"A prosperous world economy in the 21st century requires a prosperous Africa,” says Kristalina Georgieva, Managing Director of the IMF. Image: Unsplash/Sergey Pesterev
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- Sub-Saharan Africa has been offered a seat on the IMF's executive board, underscoring the continent's growing importance. It is expected that the World Bank will follow suit.
- Natural resources and a young population make Africa a promising player in the global economy, but it is underrepresented in decisions regarding IMF and World Bank funding.
- The importance of a just, geo-inclusive energy transition, with a focus on the needs of the Global South, is one of the pressing issues predicted for discussion at the Forum’s Annual Meeting of the Global Future Councils in Dubai 16-18 October 2023.
“On this continent we can see, as under a magnifying glass, the challenges facing the world. But we also see its great potential,” said Kristalina Georgieva, Managing Director of the International Monetary Fund (IMF). “To put it simply, a prosperous world economy in the 21st century requires a prosperous Africa.”
Ms Georgieva was speaking ahead of the IMF and World Bank annual meetings in Morocco in early October – the first to be held in Africa in 50 years.
Underscoring the growing importance of Africa, the IMF has offered sub-Saharan Africa an additional seat on its executive board. This will take the number of directors to three out of 24. The IMF’s sister organization, the World Bank, is also planning to raise the number of directors from the African continent to three.
How will this move affect Africa’s global standing and visibility in the rest of the world?
Africa holds great promise
There is no doubt that Africa has a lot to offer. During her speech, Ms Georgieva emphasized the abundance of natural resources on the continent. This includes vast resources of critical minerals such as cobalt, manganese and platinum, according to the International Energy Agency (IEA). Materials like these are crucial for batteries, hydrogen production and a variety of other technologies related to the energy transition. There is also a high potential for renewable energies such as solar, wind, hydro and geothermal power.
The importance of a just and geo-inclusive energy transition, with a focus on the Global South where many are still struggling with access to the necessities, is likely to be on the table of the Forum’s Annual Meeting of the Global Future Councils in Dubai 16-18 October 2023.
Ms Georgieva also highlighted the "creativity and energy" of a continent with one of the youngest and fastest-growing populations in the world. She argued that Africa could generate greater dynamism in the world economy if more capital could be channelled from ageing advanced economies to the continent.
Yet, many countries - especially in sub-Saharan Africa - have seen their economies decline and growth is set to slow to 3.3% in 2023, according to the IMF’s latest outlook. It cites high borrowing costs, the cost of living crisis, inflation and exchange-rate pressures, and increased political instability among the reasons for this. Africa is also disproportionately affected by climate change.
Going with Kristalina Georgieva’s narrative, you could say that Africa holds the keys to the global future. However, it needs to work with the advanced economies to get the urgently needed financial boost, so the continent can get back on an upward economic trajectory.
How is the World Economic Forum ensuring sustainable global markets?
Africa needs a bigger voice
The IMF and the World Bank have supported the African continent substantially during the pandemic and the repercussions of the war in Ukraine.
Between 2020 and 2022 the IMF alone has provided sub-Saharan Africa with more than 50 billion dollars – over twice the amount spent in every decade since the 1990s. It has lent money to 21 countries, with many more applications under review.
But voting rights on the IMF and World Bank are leaning towards large donor nations led by the US, Japan, China and Europe, rather than the developing nations who are in receipt of IMF or World Bank loans.
The Economist quotes Nigeria’s president Macky Sall – a former chair of the African Union – as saying that Africa’s weak representation in international institutions had led to the continent being at the receiving end of decisions it has little say in. He pointed to areas such as debt and climate change as key examples of this.
A more active role for Africa
Having a greater voice on the IMF and World Bank directorates could help redress this perceived imbalance and give Africa greater influence over decisions that will shape its future. It might also help elevate Africa’s global standing to match the promise Kristalina Georgieva expressed in her recent speech.
This will be especially important as the IMF and the World Bank are tabling a capital increase to help developing economies speed their recovery and growth at a time when aid budgets are declining.
The initiative is geared towards helping these countries fill the large gap they face when it comes to climate and development financing. In turn, commitment from the IMF and the World Bank may have a halo effect in terms of drawing more private capital to these projects, as the Atlantic Council has pointed out.
While additional representation on the World Bank and IMF directorates will be a major step forward, we also have to be realistic that loan recipients across Africa will need to continue working on issues such as applying loans effectively, strengthening financial governance and stabilizing their debt servicing.
If all the variables affecting African economies can be brought together, the IMF’s latest outlook for sub-Saharan Africa predicts growth rebounding to 4% next year. This is significantly above any predictions for the world’s largest developed economies.
The World Economic Forum’s recent report on The African Continental Free Trade Area explores the role that reinforcing intra-African trade can play in terms of developing regional and local value chains to unlock a market expected to be worth $6.7 billion in business and consumer spending by 2030.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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