Africa Archive

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AfDB Approves a USD 100 million Risk Participation Agreement with Commerzbank AG to Boost Trade Finance in Africa

This facility will help address critical market demand for trade finance in Africa

TUNIS, Tunisia, May 23, 2013/ — The Board of Directors of the African Development Bank (AfDB) (http://www.afdb.org) approved on Tuesday, May 22, a USD 100 million unfunded Risk Participation Agreement (RPA) between the AfDB and Commerzbank AG under which the two banks will share the default risk on a portfolio of qualifying trade transactions originated by issuing banks in Africa and confirmed by Commerzbank AG. This facility will help address critical market demand for trade finance in Africa by providing support for trade in vital economic sectors such as agribusiness and manufacturing. It will foster financial sector development, regional integration, and increase government revenue generation ultimately improving Africa’s sustainable economic growth.

The majority of African banks have small capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that have significant development impact. Moreover, despite the growth in trade risk distribution globally, local banks in Africa have not significantly benefitted from this growth. AfDB’s additionality lies in the use of its “AAA” rating to share trade risk and expand the trade finance capacity of banks in Africa, thereby expanding trade and strengthening regional integration.

This RPA facility, running over a 3-year period, is 50/50 risk sharing arrangement that will enable Commerzbank AG to match AfDB’s undertaking in every transaction, thereby creating a maximum portfolio of up to USD 200 million. The facility will also result in the provision of significant support to African banks and SMEs. Counting roll-overs, it is expected to facilitate about USD 1.2 billion of trade in equipment, raw materials, intermediate and finished goods over the 3-year period.

Moreover, the proposed facility aligns with AfDB’s Regional Member Countries’ priorities to promote trade as was reaffirmed by the African Union at its 18th Ordinary Session in January 2012. It is also in line with the Bank’s Ten-year Strategy and Regional Integration Strategies which seek to consolidate its engagement in trade finance in Africa.

Source: African Press Organization on behalf of the African Development Bank (AfDB).

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Promoting Youth Employment in Africa

As successive editions of the African Economic Outlook have shown, Africa’s rate of growth has outperformed the global rate over the last decade. Yet high growth is not sufficient to guarantee productive employment for all. Large sections of the population, and particularly the young, can be left behind and become frustrated. In the absence of a political process allowing them to express their views and produce policy changes, instability can result, as it did last year in a number of North African countries. This is an opportune time to reset the policy agenda of African governments towards an inclusive, employment-creating and sustainable growth strategy, aimed particularly at addressing the special needs of the young.

Africa has the world’s youngest population and it is growing rapidly. Hundreds of millions of young Africans will be leaving school over the next decades, at every level, and looking for jobs. The challenges and obstacles unemployed youth and the working poor face are diverse and vary between countries. Youth employment is largely a problem of quality in low-income countries and one of quantity in middle-income countries. Youth in vulnerable employment and working poverty are the large majority in poor countries. In upper middle-income countries more youth are unemployed, discouraged or inactive. In all country groups more young people are discouraged than unemployed, suggesting that the youth employment challenge has been underestimated.

Some conclusions are evident. The public sector will not be able to absorb the tide of young job seekers because there is little prospect of an expansion in this area. The private formal sector is growing but from too small of a base. Existing firms in this sector, the primary source of jobs paying a living wage, must be supported to grow further and become more competitive. Most importantly, attention must be concentrated on the informal and rural sectors because these will overwhelmingly be the source of new employment. Governments must focus on removing obstacles to the many small informal firms, helping them to grow and create decent jobs.

Get teh 2012 African Economic Outlook on Youth Employment at http://www.africaneconomicoutlook.org/en/in-depth/youth_employment/

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Green Growth: A Win-Win Approach to Sustainable Development?

