people come up with topics of this kind at the times of very difficult scenarios. And it says "shaping new models" -- the great transformation, shaping new models.
And part of what I read out of the statement of -- (inaudible) -- was basically calling to question some of the models, some of the things that we've been so used to, some of the structures and some of the concepts with which we have worked, and questioning whether the paradigms that we have known continue to be relevant to the imagined scenarios that we're all faced with.
And it basically is saying that there was need for leadership at different levels around the world to begin to redefine what the future could be.
As I read it, it reminded me of something. I was home recently -- and you know, I come from Nigeria, and so we've been facing quite some challenges in Nigeria. And one of the young people on television said something about some of the elders that were part of the conversation. He said, why do you want to be the voice that gives the solution to a future that you will not be part of? And I thought this is is so morbid! (Laughter.) But when that young child said that, it got me thinking that, truly, we must be careful how much we assume that we still have the solutions to what the future will be.
I think that part of the concept of moving toward the new global reality is going to be how much of the voice of those to whom that future belongs to we make as a part of the conversation.
So as I look around the table, I'm thinking to myself, we do need to have a Council on Foreign Relations that will begin to look at those in their 20s as important contributors to the imagined world and imagined reality that we're going to be facing.
The Global Issues Group, which comprises leaders of the world's multilateral and regional institutions, put its foot forward by affirming that the solutions to realizing the objectives for strengthening growth, employment and quality of life in every part of the world, and indeed for resolving severe challenges faced by the global economy, would lie in economic transformation that will happen in developing countries -- in developing countries, meaning that whatever, however you define "developing countries" of which Africa occupies a very important space, working out of the reality that we confront today is going to very much depend on how the solution is centered within the problems that they face.
And so for us, the global economic trend seems to suggest that the developing world is no longer the one with the monopoly to risk. So clearly, the address where risk resides has gone global. And to the extent that investment risk, the new risk reality, has emerged as one that is ubiquitous, one that is less associated with just the developing world of particularly a continent like Africa, the macro trends that we see and the landscape that we observe means that for boardrooms across the globe that are seeking the unbeaten path for capital flows, it's going to be important how Africa and the rest of the developing world is considered.
Your topic said Africa is the next frontier. I believe that -- in Africa, recently I was taken to task by a very vigorous young one. You know, this is the era of the young, frankly. You better prepare yourself anytime you're speaking to them. They said, you know, the idea of Sub-Saharan Africa doesn't appeal to her and we should stop calling -- saying "Sub-Saharan Africa," we should say "Africa South of the Sahara." And so I stand corrected by my young friend. I'm sure she's probably listening, so she knows I took the correction.
It is not a surprise that more and more people are beginning to see the opportunities on the continent. The fact is that as an investment frontier, Africa's story remains a very complex one. It is not a "single story," using the word of my fellow compatriot Chimamanda Adichie, who cautions against the single-story complex.
Some of the continent has shown clearly that it is not one to be associated with the stories on civil wars, military takeover and insurgencies and genocides and all of the things that defined the old Africa that some continue to insist is the only picture of the continent that they see.
The reality is that there's an aspect of Africa that has emerged, and within the last decade, clearly, one that has made giant strides toward more-open society. And so the concept of openness and the concept of democratic traditions have overridden some of the well-worn -- (inaudible) -- of a continent that was considered a basket case for its inability to build the right systems and structures and institutions that underpinned free elections and successful economic strategies, and therefore provided growth and (provide a reduction ?) for citizens.
Beyond even the progress on the democratic space with many more elections and transitions that have happened successfully is also the fact that the openness has resulted in a better embrace of the economic imperatives of macroeconomic stability and the basic trust that the fundamentals are not any different as far as economic growth is concerned.
And that if Africa understood and embraced the tradition of working through market principles and defining the roles of government and the roles of the private sector appropriately, that Africa, paying attention to the key fundamental issues of economic policy, could grow.
And so we saw in the last decade a continent that made peace with the embrace of the market as an important factor for growth.
An eminent business person did say that profit lies where the gap between perception and reality is greatest. He's not alone in that. I mean, think of it. The Economist, a magazine that I grew up on, because I had a dad who was one of their greatest fans, but I had to go -- I had to dump The Economist for a while because it woke up one day and decided that an entire continent could be called "hopeless continent." And it did this in 2000, it had that caption and said "hopeless continent."
Why? It was mirroring basically that perception that it was a continent that many assumed would never find its feet in the global scheme of things. Well, you know, there's nothing like a -- (inaudible) -- to give you a different set of wisdom. And so within the last decade, as Africa began to show that it is indeed capable of taking hold of the key economic concepts and translating the poor performance that it was associated with into better performance on the economic space, we now see that the 2011 edition of the same Economist points to it and says we recant of what we said of Africa a decade ago. We do recant of it; and therefore, we now say Africa rising.
