Professor Emmanuel Tumusiime-Mutebile shortly discussed Africa’s economic performance since 1960, stressing the fact that Africa is now on the rise, with 6 of 10 fastest growing economies of the world now located in Sub-Saharan Africa. He concluded by pointing out that, building Africa cannot be approached as “business as usual” but will require concerted efforts.
After this address, Professor Paul Collier started his lecture “Development Challenges for Africa”. Professor Collier noted his optimism for Africa, especially in this time of natural resource discovery. He emphasised the fact this was a formidable opportunity, but also one that carried big risks. Indeed, his message was one of caution, warning the audience that for the resource wealth to transform into sustained and inclusive growth for the future, a certain set of actions need to be taken, or the continent will become vulnerable to resource depletion without long-term wealth increase.
To ensure a more sustainable use of resource revenues, Professor Collier proposed two necessary measures. First, he suggested that a strong emphasis be put on infrastructure, both by way of new investment and consistent maintenance. Second, he suggested the need for resource-rich African countries to build new institutions appropriate for the challenges they are currently facing, namely that of depleting natural resources over the course of the next 25 years; those institutions will need to be set up that manage long-term inter-temporal decisions.
Professor Collier defined institutions as “a team with a mandate and a capacity to implement the rule”. Those institutions should have the ability to both guide future policy-makers and increase their accountability to citizens. According to Professor Collier, some of the most important institutions to be developed or strengthened include institutions of transparency, institutions for better use of revenues, and institutions for better investment. Finally, it will also be necessary for African nations to develop a critical mass of citizens who understand those institutions and who will defend them. Professor Collier concluded his lecture by stressing the importance of stewardship and the need for better checks and balances.
As the end of the session, Dr. Louis Kasekende, Deputy Governor, Bank of Uganda, invited the audience to comment and ask questions. Much to our delight, the audience asked a large number of questions and comments, revolving around the issues of human capital, managing expectations for future oil wealth and good government stewardship.
Session 1: Opening Session
The IGC in partnership with the Ministry of Finance, Planning and Economic Development and the Bank of Uganda organised the first Africa Growth Forum (AGF) in Uganda from 11th to 13th December 2013. This was attended by senior policymakers, researchers and delegates from various IGC partner countries including, senior public officials and Ministers from Uganda.
The opening session was chaired by Her Excellency Honourable Maria Kiwanuka, Minister of Finance, Planning and Economic Development of Uganda. The Prime Minister of Uganda, His Excellency Honourable Amama Mbabazi delivered the keynote Address and Prof Jonathan Leape, Executive Director of the IGC presented the opening remarks.
In his keynote address the Prime Minister of Uganda stressed that the main objective of the AGF was to discuss ideas for growth. He also stated that despite the global financial crisis that started in 2008/9 that negatively affected the major developed economies, the sub-Saharan African region remained resilient and had one of the fastest average growth rates in the world in the past four years or so. More specifically, regions such as the East African Community and countries like Uganda are experiencing average annual real GDP growth rates above 5%, mainly driven by trade and investment flows. Lastly, he mentioned the need for sub-Saharan African countries to address a wide range of challenges that included high income inequality, high youth unemployment, infrastructure deficits, the shortage of a skilled workforce and low intra-African trade. He concluded by thanking all participants and wishing them fruitful discussions during the forum.
Jonathan Leape, the Executive Director of the IGC, made opening remarks. He reminded participants of the role of IGC, which is to provide demand-driven and evidence-based policy advice to various countries including those from sub-Saharan Africa. In addition, he acknowledged the challenges faced by researchers and policymakers: (i) the existence of pressure to provide high quality advice within a very short period of time, for example, within a matter of hours, a day or a week; and (ii) ensuring a good connection between relevant research findings and real-world policy making. He also presented some of the areas of work of the IGC going forward, namely state effectiveness issues, developing a better understanding of the productivity of firms in Africa, exploring ways of developing efficient cities, and ensuring sustainable access to energy. Finally, he briefly presented the program of the forum and thanked the Ugandan Government for co-hosting.
Session 2: Exploiting Africa's Resources
Honorable Maria Kiwanuka, Uganda’s Minister of Finance, Planning, and Economic Development, chaired AGF’s first session, Exploiting Africa’s Resources: Dangers, Opportunities, and Learning from Success. Tony Venables, (Oxford) led discussion regarding Options for Ensuring Oil-Led Growth, during which he presented on cross-country lessons learned in managing abundant resources, citizen expectations, and potential allocations between consumption, saving, and investment portfolios.
He was followed by Dr. Keith Jefferies (Econsult Botswana) who presented Lessons from Botswana’s Experience in Transforming Resource Wealth into Sustainable Development. Dr. Jeffris’ presentation described Botswana’s policy approaches to avoid hurdles such as Dutch disease, excessive public spending, and suboptimal negotiation outcomes over the country’s forty year experience in managing mineral rents.
