Alain Boinet for Défis Humanitaires. On Tuesday 18 May, at the initiative of French President Emmanuel Macron, France hosted a summit dedicated to financing African economies to address the serious economic and social consequences of the pandemic and the sharp increase in debt. What was the objective of this summit and what were the main outcomes? There has been a lot of talk about special drawing rights (SDRs). For our readers, in order to measure the interest, could you detail this mechanism and the expected impact?
Alain Le Roy. The main objective of this summit was indeed to respond to the very strong impact of the pandemic on African economies. While Africa had experienced strong and sustained growth over the past 25 years, it experienced a 1.9% recession in 2020 and its growth prospects for 2021 are, according to the IMF, of the order of half the world growth rate. There was therefore an urgent need for action, particularly to reduce the number of people at risk of falling into extreme poverty.
Our basic finding was this. While the economic impact of the pandemic was very strong everywhere, some continents had instruments at their disposal that enabled them to carry out rapid and massive recovery plans; this was true for Europe, thanks in particular to the role of the European Central Bank and its very strong asset purchase policy, which enabled recovery plans in Europe totalling several hundred billion euros. This was also true for the United States, where the monetary policy of the Federal Reserve System (FED) enabled the US government to implement stimulus packages totalling more than 2000 billion.
Africa, however, does not have equivalent instruments and in particular no continental central bank.
Hence the idea of using the IMF and Special Drawing Rights (SDRs) as another way of injecting liquidity into the economy, this time for the benefit of all countries. SDRs are foreign exchange instruments that feed into the balance of payments and thus allow the countries concerned to finance their imports.
This is admittedly a bit technical, but the main point is that, faced with the impact of the pandemic, the international community has agreed on a new allocation of SDRs of up to 650 billion dollars for IMF member countries. This allocation, which will be legally decided by the IMF Board in June, will allow African countries to receive $33 billion directly from September 2021.
And the countries present at the summit agreed that, on a voluntary basis, a significant share of the SDRs accruing to advanced countries would also benefit African countries, through various mechanisms currently being developed, including zero-interest loans.
President Macron has indicated that we are working to ensure that the sum of SDRs that will benefit Africa reaches at least $100 billion.
This is in addition to the impact of the debt relief that is being implemented in the G20 and the Paris Club, as well as the upcoming replenishment of IDA (the World Bank’s window for low-income countries).
DH. Were all the strategic players present at the summit?
Alain Le Roy. Yes, without a doubt. Because of Covid, we were not able to invite all 54 African heads of state, but almost all the African heads of state we had invited were present in Paris on 18 May for the summit; in particular, there were the Presidents of South Africa, Senegal, Rwanda, Ghana, Côte d’Ivoire, Nigeria, Egypt and many others, twenty-two in total, as well as the President of the European Council, the President of the European Commission and several European heads of government. In addition, the Prime Ministers of Japan and Canada participated by video, the United States, through the Secretary of the Treasury, Janet Yellen, the Chinese First Vice Prime Minister Han Zheng, and many other leaders. Also present in Paris were of course the Managing Director of the IMF, the Managing Director of the World Bank, the Secretary General of the OECD, the Director General of the WTO and many other leaders of financial institutions.
All the countries that participated in the summit approved the final declaration of the summit, which can be found on the Elysée website (elysee.fr, under agenda 18 May); this declaration is admittedly very technical, but it does list the various advances made during the summit.
DH. The Franco-Ivorian financier Tidjane Thiam declared that the development of Africa was first and foremost the business of Africans, that Africa was not asking for any favours and the President of Senegal, Macky Sall, added that it was necessary to move from a logic of assistance to a dynamic of co-construction. On the African side, what are the essential ingredients of a winning “New Deal”?
Alain Le Roy. The summit did indeed conclude that there was a need for a massive stimulus, to be financed in particular by SDRs, as I have just mentioned, to deal with the exceptional crisis caused by the pandemic, and for strong support for Africa’s main endogenous growth factor, i.e. its very dynamic private sector. During the summit, an Alliance for African Entrepreneurship was launched, an initiative designed to bring together all public and private efforts to strengthen the financing of the African private sector. It is the private sector that will ensure sustainable growth in Africa now and in the medium and long term by attracting a larger share of the abundant international private flows. To this end, the summit made it possible to make progress in the risk-sharing instruments that the international financial institutions are putting in place so that the interest rates of the financing to which African countries have recourse can be significantly reduced.