Now, Africa rising is a good story, is a good caption, but it's important to our piecing together where Africa is rising from and where it is supposed to be rising to.
In Africa today, we see the brightest possibilities as being in the fact that you have the continent driving its economic vision. The economic vision of the continent has become one that the continent itself is defining, which is quite so different from what happened in the past where there was almost a confusion as to what the vision of economic development was supposed to be.
In the interaction that one has with the leadership and the citizens of the continent, that matter of taking ownership of an economic vision is so key, because then it determines that the level of commitment and investment into realizing that vision that both the leadership as well as the citizens are willing to offer.
In the last decade, what we saw was basically an Africa that made peace with the concept of macroeconomic stability as being fundamental for growth. Now, once that happened, and that's about taking ownership of the economic vision, you did not need to tell any leader that the kind of fiscal recklessness and rascality that was associated with economic behavior in the past would undermine the economic vision of growth and poverty reduction. They lanced that. You began to see management of the economy, of the macroeconomy, both on the fiscal and on the macro side from the perspective of guarding that economic reality of the necessity for macroeconomic stability.
Now, why is that important? It's important because when the crisis of 2008 commenced around the world, the continent that kept with macroeconomic stability the most was Africa. Africa kept with it while other parts of the world began to have loser economic policy. Many of the leaders on the continent held on tightly to fiscal prudence and to ensuring that the management of the macroeconomy -- inflation, interest rate, foreign exchange -- the management of it was guided seriously by this continent.
And what we see since 2008, even at a time when they have less fiscal space today than they had at the outset of the crisis in 2008, is a continuing to guard that space.
So I make a big thing out of Africa accepting an economic truth and owning it as being important. The reason I can say that very, very vigorously is that I work within an institution which for many years, many decades was looked on by most of Africa with suspicion as being institutions that wants to impose ideas on Africa.
Well, the World Bank doesn't need to say that macroeconomic stability is important, to any leader anymore on the continent. They finally got that, and they are doing it themselves. Some of them are even doing -- holding on tightly to it more than the expectation that Bretton Woods institutions want of them. That's key, because to be able to achieve the macro stability, the next level becomes your second-generation reforms, and that's where the difficulty shows up.
Because what it took -- the great investment it took to get to the point where African leaders and policy practitioners understood the necessity and the fundamental need for macroeconomic stability and to hold on so tightly to it with good effect. Because as I speak, of all the continents, Africa's rate of growth before the crisis in 2008 had become an average of 5.7 percent, sharply declined to 1.9 percent at the height of the crisis. But 2010, it's started a trend up back from 1.9 percent and ended at 3.80 percent. By 2011, we're talking about 4.3 percent. And by -- it's just continuing to be on the upward growth.
Our sense is that, excluding South Africa, the regional average for Africa's growth would be 5.9 percent, although with South Africa it ends as 4.9 percent. Now, that's significant in a world where we're seeing such low growth levels in the most-advanced of economies. So this puts it on the path immediately next to the Chinas and the Indias. And that's important to have as a perspective as we look at Africa's role going forward.
The great story for Africa sometimes is made to appear as a single story by people who say, OK, yes, so maybe the growth is because of the expansion in the commodities market; and therefore, that's what's driving the growth. But I want to clearly state that as we decompose the sources of the growth, what we find is that only one -- (inaudible) -- can be accounted for by the commodities story.
The rest of it is actually about macroeconomic reforms and the investment in the second-generation reforms that are supposed to spur growth through better economic policymaking.
This growth story is not enough. The growth story is not enough because the growth story is one that excludes quite a huge population on the continent, that must benefit from growth. And that's where the role of the World Bank and other institutions and partners of Africa in focusing on how the growth can become stronger and the growth can become broader, and therefore growth that can be shared by quite a larger population of citizens, where 50 percent are still in the category of the poor, becomes the next-most-important agenda. And that's where the issue I alluded to on structural reforms, the second-generation forms, becomes key.
And that's where, if you say Africa is the next frontier for growth, where would the growth be coming from? One important source of that growth, besides the good economic policy, is going to be how you focus on the right kinds of investments in sectors where the good policymaking is happening.
And my proposition is that agriculture and agribusiness is an important area of focus for Africa's economic growth. Agriculture and agribusiness, the value-added prospects that they hold and the fact that it is still a continent where more than 70 percent are in this sector. Whatever Africa does with other sectors of opportunities, agriculture has to be a key component of Africa's readiness to embrace private capital of the magnitude and beyond what we have seen in its embrace of policies and the right public investment that opened up the information and communication technologies sector.
The telecom sector has been an incredible success on the continent, but the opportunity to benefit from growth for the average citizen on the continent is going to be through what we do with agriculture.
And so in looking at agriculture, we say that Africa has one-quarter of he world's -- (inaudible) -- land. In fact, 50 percent of the outstanding is in Africa. Now, if Africa had the right policies and the right investments into this sector, Africa would become part of the solution to global food demand.