Finally Dr. Marcelo Giugale (World Bank) discussed the role of involving citizens in decision-making in mineral rents and public financial management in his presentation, Linking People to their Natural Resources. His presentation highlighted the potential for Direct Dividend Transfers to eliminate/alleviate poverty in Africa.
The session also included brief presentations by the Honourable Elizabeth James Bol, Deputy Minister of Petroleum, Mining, Industry and Environment of South Sudan and Dr. Joseph Asenso, Team Leader for the Ghanaian Ministry of Finance’s Energy, Oil and Gas Unit, who each gave presentations on challenges and opportunities in the South Sudanese and Ghanaian resource sectors, respectively. The discussions focused on optimal fiscal regimes, environmental protection measures, and threats of potential Dutch disease and sector bubbles.
Session 3: State Capabilities & Public Investment
This presentation addresses the macroeconomic challenges faced by many African States to improve public investment decisions and realize its full economic return on these investments. To understand the challenges that underpin public investment, Prof. Adam and Bevan discussed the International Monetary Fund (IMF) approach to improve public investment decisions through the Debt Sustainability Analysis (DSA).
The DSA model has two standard areas of focus which include: traded and non-traded goods and optimizing (saving) household and rational household. This model does not take into account monetary component as well as econometric context (it is not a forecasting model). But, this model examines the movement in the exchange rate and crowding out of private capital by public investment. The limitation of this model is that it assumes that taxation instrument is a uniform consumption tax; thus there is no margin choice that is affected by consumption tax. It operates as a lump-sum tax and pays little attention to the recurrent cost implications of public investment.
Prof. Adam and Bevan current paper extends the difficulty of managing high recurrent cost when distortionary tax and return to public investment may not be fully appropriable. Also, the government may not optimize public investment due to poor project choice, corruption, and other implementation constraints (e.g. lack of human capacity). The key question is: how recurrent cost can be managed if there is a distortionary tax? The answer to this question will help the government to manage and implement sound public investments that has short and long term inclusive and pro poor growth.
Session 5: Farm Capabilities
Session 6: Firm Capabilities in Industry & Trade
The session was chaired by Mr Keith Muhakanizi, Permanent Secretary of the Ministry of Finance, Planning and Economic Development.
Prof. John Sutton (LSE/IGC) gave a presentation about “Industrial Development in Sub-Saharan Africa: Challenges and Prospects” based on the findings of the Enterprise Map Project. Prof. Sutton noted that one of the possible development paths for countries which have a basic industrial sector is to move into middle-level manufacturing. These countries need to broaden their industrial base by improving their working practices in the mid-term horizon. The experience of many countries such as China and India shows that one way to move into mid-level manufacturing is to finance investments through FDIs, which bring in international experience and expertise. Manufacturing FDIs have been scarce in Africa in the past years.
One very effective way of channeling FDIs and investment in general is through the establishment of effective investment promotion agencies. Ethiopia has successfully developed a pro-active investment promotion agency that works with high-potential firms to ensure they are assisted at each stage, especially during their crucial first years. These agencies should target mid-size firms with high potential for job creation, and worked together with them to understand sector-specific challenges and to anticipate their problems.
Countries with natural resources have an advantage of easily attracting investments. These countries can develop their industrial base by integrating small and medium firms in the natural resource value chain at different stages. Regulations to ensure local content in the production process need to be put in place by strategically choosing the products that can be sourced locally. The fast-growing services sector can also play an important role in this process – for example, in the construction sector.
Ms. Elli Pallangyo (Assistant Director, Ministry of trade and Industry, Tanzania) and Ms. Diana Afriye Addo (Deputy Chief, Industrial Promotion Office, Ministry of Trade and Industry, Ghana) placed prof. Sutton’s work in the context of their own policy experience. They emphasised the need to focus on inputs as an important part of the production process. Ms. Afriye Addo noted that SMEs are a large source of employment in Ghana and should therefore be the main target of industrial promotion policies. She also noted that the development of manufacturing has also been very important for Ghana in the context of trade agreements, in order to ensure a good level of exports.
Session 7: Firm Capabilities in Industry
Session 8: State Capabilities & the Public Sector
This session was chaired by Ibrahim Stevens (IGC). As the first speaker, Oriana Bandiera (London School of Economics) made a presentation on ‘Breaking Down Public Sector Motivation: An Overview’. She emphasized that research on the public sector should look at how to improve the public organisations; and highlighted that the recruitment process is depends on the financial benefits, career prospects, status and social impact the employee is expected to receive. She stated that research should also look at how to improve tax compliance and, as such, it is important to understand what the motivation to pay tax is. Furthermore, research questions should be of interest to both researchers and policy makers. However concerning, she pointed out that tax structures and rates are very similar across high and low-income countries yet the Revenue/GDP ratio is much lower in the latter.
Daniel Rogger (University College London) was next to present on state capabilities by providing evidence from a study on public sector worker absence in Uganda. He highlighted that motivation of public sector output was achieved through: i) politicians providing top-down incentives by choosing the most effective organisations and providing incentives, and ii) a bottom down approach where citizens provide the motivation. However, management is missing in between these two approaches. Furthermore, he presented results on a study in Nigeria on performance management that revealed varying degrees of practices across different organisations. Likewise, it was also revealed that the more risk a project faced (e.g., construction of a dam) the lower the performance management.
