The success of the New Partnership for Africa’s Development (Nepad) would depend on how both governments and the private sector came to the party, and certainly wouldn’t work without private sector support, according to Ian Goldin, senior policy advisor at the World Bank.
Speaking at the Business Day Nepad Conference in Cape Town on Thursday, Goldin said that the World Bank, as the single largest investor in the African continent outside of South Africa, supported Nepad ”absolutely”.
The World Bank was forecasting total real income growth for Africa over the next 15 years of over 3% on average, he noted, but with per capita income growth lagging far behind this, economic growth on its own would not be sufficient to help reduce poverty to the levels targeted by Nepad.
”Nepad participants have committed to reducing poverty by 50% by 2015,” Goldin explained. ”Currently 48% of the African population live on less than $1 per day, and we want to reduce this to 24% by 2015. Although economic growth is important, on its own it will reduce poverty levels to 40% of the population by 2015.
Many other things must therefore be done to achieve the poverty reduction targets set out under Nepad, as well as the education and health targets.”
Among the other measures that needed to be taken were to reduce the outflow of domestic savings and investment, which were overall more important to African economies than attracting foreign direct investment (FDI), Goldin said.
”In Africa about 37% of private savings leaves the continent, ten times the levels seen in Asia of around 3%, and higher than anywhere else in the world. We must bring this savings back — local investment in the form of business creation is more sustainable than FDI, as studies have shown that local businesses grow faster than foreign businesses.”
By fighting for improved market access and terms of trade for Africa’s exports to the rest of the world, Nepad could also help the private sector, he added. Although Africa’s role in global trade had improved over the past decades, this was concentrated in primary products such as agriculture, minerals and oil, which faced declining and unstable prices.
As a result, African exporters faced worsening terms of trade for their products, while their exports of textiles and agricultural commodities faced the highest tariff barriers.
Total gains from further trade liberalisation were estimated at about $250-billion, he said, half of which would go to developing countries.
Another major factor that could be addressed by Nepad, Goldin said, was the existences of significant market barriers on the African continent that created the current situation of many small, poor markets in one large area.
”Local market size has been proven to be a significant determinant of foreign investor behaviour,” he noted. ”This a major problem that must be addressed by Nepad going forward, through initiatives such as wider common markets.”
He said the key to private sector growth was government’s provision of adequate educational, health and infrastructure systems, and that access to finance was vital, particularly for small firms. Public and private sector initiatives were complimentary, in that the public sector had to implement the necessary policies and facilitate the necessary institutions, while the private sector had to ”seize the many opportunities available” through Nepad. – I-Net Bridge