And we believe that the demand for food, which will reach about $100 billion by, you know, doubling the level by 2015, doubling the level that it was in 2000, creates a huge opportunity for an African green revolution that looks at appropriate investment in both the agricultural skills as well as the infrastructure that would necessitate the kind of growth that is held up in the dormant sector of agriculture, or the under-productive. The productivity of the sector is so critical for Africa to truly emerge as that next frontier that the topic seeks to explore.
Sub-Saharan Africa does already have many success stories in agriculture. The production of, say, cassava chips in places like Ghana, or organic coffee in a place like Tanzania, or cut flowers in Kenya, as well as agriculture in Malawi, all of these products are today being exported to European and other Western countries. Expanding markets, such as their reproduction in East Africa, is going to be a formidable opportunity for Africa as a frontier market.
And the good thing about agriculture is the fact that it really gets to the heart of poverty on the continent. For every one farmer in the coco sector of, say, Cote d'Ivoire, they are responsible the health and education of a multiple of 10 people in that country. So imagine the impact, the quick impact on poverty, because access to health, access to education through improved income of the farmer means a direct intervention, not waiting for development aid. But it's actually about families making the right kinds of decisions about investing in their children, and therefore improving Africa's human capital, which essentially is the most important article of fate that we must all subscribe to concerning the continent.
That it is not Africa's extractive industries, but Africa's population, properly educated, given the right tools to solve economic problems themselves, that will take the continent higher than where it currently stays in the ranking of nations as far as economic performance is concerned.
One of the things that we've been watching closely is the interrelatedness of social and demographic changes and how all of these create the domestic engines for growth. Key among this is, of course, urbanization and the expanding labor force and the rise of the middle-class African consumer.
In 1980, just 28 percent of Africans lived in cities. Today, 40 percent of the continent's 1 billion people live in cities, and this is comparable to what you have in China and in India, in fact larger than what you have in India. By 2030, that share is expected to rise to 50 percent. And Africa's top 18 cities will have a combined spending power of $1.3 trillion.
At the same time, Africa's labor force is expanding, in contrast to what is happening in the rest of the world. So while the rest of the world is facing aging populations, Africa is becoming much more youthful, much more vibrant.
The continent has more than 500 million people of working age. By 2040, the number is projected to exceed 1.1 billion, more than in China or India. And these people are going to be the ones that lift the GDP of the continent. But lifting that GDP means that the investment in the young has to start today.
It's a double-edged sword to have a youthful population. It's either we're investing in this youthful population, converting them to the human capital that would determine the innovations and the solutions of the present and the future, or we would have a situation where they would become the underbelly of economies that never go beyond their current performance. And in fact, they would become sources of destabilization on the continent. Disruption would necessarily happen where the citizens, especially these youthful ones, do not have the opportunity to express themselves as economic agents, which is what is encouraged through the greater openness of the continent to open economic principles.
Of course, an important theme that we need to get in mind is that climate change is a risk that faces Africa. Even though Africa's contribution to global warming isn't as significant as you may, which is 0.2 percent -- .02 percent, the fact is that the impact of the climate change, climate variation, weather variation is already huge on the continent.
Whether it is in what you have followed in the Sahara region of Africa, or it's in the coastal erosions or in the (decertification ?) that's happening with such frequency, and the heat waves and the storms and the floods, all of our different parts of the continent, it is clear that agriculture stands a risk, even though we have a valuable proposition that leads to that real growth.
Because when you look at the comparative-advantage-embracing approach for economic policy, and agriculture is it, then anything that threatens agriculture fundamentally like climate change becomes an important element for focus by the African policymaker.
And so beginning to look at this as something that practitioners on the continent will pay attention to is critical.
I do want to say that there are many issues that we can learn from. In the improvements that we've seen in investment flows into Africa, taking the telecom sector as an example, what we have learned is that the right public policy preceded the flow of investment.
Now, with that lesson, it means that outstanding areas of reform in energy, in transportation, in agriculture, in health, in basic environment and sustainable development and all that that is associated with it, we need a strong focus on the right sets of policies -- the right sets of policies, the right sets of legal and regulatory systems, the right sets of definition of rules of government as well as the private sector.
But even more important is an understanding of how innovation happens. When the telecom sector and the ICT took off on the continent, hardly did anyone realize how a country like Kenya, with its youthful population, would be the first set of people that would take this access to information as an important tool for economic interaction. And so the (impasse ?), the mobile money today is associated with the innovation in Kenya.
The good thing is it's an example of how innovation can be driven within the continent. Because at the World Bank, we actually support through the (South-South ?) lending the provision of the lessons of the (impasse ?) to countries in Asia. So Africa is a home for innovation.
