Harnessing Africa’s Sovereign Wealth

0

Today May 18 2021, African heads of state, European leaders, and representatives of international institutions will gather in Paris for a summit on financing African economies.

The President of the Republic of France Emmanuel Macron hopes that new and ambitious solutions will be found so that Africa can face up to this unprecedented shock and return to growth, like other continents that have been able to implement massive recovery plans.

All the signatories of the April 15, 2020 letter have been invited to the Summit, as well as several other African heads of state, members of the G7 and G20, and leaders of international organizations.

Photo/Courtesy

Well someone would ask, Is it not the right time that African nations believes in themselves and drums up a campaign of mobilizing its national resources and using them to attract additional foreign capital? This could be the only way of ensuring our economies’ financial independence.

The COVID-19 pandemic has exposed the lingering vulnerabilities of African economies. They remain too sensitive to exchange-rate risk, unable to finance themselves, and too dependent on donors. In addition, adverse risk perceptions mean that most international investors and asset managers still have only a marginal presence on the continent.

But Africa urgently needs to attract international capital. After the continent’s pandemic-induced recession in 2020, the African Development Bank expects real GDP to grow by only 3.4% this year. This projected recovery will not generate the resources we need to meet our development needs.

Akim Mohamed Daouda the Chief Executive Officer of FGIS, the Gabonese Strategic Investment Fund argues that Financing Africa’s development will require governments to think of new ways to secure international investments without increasing their debt and using the continent’s African sovereign wealth funds {SWFs} is one of the most credible options. As in many other countries around the world, these state-controlled institutions manage national surpluses with the aim of building wealth and providing a sound financial foundation on which governments can formulate ambitious development or diversification policies.

Photo/Courtesy

Over the last decade, 15 African countries including Morocco, Nigeria, Gabon, Rwanda, Senegal, and, more recently, Djibouti have established SWFs. According to a recent report by the International Forum of Sovereign Wealth Funds, these funds currently manage a total of $24 billion in assets. While this amount is not comparable to the size of other SWFs internationally, it is nonetheless significant in the context of African economies.

According to Uche Orji the Chief Executive Officer of the Nigeria Sovereign Investment Authority Africa’s SWFs are proof that African countries also can be financially innovative.

He adds that Countries such as Senegal, Rwanda, and Djibouti have understood that such funds are not only for commodity-rich economies. At the same time, oil producers such as Gabon and Nigeria are using their SWFs to diversify resource allocation and adapt to the evolving economic context. In each case, these funds base their strategies on rigorous management of national savings, modeled on best private-sector practices, in order to serve national development goals.

ALSO READ: Kenya to tap on blockchain technology as it host global fete

But although African SWFs have already shown their effectiveness, their potential remains largely untapped. By mobilizing and leveraging national savings, SWFs not only can increase governments’ capacity to finance public policies, but also can help to attract more foreign capital. Above all, African SWFs can set an example by demonstrating governments’ commitment to their own economies: if we do not invest in our strategic infrastructure, industries, or social sectors, how can we expect others to come and do it for us?

‘We are convinced that our national savings can also be mobilized to integrate African economies into global capital flows. In recent years, African SWFs have demonstrated their capacity to implement innovative mechanisms such as public-private partnerships in the utilities, roads, ports, airports, telecoms-infrastructure, and health-care sectors. And they are agile enough to do much more, such as securitizing state assets or using leaseback arrangements to fund public entities. All we need is our governments’ willingness to make full use of their SWFs.”says Mamadou Mbaye Chief Executive Officer of FSD, the Djibouti Sovereign Fund.

Besides showcasing investment opportunities, A institutions know how to implement projects complying with environmental, social, and governance norms that are aligned with the United Nations 2030 Agenda for Sustainable Development.

Last year, for example, African SWFs made strong commitments in the health sector. FGIS, the Gabonese Strategic Investment Fund, took over the country’s National Pharmaceutical Office, while the Nigeria Sovereign Investment Authority forged a partnership with the US nongovernmental organization BIO Ventures for Global Health aimed at strengthening cancer research.

In this context, It is in the better and goodwill of Africa nations to encourage an institutional framework that encourages greater collaboration among African SWFs in order to pool our resources and projects. Such cooperation can further encourage African governments and international partners to use these funds to bolster the continent’s financial sovereignty.

The Paris summit will help Africa, but, above all, Africa Must plan to help themselves

 

I am a Multimedia Journalist with six years of experience from Digital to Broadcast Media{Radio and Television}. Interested in reporting Current affairs happenings within and across the borders. I have an excellent attitude towards working with others and communication skills extremely patient and persistent with the ability to formulate unique ideas and hand-eye coordination. Ability to work under minimal supervision, curious, hardworking, and polite. In another life, I am a News Anchor and Reporter

Leave A Reply