The concept of ‘Green Growth’ is one which has understandable political currency, highlighted by its prominence in this year’s ‘Rio+20’ meeting hosted by the United Nations Conference on Sustainable Development. In promising to reconcile the goals of low-carbon and sustainable development with other valued outcomes such as job creation, poverty reduction and economic growth, it appears to offer a win-win solution for confronting the growing threat of climate change. This is the tenor of many recent reports on the concept, such as the Organization for Economic Cooperation and Development’s Towards Green Growth (2011) or the United Nations Environment Programme’s Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication-A Synthesis for Policymakers (Danielle Resnick and James Thurlow, UNU-WIDER, 2011) http://www.wider.unu.edu/publications/newsletter/articles-2012/en_GB/06-07-2012-green-growth/

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Aid for Trade to Africa surpasses other regions, says ECA-led study

Aid for Trade to Africa surpasses other regions, says ECA-led study

ECA Press Release No. 90/2011 Web: http://www.uneca.org/

Addis Ababa, 21 June 2011 (ECA) – African trade experts from member State capitals and the Geneva-based African trade negotiators assembled on Tuesday in Geneva for a
roundtable organized by the United Nations Economic Commission for Africa (ECA) in
preparation for the 18-19 July, 3rd Global Aid for Trade (AfT) review. The aim of the
Review will be to assess the impact of AfT on economic growth, trade creation and poverty reduction.

According to the Information and Communication Service of the ECA, the day’s
roundtable discussed a collaborative study prepared under the auspices of the African
AfT Working Group. The Working Group comprised the African Development Bank, the ECA and the World Trade Organization (WTO).

Speaking at the meeting, Stephen Karingi, Acting Director of the ECA Regional
Integration and Trade Division said, “AfT to Africa enjoys continuing growth, with no
apparent decline, following the global economic crisis and no signs of diversion from
other ODA.” He added that compared to other regions, Africa now supersedes Asia as the principal regional recipient of AfT.

Accordingly, economic infrastructure continues to enjoy the largest share of AfT to
Africa, closely followed by building productive capacity. The study shows that up to USD 7.2 billion has gone towards spending in economic infrastructure.

“During the period under review (2006-09), a few countries and regions appear to
receive a disproportionate share, but per capita AfT tells another story,” said Karingi.

He explained that as an example, Nigeria, Uganda, Kenya, Ethiopia and Tanzania were
among the top AfT recipients. “Yet, on a per capita basis, Island economies received
on average, a higher percentage (17.6) than say, non-LDCs, which received 9.9 per cent.”

Karingi also said that the increase in AfT to Africa is more impressive than the total
ODA flows to the region. “In other words, AfT to Africa increases at much faster rate
than the total ODA flows; growth rate of total ODA stands at 11.1% , while AfT 21.4%) during the period under review (2006-09).”

He argued that the picture demonstrates that AfT to Africa “has been rising, both in
volume terms and as a proportion of both the global AfT and total ODA to the region.”
To the relief of social development actors at the meeting, the study revealed that the
increase in the volume of AfT “was additional and not at the expense of a diversion of resources from other social or economic sectors.”

Case stories were also submitted to the WTO, which according to Karingi, provided a snapshot of AfT experiences on the ground in Africa.

“Of the 269 case stories submitted to the WTO, 114 pertain to Africa,” said Karingi. He added that ECA’s case story documenting the impact of AfT on specific binding constraints is a notable contribution on AfT Approaches for the whole continent.

A number of other issues emerged from the study, including the fact that AfT flow to
Africa is the most stable compared to other developing regions, such as Asia, America,
Europe and Oceania. There are also considerable variations among African countries in
AfT flows in terms of volume, per capita, ratio of disbursements to commitments as well as the share of AfT in the total ODA flows.

The conclusions will feed into the African Group position to the Committee of Trade
and Development to be held later in the week on 23-24 June 2011 and the Third Global Review of Aid for Trade to be held on 18-19 July 2011.