What it means is that, as we look at energy and we look at agriculture, what are the innovations that could come out of all of this? But only to the extent that we can see that interrelatedness between the policy, the necessary investment on the side of government and the definition of a clear road for it, as well as the participation of the citizens in finding the solutions that are appropriate for them.
The challenges that remain are huge, as I said. Less than 25 percent of Africa's population has access to electricity, compared to 40 percent in other low-income regions. The consequence is that Africa is less competitive beyond the factory floor and remains constrained and unable to take advantage of the 2 percent increase in growth as well as 40 percent increase in productivity levels that result from better infrastructure.
In fact, you know, when you look at the challenge of energy on the continent, it's such an incredible obstacle to growth. And yet, we know that by reforming and structurally changing the sector and having the right policy framework and legal systems, that the same way that the market was drawn to the opportunity in the telecom sector, so also will the market be drawn to the opportunity in generation, in distribution.
And so what are the incentives that would drive the process of making this sector a sector that opens up and receives the market as they come calling? It's a huge place of opportunity.
Even in the financial sector, still just less than 30 percent of Africa has access to financial services. What does that say for a frontier market? Access to finance is the life wire of any economy. And if there are still serious exclusion of a huge population, financial exclusion, then there is an opportunity in that space for really bringing more people into the economic activities.
It was Winston Churchill that said that the pessimist sees difficulty in every opportunity, while the optimist sees opportunity in every difficulty. And so in the Africa rising, Vijay Mahajan adopted the approach and sees Africa as a home to more than 900 million consumers richer than most people think and presenting an opportunity as big as China and India.
Now, if that is taking a perspective, it shows that the Council on Foreign Relations is having the right kind of conversation, because if you fragmented Africa, you would not see this big essence of the market and the opportunity it presents, which is what takes me to the issue of regional integration, because the regional integration of the continent is really one idea whose time is well past.
(What can we talk ?) of regional integration has been more difficult than expressing the desirability of it. And so the kind of attention to the opportunities for integrating policies and investments and identifying solutions that can be solved from the perspective of regional goods is really germane to any conversation on Africa as a frontier market.
Markets that are too small are of less significance than markets that are sizable. And so in the work that we do with the continent, whether it's in the integration through infrastructure, or it's integration through policy harmonization, or it's integration through institutions and regulatory systems, what we're pushing toward is as driven by the leadership of the continent that it not be so separated from the domestic policy environment.
The domestic policy environment and this regional policy environment must find places of convergence. And the further studies into the political economy of fostering those linkages is going to be a key and an important area of focus.
Most of Africa says enough with development aid, we want trade and we want investment. And I agree, completely agree. But there is still a huge agenda for investing to enable the right business environment on the continent. Beyond the reform of the business environment in the -- (inaudible) -- of investment climate reforms, if you do not solve the energy crisis on the continent, the cost of doing business on the continent remains really prohibitive.
If you do not solve the transportation issues, if you do not invest and produce the right variety of skills on the continent, the cost of labor continues to be -- will be prohibitive. Then the population is not an advantage, because side-by-side a population are opportunities for work that will be taken up by others.
And so all of this means that both development assistance, trade and investment must all come together as a package that will support Africa in emerging into that frontier that we all agree it must emerge into.
The role of the Diaspora as part of that strategy for mobilizing as much resources for Africa's investment as possible is key. There are some of the countries in Africa today where the Diaspora flows whenever the decline become a business for balance-of-payment crisis. It's become that important.
And so how the transition that would begin to happen as you see more of the country -- more of the development -- more of the countries providing development assistance to Africa, as they go through the global economic crisis and as they try to determine priorities, it's going to be important that conversations as to how the Diaspora flows begin to solve as much more than a simple or mere social protection. Because today, the value of a lot of the Diaspora flows is as a social safety net for the Africans that receive those money.
But it has much more role for development as we see. And so some of the conversations on Diaspora bonds have got to be much more sophisticated than merely looking at it as an instrument to mobilize resources. But to coherently defining the space that those resources would take in helping to accelerate and push up growth in particularly the sectors that are key factors for growth is an idea that's right on the table.
Our estimate is that remittances are more than double official aid received by developing countries, reaching about 325 billion (dollars) in 2010, of which more than 20 billion (dollars) flows to Africa. Now, $20 billion is significant resources flowing as Diaspora resources.
For this reason, we are focused on work that reduces the transfer costs of worker remittances and work that helps to look at them for their impact on growth and poverty reduction by unlocking opportunities to channel those remittances to productive investment rather than mere consumption.
For investors, what I would always ask is, do you yet have an Africa strategy? If Africa is the now and the future, then no global player will do well by not having their Africa strategy.
For partners or investors, working with the continent means understanding the continent. And so the necessary investment in understanding the opportunities as well as the challenges on the continent would go with understanding the citizens and the voice that they express about where they see the continent going.