DH. Another objective of the Summit was the vaccination of African populations, which is still low, even if the number of infected people is fortunately very low. What is the status of the so-called ACT accelerator mechanism and its Covax facility that is to address this? There was also the issue of vaccine production in Africa and the removal of intellectual property constraints. What has been achieved in this area?
Alain Le Roy. This is obviously an emergency that everyone recalled during the summit. The Covax facility, which France initiated with the European Commission, should make it possible to vaccinate 20% of the African population by the end of 2021. With the AVATT facility created by the African Union, the vaccination rate should reach 30% by the end of the year. And we are currently examining various solutions to achieve an immunisation rate of 40% by the end of 2021 and 60% by mid-2022.
And France also strongly supports the initiatives underway to develop vaccine production in Africa. President Macron has just discussed the implementation of this initiative with his counterparts during his trip to South Africa and Rwanda. As for the discussion on the suspension, on an exceptional basis, of intellectual property rights, it is underway at the WTO, but a consensus has not yet been reached.
DH. Another part of the Summit was devoted to supporting the private sector, especially SMEs and VSEs, in order to stimulate internal growth and create millions of jobs in the face of the demographic explosion. Was there any real progress in this crucial area?
Alain Le Roy. Yes, clearly. Firstly, by putting this subject at the heart of the summit, as it is essential for the creation of jobs for the very large number of young people in Africa. Then by launching this Alliance for Entrepreneurship in Africa, which can already mobilise a billion dollars, thanks to the support of the IFC (the World Bank’s private sector subsidiary), to invest in the African private sector both in terms of equity and loans. And the European Commission is now also developing important new instruments, with associated funding, to improve the financing of this sector which until now has had great difficulty in finding local funding. This includes increasing the number of venture capitalists, helping to strengthen local banks and African funds, so that finance reaches even the smallest companies. The movement is now well underway.
DH. In addition to macro-economic decisions involving billions of dollars, what is the added value of humanitarian and/or development NGOs given their proximity to the most vulnerable populations, their experience and their long-term commitment?
Alain Le Roy. This summit, which brought together heads of state and leaders of international organisations, was naturally interested in global, macro-economic solutions, given Africa’s very significant current financing needs; the IMF estimates them at nearly 300 billion dollars by 2025. And of course only the heads of state can decide on the allocation of SDRs in the appropriate amounts
But it is clear that there is a need for actors on the ground to ensure that this indispensable global funding ultimately benefits the local populations that need it most. And for this, the role of humanitarian and/or development NGOs is essential, in the long term, to complement the role of public development agencies such as AFD. There is an obvious complementarity between the efforts of States interested in the development of Africa and the efforts of NGOs which ensure the effective relay on the ground and can reach the most vulnerable populations.
DH. Some commentators suggest that there was no firm commitment from all the participants at this Summit and that the President of the Republic, Emmanuel Macron, was now hoping for a political “agreement” at the next G7 or G20. What do you think of the situation, since you prepared and participated in the Paris Summit from start to finish?
Alain Le Roy. There were a lot of firm commitments during the summit, you only have to read the final declaration of the summit, adopted by all the participating countries. But it is true that we would have liked to see a precise figure in the declaration on the amount of SDRs that the advanced countries will reallocate to African countries. President Macron said during the press conference following the summit that we wanted at least $100 billion to reach Africa from the allocation of SDRs, in addition to the tens of billions that the IDA replenishment will bring.
This figure could not be included in the statement because several countries, such as the US, cannot make a legal commitment until the SDR 650 billion allocation has been formally voted on by the IMF Board. This vote will take place in June, which is why the reallocation figures will only be made public in October, at the G20 meeting, with the associated mechanisms that we are working on.
DH. By way of conclusion, what would you like to add?
Alain Le Roy. That this summit, despite all the progress that has been made, is obviously only one stage in the process of giving Africa the means to ensure its long-term growth and to achieve the sustainable development objectives. This year’s forthcoming G7, G20 and COP26 meetings must also contribute to this.
In any case, it was very important to get all the main global players, Africans, Europeans, Americans, Canadians, Chinese, Japanese, etc., around the same table and to commit to greater solidarity with the African continent on the one hand, and to work within a multilateral framework to concretely reduce the divergences between African economies and those of the most advanced countries on the other.
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Who is Alain Le Roy ?
Alain Le Roy is Ambassador of France and Honorary Senior Advisor to the Court of Auditors. He has been Ambassador of France to Madagascar and Italy, as well as Under-Secretary-General of the United Nations, in charge of peacekeeping operations, and Secretary General of the European External Action Service.