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LDCs set to jump start to a green economy

With their low-carbon profile, rich natural assets and promising policy initiatives, the world’s 48 least developed countries are well-positioned to jump start the transition to a green economy, according to a new UN report released at the start of the Fourth UN Conference on Least Developed Countries (LDC-IV). Carla September reviews the report, titled Why a Green Economy Matters for the Least Developed Countries. http://www.world-economy-and-development.org/wearchiv/042ae69ee20b05812.php
According to a new report released by the UN Conference on Trade and Development (UNCTAD), most of the investments taken in LDCs have not yet resulted in significant economic growth and job creation. ”Such investment has not tended to ‘fertilize’ LDC economies by leading to greater links between foreign businesses and local firms that can spread know-how and technology and help spur broad-based, long-term economic growth,” the body emphasised. In order to effectively address those countries’ economic potential, the international community should strengthen the ability of LDCs to attract foreign investments by inter alia setting up a ”LDC infrastructure development fund”, the report reads. http://tinyurl.com/63op5zt

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Governing Development in Africa – Economic Report on Africa 2011 – Focused industrial policy

To catch up and, more important, to meet its own development objectives, Africa needs to promote rapid industrialization that will promote innovation, technological adoption, entrepreneurship, high value added and employment-generating manufacturing. This will enable the continent to overcome the low contribution of industry and manufacturing to GDP and employment. The formulation and implementation of industrial policy will enable African governments to target particular activities or sectors for support. Each country will have to identify niche industries where it has competitive advantages or the capability to develop dynamic advantages. This in turn will contribute to Africa’s industrial development. However, unlike most countries in post-independence Africa, which thwarted the emergence of a capitalist class, the 21st century African developmental state has to vigorously attempt to build an indigenous capitalist class.
Also, unlike the experiences of the 20th century developmental States elsewhere, industrialization in Africa in the 21st century will have to be sensitive to environmental sustainability (chapter 3). The development of renewable energy and a green economy as part of Africa’s overall development strategy cannot be over-emphasized. Renewable energy in particular and the green economy in general offer Africa a basis for transforming the structures of its economies and to create sustainable jobs and livelihoods.
The industrial strategy of the developmental States of East Asia suggests that creating industrial winners through fiscal incentives to facilitate enhanced productivity and some form of protectionism were critical for the growth of local manufacturing. While protectionism may be difficult and largely unfashionable in a globalized economy regulated by WTO, nonetheless, as part of their industrial policy, African States should ensure a phasing-out process to protect local industries, which is necessary for their growth and consolidation. This will enable them to compete, over time, in the global economy.
http://www.uneca.org/era2011

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Africa Platform for Development Effectiveness (APDev) | Inspiring Change

Africa Platform for Development Effectiveness (APDev) | Inspiring Change.

APDEv is an African-led and owned physical and virtual multi-stakeholder platform and organizing mechanism for mobilizing African policy makers and practitioners towards achieving sustainable development results. The Platform focuses on 3 inter-related themes of Aid Effectiveness and South-South Cooperation with Capacity Development as a core driver for development effectiveness (DE) fostering “knowledge and evidence-based innovation processes” which is one of the six cornerstones of the AU-NEPAD CDSF.

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EADI EDC2020 Publication: Rising Powers and New Global Challenges

EADI: EDC2020 Publication “Rising Powers and New Global Challenges” – Bonn Sustainability Portal.

The challenges facing European development cooperation have changed substantially in recent years. Analysts and politicians have commented on the increasing influence of China in Africa and the challenges this poses for EU influence to the EU strategic and policy objectives.

In fact, both China and India have expanded their development cooperation programmes in Africa and are using aid as a means to gain economic and political influence and access to strategic resources, above all energy resources. In doing so, they appear to challenge the aid principles agreed by the OECD Donor Assistance Committee (DAC). Because of China’s high-profile in Africa, much of the discussion about new donors has centred on China’s role as a new actor in development cooperation, and the differences between its approach to development cooperation and the DAC principles. But the challenge for EU development cooperation goes far beyond aid principles and the DAC consensus. The underlying challenge arises from a combination of the emergence of new economic and political powers and a radically changing global conjuncture.