And that takes me to the importance of the civil society and the voice of the citizens in Africa. A lot of what's driving better performance in some of the countries that we see is that demand for good governance and accountability is becoming a pattern of relationship between those that govern and those that they govern.
And so, how can we consolidate this demand for good governance by the citizens of the continent? How can we as partners, whether in the development world or in the private sector, encourage the kind of responsible partnership with the civil society, with citizens group, with communities in the kind of way that governance, which was always the key obstacle to Africa's growth, can finally be one that gets resolved through the participation of the three sectors: by private sector, public sector and the civil society.
For us at the bank, our focus has been on the governance agenda and the public sector as the foundation of everything that we do. We came to the awakening that even in solving Africa's energy problem or solving its transportation problem, ultimately, it would be a governance and institutions-building issue.
And so working through that process means that you cannot do the governance agenda with the citizens. It's ultimately about the citizens. And it's a message to those that lead the continent. The citizens of the continent are asking for better governance. It's not an external agenda. No one external to Africa can foster good governance as much as the citizens can. And that space where the citizens are occupying now and demanding on the business of greater transparency and access to information for results from government means that everyone of us, including the Council on Foreign Relations, should really be spending a lot of time trying to figure out what it is that we can do to support the voice of the citizens, to strengthen that voice and that demand for good governance and for results.
Because it is in so doing that the economic freedom and the right economic policies will come together and enable the performance that readies Africa more and more as that frontier that no one can ignore.
So thank you very much.
FRAZER: Well, thank you, Obi. That was really quite fantastic. You've put a lot of serious substance before us. I heard someone outside before we started say that there's people around the world who are going to be sad that you're leaving the World Bank. And I certainly share that sentiment. But I have another one in which I'm so happy you're leaving the World Bank, because a force with the voice that you have and the ability that you have, going back to Africa and working for all that you just stated here, makes me very confident in Africa's future.
And so I'm very pleased that, in many ways, you're going to fly free and do your thing. And we're going to look forward to watching you over the coming years.
But with that, let me open the session for question and answers. We want to invite the audience members to join in a discussion. If you have a question, please orient your name tent vertically so that I can see your name. When you are called upon, please state your name and affiliation, and keep your questions as concise as possible to allow as many participants as possible to speak.
And I'm going to take three questions at a time. And we have about 15 minutes' worth of time for the Q&A. So with that, I'm going to just go right around the table.
Mr. Robert Hertzberg and then Joel and then Ambassador Davis.
QUESTIONER: My question relates to good governance. Your final comments, you indicated this is fundamentally up to the citizens of Africa. But you also -- I heard you also call for help from the Council on Foreign Relations and the people around the table.
What is the role of outsiders in helping to foster good governance in Africa?
QUESTIONER: Joel Barkan, Center for Strategic and International Studies. First, thanks very much for the first point you made about Africa is not a single story. It's a very varied one. My questions are basically two.
You talked about ownership. And at the bank, one of the mechanisms for facilitating ownership has been budget support. And yet, there has been some stepping back from budget support in a number of countries, Uganda in particular in recent years. I'd like you to comment about budget support as a mechanism.
And secondly, in respect to your point about macroeconomic stability, there also appears to be some slippage in parts of the continent -- again, Uganda, Ethiopia in particular where inflation is now 40 percent.
FRAZER: Ambassador Davis.
QUESTIONER: Ruth A. Davis, former ambassador to the Republic of Benin. Thank you very much for your insightful, sweeping remarks. I wish you would comment a little bit about the role of women entrepreneurs in this sort of developing a new frontier, economic frontier.
FRAZER: Thank you.
EZEKWESILI: OK. So let me take these ones quickly. On the role of the outsiders, I think that there's a lot in terms of partnerships that are going to be key, and a lot in terms of the -- in terms of the lessons, the lessons of performance.
There are many systems that underpin good governance. Good governance is not simply anecdotal. There are important systems and structures that are going to be necessary. There's a lot of human capacitation issues that are involved. There is a need to underpin good governance in analysis, in clear definition of what the intended outcomes are. And there's a lot that is missing yet in that conversation, because even though citizens are finding their voice because of the global reality that we all face today, that citizens have more access to information, you have to ask, what kind of information?
The quality of the information, the analytics behind the information, means that there is need to engage. There are certain groups that have been trying to do things, say, in the health sector, from the outside. Well, don't try doing that thing as an outsider. I mean, perhaps what you really need to be doing is finding the voices from within (lose ?) interest, (rely ?) in that sector on providing them with the kind of critical knowledge that they require, because their voice has more legitimacy than your voice.
The legitimacy and the credibility of the voice of the owners of the development problem is really an antidote to a lot of the lack of traction that we have seen on the conversation on the demand for good governance. And I -- it's how we now take this and really turn it into a product of help, of support, of partnership that really matters as we go forward.
