A new ‘club’ comes together

The best way for the Compact with Africa to succeed is to keep African policymakers in the driver’s seat—and in close contact with each other. 

by | Dec 22, 2017

When German Chancellor Angela Merkel first announced last year that her country would use its presidency of the G20 to promote a major new development initiative with Africa, I found most of my colleagues and associates greeted the news with cautious optimism if not skepticism. Sure, everyone agreed any additional support from the G-20 would be welcome, but more and more African countries are moving beyond the limitations of the traditional North-South relationship.

Would this new grand plan acknowledge the new economic realities in Africa—primarily that countries need investment partners, not simply donors or lenders, to help them grow, and, more importantly, transform their economies? And that these partnerships need to be African-led and also country-specific? After all, each country is different, with its own needs, its own opportunities, and its own challenges.

ACET has had the privilege of being involved on the periphery of the CWA process, offering advice and consultation when asked and wherever possible. Over the past few months, I’ve pledged ACET’s support to try and bring together African countries to discuss the best ways to take advantage of the Compact and move it forward. And now, that’s happened!

In July, G-20 leaders approved the final product: the Compact with Africa (CWA). And while a full evaluation will take some time, the good news is that the plan focuses on the right things. Its goal is to strengthen fiscal management and boost private investment in Africa—basic preconditions to balanced growth and economic transformation. And as Germany’s Federal Minister of Finance, Wolfgang Schäuble said, the Compact is intended to be a long-term, demand-driven process, wherein the participating African countries will determine how they seek private investment under the CWA, with whom they cooperate, and in what form.

“While the CWA exists foremost as a compact between Africa and its development partners, I believe that its ultimate success hinges on the ability of the African countries themselves to work together.” – K.Y. AmoakoClick To Tweet

While the CWA exists foremost as a compact between Africa and its development partners, I believe that its ultimate success hinges on the ability of the African countries themselves to work together. They will move faster—and leverage the CWA’s financial opportunities more efficiently—if they collaborate on joint challenges, seek joint solutions where possible, and share lessons, whether good or bad.

ACET has had the privilege of being involved on the periphery of the CWA process, offering advice and consultation when asked and wherever possible. Over the past few months, I’ve pledged ACET’s support to try and bring together African countries to discuss the best ways to take advantage of the Compact and move it forward. And now, that’s happened!

A wide-open dialogue—and broad consensus

On September 6 in Accra, Ghana, ACET hosted the first meeting of African Finance Ministers and representatives from participating Compact countries. By then, seven African countries had signed on—Côte d’Ivoire, Ethiopia, Ghana, Morocco, Rwanda, Senegal and Tunisia. All but Ethiopia and Tunisia were represented at the meeting, which also included several countries aspiring to join the CWA down the road: Benin, Burkina Faso, Gambia and Guinea. In addition, representatives from the “partnership side”—the World Bank, IMF, African Development Bank and Germany—attended.

While Germany should be applauded for championing the Compact in the first place, Ghana’s Minister of Finance, Ken Ofori-Atta, deserves a special commendation for initiating an exciting new process of peer learning in Africa. Minister Ofori-Atta set the right tone with his opening remarks, which emphasized the long road ahead and the importance of countries mapping out a few quick wins to establish momentum. The rest of the day-long discussion provided the ministers and their representatives with an opportunity to express their commitment to the CWA objectives. It also allowed them to talk directly to each other about some of their biggest investment challenges—and how the CWA fits in that picture.

“There are all kinds of techniques for peer review. The important point is to establish a system for Africans to monitor progress for themselves.”
– K.Y. Amaoko
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For instance, Côte d’Ivoire’s representative, Adama Coulibaly, spoke of the difficulty of getting the private sector to invest in education and poverty reduction, compared with the ease of attracting support for ports or roads development. Coulibaly’s concerns raised the larger question of how the CWA can support critical sectors in need of intervention, such as health and education, where external financing is often much harder to come by.

The representative from Rwanda pointed out that investment in Rwanda is not yet commensurate with the government’s extraordinary efforts to make the country attractive to investors. Ghana’s Ofori-Atta emphasized the need for private investment in manufacturing industries to add value to agriculture and create jobs. Morocco’s Minister of Economy and Finance, Mohammed Boussaid, discussed the importance of countries staying committed to the CWA process, while Senegal’s representative raised issues having to do with broader, long-term goals of economic transformation.