The DAC consensus was formed in particular economic and political circumstances. In the 1990s, the collapse of the Soviet Union freed development cooperation from great power politics, while reductions in spending by Russia and donors in the Middle East donors left the DAC group in control of 95% of international aid (Manning 2006: 371-2). The removal of aid competition allowed donors to pursue economic and political conditionality, human rights and democracy issues more insistently. At the same time, with a relatively benign global environment characterised by low and stable commodity prices and growth across much of the world, the DAC donors were confident about prioritising aid towards poverty reduction and the needs of the poorest countries downplaying the role of aid in pursuing the strategic and political interests of the donors.

By John Humphrey, Institute of Development Studies, UK

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Donors’ mixed aid performance for 2010 sparks concern

Aid to developing countries in 2010 will reach record levels in dollar terms after increasing by 35 per cent since 2004. But it will still be less than the world’s major aid donors promised five years ago at the Gleneagles and Millennium + 5 summits. Though a majority of countries will meet their commitments, the underperformance of several large donors means there will be a significant shortfall, according to a new OECD review.

Africa, in particular, is likely to get only about USD 12 billion of the USD 25 billion increase envisaged at Gleneagles, due in large part to the underperformance of some European donors who give large shares of official development assistance (ODA) to Africa. Eckhard Deutscher, Chair of the DAC, noted that: ”Aid has increased strongly as 16 donors have honoured their commitments. But underperformance by the others, notably Austria, France, Germany, Greece, Italy, Japan, and Portugal, means overall aid will still fall considerably short of what was promised. These commitments were made and confirmed repeatedly by heads of governments and it is essential that they be met to the full extent.”

Commenting on the figures, OECD Secretary-General Angel Gurría said: ”It is reassuring that most donors are recognising their international responsibilities. As we head into new rounds of discussions about funding climate change and food security concerns, I encourage all donors to carry through on their development promises.” Source: OECD, http://tinyurl.com/ye8zrej

The EU falls short $19bn on development pledges. Some of the overall shortfall will come from the EU15 – the old, wealthier member states that made the original pledges. EU countries are skipping out to the tune of $19 billion (€14bn) on the aid pledges they made to developing countries five years ago at a landmark G8 meeting, according to the Organisation for Economic Co-operation and Development. Aid to poor countries in 2010 will be lower than donors promised five years ago at the 2005 Group of Eight meeting in Scotland – largely as a result of the economic crisis, says a report published on Tuesday by the OECD, the international club of wealthy countries. With national budgets squeezed in the wake of the crash, many governments believe that charity begins at home.

Max Lawson, senior policy adviser at Oxfam, said: ”These broken promises are nothing short of a scandal. A woman dies every minute in childbirth somewhere in the world because of inadequate medical care and 72 million children remain out of school. The missing $21bn could pay for every child to go to school, and could save the lives of 2 million of the poorest mothers and children.” Source: EU Observer, http://euobserver.com/19/29496

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Diaspora to Promote Job Creation and Youth Development in Africa

More than 50 Washington D.C.-based members of the African Diaspora participated in the launch of the 2008/2009 Africa Development Indicators (ADI) report . As this year’s ADI focuses on ‘‘Youth and Employment in Africa – The Potential, The Problem, The Promise”, the launch targeted Diaspora with an interest in youth development and promoting job creation in Africa. ‘‘The ADI launch in D.C. targets people who can really make a difference to Africa – the Diaspora,” said Shantayanan Devarajan, Chief Economist of the World Bank’s Africa Region, in his opening remarks. He further explained that data can be a good tool for accountability to help citizens hold leadership responsible for measurable results. http://tinyurl.com/d4s24k