You talked about ownership and budget support and working a way -- we actually at the bank, in the Africa region, I dare say, our budget support is an important part of our policy memo in the work with countries, because this dramatically helps us to get countries to take charge of the important reforms that they want to see happen in critical sectors of the economy. But you have to be careful that you don't do budget support in a situation where there is an entire -- a lack of appetite for change.
A budget support simply becomes a source of improving resources that are available for the wrong kinds of priorities -- you don't want to do that. I mean, you cannot be so -- (inaudible) -- about budget support that you ignore what the outcome you are trying to achieve really would be, and whether they're being achieved.
We do a lot of rigorous -- we pay rigorous attention to what change happens as a result of budget support. We avoid budget support fatigue where people begin to think that they are entitled to budget support as a way of revenue mobilization, when indeed it should be the incentive for ensuring that sustainable reforms are undertaken so that you can exit from budget support as a country at some point.
You talked about the slippage in some parts of the -- in some countries on the continent. Certainly, a lot of them during this next cycle of the crisis that we've seen, entered with less buffer, whether policy buffer or fiscal buffer. And so it has meant that it's been more challenging.
But just watch the policy actions of the governments. Unlike in the past, they went toward the path of least resistance, which would be to ruin it even further. But what you see on the part of policymakers and the leaders is, trying to manage it and finding support that would enable them, you know, get back to the place of stability.
So some of the public expenditure measures that governments are taking are really being taken to getting this instability, the macro instability that is setting back into a place of stability.
Now, for us, we watch it and we look at how we can support. So the support through policy, policy notes that would enable them know the wrong options not to take, because there are times when this situation arises, and the next thing people do is the action that comes to the mind. So we're grounding action in evidence. And so evidence-based policy, orientation is really taking foothold, building the critical capacity within both the ministries of finance, working with our colleagues in the central banks with the fund is important for the policy options they take.
And then looking at public expenditure, looking at the budget and seeing how the instrument of the budget can be better utilized for dealing with some of these challenges that they are coping with. But a slippage is bound to happen. But I look at trend. I don't look at -- you know, I look at trend. When a slippage happens, what's the trend in terms of policymaking. It's mostly positive in most of the countries that are affected.
For women entrepreneurs, as you know, the bank has the gender action plan, and gender is a key part of our work in the Africa region considering that some 50 percent of the people on the continent are women. And our particular area of focus is women economic empowerment.
And so you've come out of Benin. You know the typical Benin woman is an entrepreneur by nature. Congenitally, they are entrepreneurs. And so we're focused on what it is for human capital development. We're focused on education; girl child education is key. You need a basic level of education in order to unleash your innovative mind. That's a piece of it.
The other piece of it are the doing-business environment for women, looking at the kinds of obstacles that women entrepreneurs must face, looking at issues involved in business registration, in access to capital, in basic recordkeeping, in access to markets. So we are focused on that, even at the very country, up to the project level. So it's a huge agenda for us.
QUESTIONER: Hi, Claire Casey from Garten Rothkopf. You spoke about both energy and a need for energy infrastructure development, and climate change as a major risk. And I'm just wondering if you could offer your perspective on how to reconcile those two or what the appropriate balance is in low-carbon development given the urgency of the challenge, the scale of the challenge and also the higher costs and risks of -- (inaudible).
QUESTIONER: I'm Michael Samuels from Samuels International Associates. Thank you very much for sharing your insights and visions. But would you also share with us your two biggest frustrations from your last period at the World Bank? (Laughter.)
QUESTIONER: Hi. Jonathan Cahn, I'm with SNR Denton. I'm afraid Mr. Samuels has preempted my question. But I would obviously like to hear your response. I'll have to leave a bit earlier than I wanted to, but was asked by Ambassador Bob Gelbard to give you his regard.
EZEKWESILI: Thank you.
FRAZER: And then we have eight more minutes, so we'll finish this round and then we'll take the last three.
EZEKWESILI: OK. So the climate change and development, I don't think there has to be a trade-off. I really think that it is how much we look at development solutions from an integrated perspective. Because as I just said, agriculture is important for the continent, and there you see that climate change, with the (floats ?), with the decertification, with the coastal erosion, will affect climate change.
So climate-smart agriculture means that you're going to be thinking of agriculture through the lens of the risks that are inherent in Africa not having a good program for managing the climate change issue.
When you look at Africa's opportunities for hydropower, it's huge. Only 10 percent of it is being utilized at the moment. Now, what are the drawbacks to unleashing that opportunity? That has to be part of the global conversation as far as Africa's role in helping manage the global climate change agenda is concerned. So that way becomes a win-win and not a conversation that -- (inaudible) -- of Africa's development for better climate environment.
Otherwise, if you enter that conversation that way, then you would have people who would simply say, well, Africa did not contribute to the global warming. It's such insignificant contribution; and therefore, it ought not to just be called into any kind of arrangements that would -- (inaudible) -- stem the tide.
