We should not lose this opportunity for a recovery and reset of our relationship and our economies
By Vera Songwe.
As African and European leaders gather for a crucial EU AU summit in Brussels, Africans are gripped by both a sense of hopeful anticipation – and a sense of fatigued apprehension.
Hope because the summit is about Financing for Recovery, and adequate sustainable finance for recovery is exactly what is needed. Apprehension, because too many summits have happened with too little impact in the last few years, and too few leaders north or south of the Mediterranean have grasped the huge challenges – but also even larger opportunities – that lie before us now in this extraordinary historic moment.
In a few decades, Africa’s youth will be some six times as large as Europe’s. Our youthful creativity, dynamism and problem solving will be essential to a host of challenges Europe is facing today and will increasingly face in the future.
How do we partner to fight climate change and promote democracy? How do we partner to ensure health systems are delivering health security for all regions’ citizens? How might Africa’s dynamic diaspora help be a key part of powering Europe’s own dynamism? How do we rally common efforts to fight illicit financial flows?
Europeans and Africans agree – globally we need an average of 2-3% more of global GDP invested in sustainable infrastructure to avert a climate catastrophe and deliver a jobs-rich inclusive growth. For African countries the investment need is proportionally more because financing for our recoveries has so far been virtually non-existent, our youth have huge aspirations, and our starting point is from far lower investment and per capita income point.
Today, there is a dangerous and dynamic divergence in our recovery rates – vaccines rates are pulling us apart, the differential in access to fiscal stimulus widening the recovery gap; and the quantitative easing now underway in the US and Europe coupled with inflation pressures are crippling our economies. All this is increasing global inequality, and as we are already witnessing fuelling conflict as citizens demand more from their leaders.
The response in Brussels to these pressures must be different. We need trillions more invested in a new mutually beneficial growth story, a new and inclusive green-jobs-rich growth vision. The African Union Green Recovery Action Plan combined with the African Continental Free Trade Area provide the framework for this recovery and reset plan. African leaders in Ethiopia in February pledged to accelerate the implementation of these programs. The Brussels meeting provides a platform where Europe can partner with Africa to accelerate the implementation of this agenda to build a prosperous Africa.
Here is a critical path of practical decisions the leaders gathered in Brussels can take to make the summit meaningful and impactful immediately which will also help build momentum for more global action and partnership with Africa.
First, Europe must ensure African economies can meet their liquidity challenges by meeting or exceeding China’s offer to recycle at least 25% of their Special Drawing Rights – SDR162 billion of the SDR 650 billion issued. Consistent with the Paris agreement and President Macron’s call, $100 billion of this should be allocated to Africa, including to vulnerable Middle-Income Countries. About 7 European countries and the UK have pledged to recycle SDRs or budget equivalents amounting to some $15bn in SDRs.
More is needed, and the Brussels summit can help bring the number of pledges up. 94 percent of developed country SDRs are unutilized, while Africa uses 52 percent of its SDRs. In Senegal, SDRs have been used to shore up the development of pharmaceutical manufacturing capacity.
These SDRs can be recycled into a series of strategic places: the IMF Poverty Reduction and Growth Trust (PRGT), – where countries in need must have rapid access to them; the new resilience and sustainability trust, a new liquidity and sustainability facility to help reduce interest rates for sustainable infrastructure; the African Development Bank and Afreximbank.
These African institutions are leading the charge for green growth and regional trade and strengthening them builds more trust and equality into the partnership between the AU and EU.
Second, urgently create a joint working group with African Finance ministers to review and revise the Common Debt Framework and reinstate the DSSI. Almost a year after it was announced and over two years into the crisis many countries in need of orderly debt work-outs do not have access to robust, and speedy instruments.
European creditors could also be more creative with debt for climate adaptation swaps by including this option in the Common Debt Framework. Introducing a time-bound DSSI and broadening its eligibility will be critical to buffer low-income and vulnerable middle-income countries.
Third, agreement to work with African countries on a credible, transparent and just transition agenda to be delivered by the African COP in Egypt. African countries have unanimously signed on to the Paris agreement of reaching net-zero by 2050.
To do this Africa needs a global carbon price consistent with the Paris goals, and a more honest conversation about supporting a mechanism for loss and damage – so climate-vulnerable nations can be compensated for the current impacts of current and historic carbon emissions.
The EU should also back African leaders’ call for 50 percent of climate finance to be for adaptation and offer credit enhancement facilities or partial guarantees to improve the rate of African green and blue bond issuances. In addition, in order to ensure that African nations are not stifled in their development, gas for cooking and baseload energy must be a funded part of a just transition.
Fourth, the fight against COVID-19 persists but today more African children are dying of Malaria so the health response must be comprehensive. Europe must scale up an investment package for vaccine manufacturing capacity, agree to share Intellectual Property with African manufacturers, and increase financing for African health systems.
Germany and the US are about to host key summits for vaccine equity and fighting the next pandemic, so this AU-EU summit can signal Europe’s collective intent towards greater generosity and collective health security. Europe and Africa must also support the creation of a pandemic preparedness facility.
Finally, investing in the real sector must remain a priority. Europe and Africa should commit to deepening trade partnerships including through support for the AfCFTA and the development of sustainable resilient value-adding supply chains. The CFTA has created huge investment opportunities. For example, in the transport sector alone over $400 billion is required in investments to realize the full benefits of the CFTA.
Joint initiatives by Team Africa and Team Europe, in energy, transport and digitization could help accelerate these investments, create jobs, transfer technology and improve livelihoods for all, particularly for the youth and SMEs.
The recently announced Global Gateway project is a welcome initiative. For Africa digitization is a crucial pillar to accelerate development and African countries look forward to having a level playing field with access to the best global technologies for their ambitions.
African governments in return must continue to improve their governance systems. The most critical will be improving domestic resource mobilization, combatting Illicit financial flows and opening the civic space for more inclusive dialogues. Improving the enabling environment for private sector participation and especially encouraging youth entrepreneurship building on initiatives such as Compact with Africa remains important.
Our global goals, the 2030 agenda and the Paris Agreements coupled with our continental aspirations reflected in Agenda 2063 provide the basis for a collective, robust and successful partnership. The Brussels summit is a trust-building summit after a rocky two years where multilateralism gave way to nationalism.
Europe and Africa should not lose this opportunity for recovery and reset of our relationship and our economies.
Ms Songwe is the United Nations Under-Secretary-General and Executive Secretary of the United Nations Commission for Africa (UNECA). For more information on COVID-19, visit www.un.org/coronavirus