Using evidence from Uganda, Andrew Zeitlin (Georgetown University) discussed about how to improve teacher attendance. Based on the fact that “schooling isn’t learning”, he emphasised the importance of improving teacher attendance. Delegated incentive strategies could be challenging but they bring the incentives to go to school. The main lesson from his presentation was that the type of local accountability that harness stakeholder performance can have powerful effects; but it is concerning that parents do not seem helpful in the monitoring of teachers attendance.
The discussant for the state capabilities session was Patrick Muzaale (Public Service Commission, Uganda). Patrick emphasised that is necessary to improve participation at the level highlighted in the projects so that it is synonymous with what the needs are. He also emphasised that the right people were needed on board with the right attitude, because incentives alone were not enough to improve productivity.
Some of the major issues arising during the discussion that followed are: i) teachers attendance does guarantee that the quality of teaching will improve; ii) there is need to factor in the issue of the wage bill and common payments’ freeze; and iii) tax collection costs, especially when trying to bring the informal sector in, should not exceed the value of the actual collection.
Session 9: Conversation on Effective Governance
The session on ‘A Conversation on Effective Governance’ was chaired by Prof Paul Collier. Prof Collier highlighted the need for governments to build effective organisations to enable a productive environment for the public. Considering the scope for accountability is slightly limited in the region, the task is to identify mechanisms to ensure enough internalisation to motivate people and to build norms.
This was followed by comments from the first speaker Dr. Felicien Usengumukiza, Deputy CEO of the Rwanda Governance Board who shared the Rwandan experience of transformation in leadership as a pillar for economic transformation. Through a combination of home grown solutions like the use of performance contracts (‘imihigo’) and assessment of governance matters at all levels of the civil service, Rwanda has achieved effective governance. He emphasised that strong leadership and transparency are key elements for eradicating corruption. The second speaker, Mr. George Bamugemereirwe, Deputy Inspector General of Government of Uganda stressed the importance of practical engagement of the public and private sector to achieve accountability. This requires them to ask the right questions on a regular basis that can trigger achievement of outcomes. He provided the example of Northern Uganda Social Action Fund 2 which has actively involved the public and has used community policing agencies. The fund was discussed as a good model for project design, implementation and quick action suggesting that it might be possible to involve the public to police management to avoid budgetary repercussions.
Mr. Thomas Doe Nah, the Executive Director of the Centre for Transparency and Accountability, Liberia agreed that there is not enough pressure from below to drive implementation at the top. Building on the experience of Liberia over the years, he underlined the importance of proactive participation, trust and consensus to avoid conflict. Convergence between the government and the public is crucial to build trust and to facilitate progress. He commented that it is vital that citizens share the winnings and losses of the government. This can be achieved through proactive engagement, inclusive and responsive government and an adequate compensation and merit system.
The session concluded with two practical solutions from Prof Collier. Firstly, in order to build trust, the government can try to ‘signal’ their competency by adopting a policy that an incompetent government is unable to afford. Secondly, there is need to shift budget support to well performing institutions to scale these up.
Session 10: Priorities for Further IGC Research
Chaired by IGC Executive Director Jonathan Leape, this session provided policy-makers the chance to tell the IGC what their top priorities for research were, and to answer additional questions from the audience. The panellists included Mrs. Diana Afriyie Addo, Hon. Elizabeth James Bol, Keith Muhakanizi, Louis Kasekende, Amb. George Kayonga, Francis Chipimo and Hon. Helen Kuyembeh. Some of the key priorities for research mentioned by panellists are mentioned below.
George Kayonga (Rwanda) reinstated the importance for IGC to frequently collaborate with partners and to commission research related to structural adjustment – the movement of labour from agriculture to the industrial and service sector – and its related problems of unemployment, urban development and transition from the informal to the formal sector. Elizabeth Bol (South Sudan), after expressing her enthusiasm for more research to inform African policy-making, requested the IGC to research the various aspects surrounding oil extraction in South Sudan, including the economic impact of the oil shutdown, the support of women in extractive industries, local content policies and corporate social responsibility. Diana Afriyie Addo (Ghana) asked IGC to help them gather more and better data to identify growth trends and improve forecasting. Others mentioned the importance of studying trade and the dynamics of inter-regional integration and civil service reforms.
Following the short presentations from the panellists, audience members asked several questions. Some of them pertained the importance of considering social aspects of growth in research, such as poverty and inequality, in order to ensure that growth is truly inclusive. Others pertained to the importance of large projects and infrastructural development. Finally, Jonathan Leape concluded by thanking everyone for their feedback, and reassured everyone that the comments would be instrumental in shaping our work and would be seriously considered. He also encouraged everyone to get in touch with our country office staff to develop partnerships, identify the agenda and collaborate on further projects.