But that would be not an intelligent response to a problem that it is already having to adapt to. So I hope that answers your question.
QUESTIONER: I think so, yeah. (Laughter.)
EZEKWESILI: Go ahead, ask a follow up. You seem to --
QUESTIONER: Well, I guess one of the most-controversial projects in the World Bank in recent years has been a coal plant that arguably was necessary for feeding industry that's growing. Those choices are being made every day. And I was just wondering your perspective on the path forward.
EZEKWESILI: Well, you would see that even in understanding the role that fossil plays in energy development and in energy, and therefore for development, there is a clear understanding that when you're dealing with low-income, poor countries that are only just needing energy in order to start the process of growth, that you've got to look at it slightly differently from how you look at it when economies that have had history of growth for so many decades continue to behave in an irresponsible manner. They are two different conversations.
And so reconciling those views in a way that you recognize Africa's own disadvantage and yet Africa's own opportunities. If you took some of the countries where you have coal in Africa, you would find that there are countries that have mostly that as the source of energy. That is the most they have in terms of natural resources. So you take a country like Botswana, a country like Botswana, it is really -- and yet it is a country that says we recognize the risks of climate change; therefore, we will invest ourselves in looking at renewable options. That requires significant investment.
As all of that conversation is going on, is being able to balancing the conversation on climate change and development as an integrated solution to the growth of these economies and the tackling of poverty that would enable the conversation of a (divisive ?) and a conversation that requires immediate trade-offs of the two agenda of development and climate change. Right? OK.
And then there was a question as to my two biggest frustration. What if it is only one? (Laughter.) I think that the -- actually, now that you ask me, I was thinking as what -- I think, why don't I start with my greatest joy? My source of my greatest joy is to see what is going on on the continent by virtue of the participation of the citizens in the development process.
There is no continent that could ever have developed without the full engagement of the citizens in the process. For many decades, it was difficult to get that level of involvement that I see today on the continent. And I have been to most of our client countries, and my interaction with the citizens always has been the high point of my, you know, talking with the presidents and the cabinet is not even half as exciting as when I am sitting in a room like this and there are market women, you know, that are in that meeting, there are civil society young activists, there is a private sector entrepreneur trying to make an inroad into the market space and facing the obstacles and the constraints.
And in that conversation, the energy that you see, it is really a source of optimism. It can do -- it's basically a spirit that says take the obstacles to our growth away and you would see us grow.
Now, that is so really wonderful, because it then helps me shape my conversation with the policymakers, because in discussing with the policymakers and reporting that I met with citizens who know the solutions to their problems, they are just asking you to get out of their way, get off their path. Take the obstacles that you put on their path away from them and they can find solutions to their problems.
Many of the citizens are actually not asking for handouts. It is so amazing. They don't need your handout. They just need the environment to unleash their creativity, their ideas and their solutions. That has been a very, very, very, very good thing that I have benefited in this job.
Now, frustration would have to be -- what if I don't have any frustration? (Laughter.) I am really trying hard to think, because I am an incurable optimist, right? So, you know, the -- I am an inpatient optimist. Ah, maybe that is my frustration! Yes, it is not happening as fast as I would like to see it happen.
I mean, I believe that since we know that Africa must attain 7 percent economic growth rate per annum on a sustained basis in order to make a serious dent on the poverty levels. Right now in the last decade, poverty has declined by 1 percentage point every year. I want to see it decline by 5 percentage point every year. But what that would require it must see investment.
The investment, public investment and private investment, that you would need in order to attain that is so huge, that when I look at the development space, I don't see it yet. That has to be a major frustration. A major frustration is knowing that Africa needs to raise an additional $48 billion, less the about 11 billion (dollars) that we believe can be saved and the 17 billion (dollars) that we believe can come through better efficiencies and policies and investment for infrastructure development. And looking at the space, looking at the flows, it is not happening fast enough.
Maybe some of you here can have the solution to it, but that huge sum that you need in order to add many (bouts ?) of growth to the existing growth and take it to 7 percent is a source of immense frustration for me. How, where do we find the flows, the flows that will take care of the infrastructure problem?
The other frustration, but which I hope will be overcome, is when people, when the leadership, those amongst African leadership that still haven't understood that Africa's great opportunity is actually the people, not the copper, not the oil, not the gold, those leaders that are still caught in this binge for extractives is a major source of frustration and great concern for me.
Because an elite class that has not understood yet what the citizens are saying, which is that they want education, they want investment in the things that make them very productive and competitive. Moving that agenda would mean that the good-governance demand would force the leaders to focus on the things that translate the rents from the extractive industries into investments in health, in education, and in important things that would enable them grow a drive in human capital base, because it is the knowledge of the citizens that would really grow Africa in this next cycle of growth that we are talking about.
