Levelling the playing field
So what can African governments and stakeholders do in these circumstances? Others have advocated for the – unconditional – release of special drawing rights, held by the IMF, as was done in the 2008 financial crisis for wealthy nations. We have argued in African Business magazine and elsewhere for new, innovative and longer-term solutions such as a “borrowers’ club”.
But the work on Africa’s own, exclusively African financial organisations is also a crucial, long-term answer that can be combined with others. Yes, the African Development Bank (AfDB) exists, and is an incredibly important institution for Africa. But as we saw play out in mid-2020 with external questioning of the Bank’s president, Akinwumi Adesina, the fact that the AfDB board and capital is inclusive of non-African countries, suggests its financial decisions and attitude to risk are heavily externally influenced as well.
The fact is, European, American, Chinese and other populations benefit hugely from integration and independence of their own financial systems. These systems allow for elimination of foreign exchange issues that disrupt trade; they enable exchange rate stability to avoid competitive depreciation; and they also enable new debt to be issued promptly to shield citizens and businesses from challenges such as Covid-19 – without prior, protracted consultation, negotiation and concessions with the rest of the world. African citizens – and others around the world – deserve these benefits too. The playing field needs levelling.
The whole point behind the creation of the African Union and the plan for its new trade, financial and other institutions 20 years ago was this levelling. A unified position was required to effectively deal with dire economic conditions that plague the African continent.
The fact that the AfCFTA has swung into action in the year of a pandemic provides ample inspiration for a further, proactive 2021 agenda. The work has already been done on the documents for these key financial bodies. It’s time for African governments to get signing again. 2021 needs to be all about the money.
Hannah Ryder is the CEO of Development Reimagined, a pioneering African-led international development consultancy based in China.
Ovigwe Eguegu is a policy adviser at Development Reimagined and a specialist in geopolitics