Keynote Address at the G20 Compact with Africa Side Event On the occasion of the 7th Tokyo International Conference on African Development (TICAD7)

IMF News, August 29, 2019

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Canonical URL: Keynote Address at the G20 Compact with Africa Side Event On the occasion of the 7th Tokyo International Conference on African Development (TICAD7)

Speaker: Abebe Aemro Selassie, Director, Africa Department, IMF.
Occasion: TICAD 7, Yokohama, Japan.
Date: August 29, 2019.
Central focus: The Compact with Africa (CWA) — its rationale, progress to date, IMF engagement, and priorities to enhance private investment in Africa.

Time horizon/contextual observations:
- The Compact was launched "two and a half years" prior to the address.
- Many African countries have made strong progress over the last "20-30 years".
- "Since 2000, GDP per capita has more than doubled in 28 countries in sub-Saharan Africa."
- Rwanda has "uninterrupted economic growth for close to 25 years".
Heterogeneity of CWA membership:
- "There are now 12 African countries participating in the CWA."
- Compact countries vary markedly in per capita income, population, and export diversification.
IMF staff growth projections for North African Compact countries:
- Tunisia: "real GDP ... growing at 2.7 percent."
- Morocco: "real GDP ... growing at 3.2 percent."
- Egypt: "real GDP ... growing at 5.5 percent."
Recent 2018 growth performance among sub-Saharan CWA countries:
- Rwanda: "8.6 percent."
- Ethiopia: "7.7 percent."
- Ghana: "5.8 percent of GDP."
- Guinea: "5.6 percent of GDP."
Medium-term outlook:
- Growth momentum across all CWA countries expected to "stabilize over the medium-term at around 5.7 percent (2019)."
- Africa as a whole: growth of "3.6 percent."
Employment objective and shortfall:
- Compact countries aim to create "20 million jobs per year over the medium-term in sub-Saharan Africa as a whole."
Revenue and fiscal space:
- Identified revenue gap in Africa of "3-5 percent of GDP."

Reform commitment and Doing Business performance:
- "Nearly all the Compact countries have featured in the group of top ten reformers in the Doing Business survey results."
- Rwanda: ranks "number two in the region behind Mauritius" and globally strong in "registering property (2) and getting credit (3)."
- Rwanda’s land registry: property transfer "takes seven days" at a cost of "0.1 per cent of the property value."
- Rwanda, Togo, and Côte d'Ivoire: "made it to the list of global top 10 improvers" (this year); "Guinea was among the notable reformers."
Evidence on private investment flows:
- IFC analysis (2018): "7 of the 12 Compact countries (Burkina Faso, Côte d’Ivoire, Ethiopia, Guinea, Morocco, Rwanda, and Togo) sharply increased the amount of announced cross-border investment compared to 2017."
- Other Compact countries saw declines; declines in Egypt and Ghana were "partially due to one-off factors related to energy sector investment."
Investor behavior and remaining gaps:
- Investors remain cautious; in some cases investors require government guarantees even for "purely or substantially commercial endeavors."
- Private investment has increased in some CWA countries but "not enough given the scale of the challenge."

Program coverage and policy engagement:
- "10 of the 12 CWA countries currently have in place an IMF-supported program."
- IMF provides policy advice through program discussions or Article IV consultations.
Capacity development and technical assistance (FY 2018):
- Support for Compact countries accounted for "8 percent of the IMF’s capacity development budget in FY 2018."
- Activities included "67 TA missions, 334 country visits by short-term and long-term experts, and training of over 1,700 country officials."
IMF operational involvement:
- IMF staff are "full member of all Compact country teams," typically with Resident Representatives supported by HQ-based country teams.
- HQ-based events and peer-learning initiatives cited include: "2018 Spring Meetings flagship seminar on 'Attracting Private Investment in sub-Saharan Africa'", events in Dakar, Marrakesh, and Addis Ababa on diversification, growth, and private-sector-led development.
- IMF staff maintain and monitor the CWA website and policy toolboxes to foster transparency and provide policy measures and support instruments for private sector development.

For Compact countries:
- "Accelerate implementation of reforms to promote private investment."
- "Delivering on their structural reform commitments in their investment compacts" to enhance competitiveness and attractiveness for private investors.
- Address the revenue gap: with a revenue gap of "3-5 percent of GDP in Africa" there is "significant room to raise revenues."
- "Enhancing transparency of public financial management" to reduce corruption and prevent rent-seeking.
For international development finance institutions and partners:
- "Identify bankable projects, mobilize investors, and provide technical expertise and/or targeted financial support as needed."
- Highlight and help resolve "policy-induced constraints" that prevent projects from moving forward so governments can address them quickly.
For G20 members and partners:
- "Stepped-up G20 engagement" and greater coordination, joining forces and engaging in existing business-to-business and business-to-government fora.
- Seek synergies with ongoing Compact processes to help Compact countries "deploy their somewhat limited capacity more effectively."
- Positive signals cited: "US OPIC Africa, the German Africa Grow/Africa Connect, and the French Choose Africa."

The Compact with Africa remains relevant and necessary; its "raison d’être ... very much remains in place."
Progress has been made but "challenges remain ahead of us."
The Compact is a partnership; success depends on collective action to "engender the private investment flows that the region needs." The speaker urged action "The time to act is now" and anticipated further discussion from panelists.

Keynote Address at the G20 Compact with Africa Side Event, Abebe Aemro Selassie, Yokohama, Japan, August 29, 2019.