FRAZER: I think we have actually heard what Obi is going to be doing next. We have heard this over and over. I think we know. We have run over time. I am going to allow the last three to ask your question, make your statement, but I would also, you know, maybe suggest that, Obi, if you can't answer it really quickly --
FRAZER: -- that you take it outside the hall so that we can stay -- we are just over now, and I don't want to go too far over. So Whitney.
QUESTIONER: Thank you, Jendayi. Thank you, Obi, for a very fulsome conversation. My question goes to your first comment about Africa taking ownership for its own economic policy in vision, and nowhere has it been more evident recently than in Nigeria and removal of the oil subsidy. And we saw very bold economic move, but a very equally strong public backlash from civil society. And I am just interested in your comments on what the government got wrong and what the government may have, you know, done right in that context.
EZEKWESILI: It is simple: pace and sequencing. Pace and sequencing, yes.
FRAZER: And concise. (Chuckles.)
QUESTIONER: Yeah, Madame Obi, many respects. First of all, I want to say many respects. You have transformed the World Bank and how many of us relate to the World Bank. Before we used to be out there throwing eggs at the bank and now we are inside dialoguing on important issues, so I want to congratulate you on that.
My question has to do with agriculture. And China is -- they are big time now. Middle East countries are buying up land in Senegal and Mali, and some of us are wondering whether or not the future of Africa is being mortgaged. Now, you came up with this document, what is Africa's future and the World Bank support to it, which is the strategy document before the bank. Many of us are concerned that, as you leave, as you make your departure, the World Bank may revert back to some of its old ways. What assurances do we have that the World Bank will continue along the path that you have outlined?
QUESTIONER: I would love to hear a little bit -- my name is David Apgar, I am actually a consultant with the World Bank. I would love to hear a little bit about the vision for innovation and agriculture that you have. I mean, this sector is so exciting because it is immune from two of the four classic traps that Paul Collier talked about, the resource trap and the governance trap. And the two that you have been so involved with personally yourself.
But it is not going to -- the innovation is not going to work the way it does in technology or in sectors that we have seen in Europe and the U.S., it may be more exciting, but it is going to be a very different model. It is not going to be one or two little companies that suddenly become huge. I would love to hear a little bit of your detailed vision for that.
EZEKWESILI: Well, you know, I mean, I think that our agriculture team is quite seized on these issues of how to first start the innovation, and that is why in recent times we have invested on a regional basis on research and development. So one of our regional integration projects is the productivity, agricultural productivity project: East Africa, West Africa, Central Africa, and Southern Africa.
Within that project, what we're basically trying to do is working with the researchers and the researchers within the continent and outside of the continent to finding these new ideas that will really make the agriculture sector a transformational one and not just at the top level, but also in terms of organizing the ideas of the rural farmers and the way that they have overcome some of the challenges.
And so how do we enhance their productivity through seeds, new ideas for seeds, ideas for access to -- (inaudible) -- and new sources of technology and the integration into the market. So it is quite a huge agenda, and I hope that that is something you can look up on our website because we do -- we're paying serious attention to the research and development needs for that sector, for its transformation.
The question on the -- on agriculture, in terms of what is called the land acquisition by outsiders, we have worked with other partners on something called the code for responsible agriculture investment. And this code basically lays out some principles on the business of which government needs to be looking at its conversation on land. And we look at it as being a conversation that must involve the voice of its citizens.
The reason is that you need a good synergy between the small, rural farmers and the large investment. Just the small, rural farmers would not cut it. The large investments ignoring the small, rural farmers would be a catastrophe. Therefore, you need a forum and a framework and systems that are well designed to enable the necessary conversation between small, rural farmers and big investors in agriculture.
In a place like Zambia, we have a program that includes -- that involves outgrower farmers (scheme ?), and the outgrower farmers are gaining opportunities to technologies -- exactly the kind of question -- technologies and access to imports and access to infrastructure and even access markets in ways that they were not in the past.
So how do we take advantage of the opportunities while reducing, understanding the risks and mitigating those risks because there are risks? And then there are risks that pertain directly to the farmer. But then there are also governance risks that are associated with how land deals are made.
So the transparency principles within the code of responsible investment would help countries to determine how to ensure that it is a participatory process and not one that lends itself to elite rent capture that we have seen in the extractive industries.
And then I think finally on Africa's strategy, the strategy is so well -- is so -- is owned by many. The strategy wasn't a World Bank strategy. It is a strategy that all the spectrum of partners on the continent and outside of the continent were part of. We simply coordinated the emergence of that strategy.
And my sense is that all of the partners that supported the strategy, particularly our client citizens, are going to be the owners of this strategy going forward, and that they are going to be demanding for the results that has been promised in that strategy. And our implementation plan that accompanies the strategy is already targeted toward ensuring that, but thanks for the compliment.
Thank you very much.
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