The ministers noted how beneficial they found the day’s discussion and saw great value in building upon it to continue a shared dialogue around key challenges and best practices—an informal “club” of CWA countries, as Minister Ofori-Atta warmly described it.

All in all, it was a wide-open dialogue that highlighted a number of shared interests and concerns. Even more promising, the ministers and representatives reached agreement on a number of key areas within the context of the CWA.

A consensus statement, read aloud at the end of the day, promised greater efforts to mobilize domestic resources while noting that the process of raising additional revenue has to go hand-in-hand with improving the efficiency of public expenditures and public services—in effect, a “compact” between citizen taxpayers and their governments. It also reaffirmed the countries’ mutual resolve to strengthen business frameworks for both domestic and foreign investors and to work with international finance institutions—including the World Bank, IMF and African Development Bank—to develop financial instruments that will attract foreign investment on terms favorable to all parties involved.

The attendees found agreement on concerns and shared expectations regarding the CWA as well, namely that financing institutions and the G20 countries will follow through with their own action plans and investments specific to the CWA commitments of each participating country. In addition, the ministers and representatives expressed the need for the CWA to support individual member efforts to maintain macroeconomic stability and implement transformative policies—including those to bring about economic diversification, inclusive growth and youth employment—while also taking into account the value of a regional approach.

A new platform for peer learning and review

But one of the most important areas of consensus concerned the importance of peer learning. The ministers in particular noted how beneficial they found the day’s discussion and saw great value in building upon it to continue a shared dialogue around key challenges and best practice—an informal “club” of CWA countries, as Minister Ofori-Atta warmly described it.

To that end, we all discussed the possibility of bringing a peer review mechanism into play that can be used to measure progress, promote mutual accountability, and serve as an “honest broker” among the countries.

This idea actually started with a discussion I had with Minister Ofori-Atta a few weeks before the Berlin G20 Africa Partnership meeting last June. We believed the CWA held great promise, but without any process for monitoring or evaluation, we wondered, how difficult will it be to keep it on track? Our conclusion: very difficult. Subsequent consultations with the three IFIs involved, as well as Rwandan Finance Minister Claver Gatete and others, revealed tremendous support for a unified review mechanism—and for an African organization to help lead it, as a way of ensuring Africa retained ownership over the CWA process.

So, at the Accra meeting, we agreed that ACET will undertake a coordinating role in CWA implementation, including the facilitation of peer learning activities and a peer review process. We won’t be doing it alone, however, but rather working in partnership with local institutions in CWA countries, and with regional institutions such as the Economic Commission for Africa and the African Capacity Building Foundation.

I am very excited about the possibilities ahead. I know I may be biased, but ACET is in a great position to contribute to the CWA process in just this way. We already work in many African countries, filling in the “missing middle” as we say, between national think tanks and continental organizations.

And in March 2016, at the first-ever African Transformation Forum in Kigali, Rwanda, we launched the Pan-African Coalition for Transformation, which intends to link like-minded countries and stakeholders around specific aspects of transformation strategies—such as agriculture, light manufacturing, and youth skills, among others—to speed up progress. In that sense, we already are promoting peer learning for transformation.

Working within the context of the CWA is just the next step!

The specifics of a review process for the CWA countries will be worked out in the months ahead, but it will draw lessons from the African Peer Review Mechanism, which was adopted in 2003 as part of the African Union, and it will incorporate good practice from other experiences, such as the OECD. There are all kinds of techniques for peer review. The important point is to establish a system for Africans to monitor progress for themselves.

The initial meeting of this new club of countries proved so successful that ministers reconvened a second time, just a few weeks later, on the margins of the annual Work Bank-IMF meetings in Washington, D.C., this time with Ethiopia and Tunisia present. The ministers quickly picked up where they left off, planning the next steps in making the new Compact with Africa the success we all need it to be. After all the CWA is for Africans. And Africans should be the ones who guide it!

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Written By

Dr. K.Y. Amoako

President and Founder

African Center for Economic Transformation (ACET)

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