From Africa Rising to Rising Debt in Africa: The Looming Debt Crisis

By Dr. Maureen Were

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Africa’s rising public debt continues to attract increased attention regionally and internationally. The narrative about Africa seems to have gradually shifted from ‘Africa rising’ to ‘rising debt in Africa’. In December 2018, I attended the African Economic Research Consortium (AERC) biannual research workshopin Nairobi. AERC is a premier institution devoted to the advancement of research and training to inform economic policies in Sub-Saharan Africa(SSA).The plenary session onthe looming debt crisis in Africanot only grabbed my attention, but also elicited illuminating and timely discussions.

Growing risk of debt distress

As was noted in the discussions, the  key concern is not just about the amount of debt, but the rate at which it has accumulated, and  the shift towards non-concessional debt, especially commercial debt, which is costlier and more vulnerable to changes in financing conditions.  According to the April 2018 edition of the Regional Economic Outlook for Sub-Saharan Africa by the International Monetary Fund (IMF), the median level of public debt in SSA as at end of 2017 exceeded 50% of gross domestic product (GDP). About 40% of low-income developing countries in SSA slid into debt distress or are at high risk of debt distress. These include Chad, Mozambique, South Sudan, and Republic of Congo.

Increases in the amount and cost of debt imply higher shares of revenue towards the servicing of debt at the expense of other priority needs. Moreover, although the debt levels for some countries are currently considered to be within manageable limits, on average, the risk of future debt distress is rising across SSA. These have implications on debt sustainability and sustainable development, especially given limited growth in domestic tax revenues and export earnings in most SSA countries.

What factors have contributed to the accumulation of debt?

There are several factors that have contributed to the buildup of public debt, most of which featured during the discussions. These include the following:

  • Infrastructure gaps: Debt accumulation is partly due to the need to finance infrastructure projects, with some countries like Ethiopia and Kenya looking towards China to close the gap.
  • Weak domestic debt markets and lack of long-term financing options.
  • Increased access to international financial markets:The buildup of debt between 2008 and 2016 coincided with negative yields in advanced countries following the global financial crisis. This made several African countries attractive to foreign investors, leading to increased issuance of sovereign bonds. As monetary policy is tightened in advanced economies, rising interest rates can pose a challenge.
  • Fiscal sustainability challenges: Revenue mobilization has not matched the increase in expenditures, leading to increased fiscal deficits and limited fiscal space. Despite economic growth, tax revenue as a share of GDP has not increased significantly.
  • The fall in commodity prices disproportionately affected countries dependent on oil exports, such as Nigeria and Angola. The global commodity price boom that began in the early 2000s dissipated after prices started going down in 2011 as global demand softened vis-à-vis
  • Other factors include exchange rate depreciation (Zambia); poor debt management, including cases of undisclosed debt (Mozambique and Republic of Congo); and negative growth (Chad, Equatorial Guinea and Republic of Congo).

What could then be done to avoid the looming debt crisis?

Based on the above, some of the policy proposals in terms of way forward include the following: ensuring higher returns to investment and better value for borrowed funds; strengthening public debt management; promoting public-private partnerships; deepening domestic financial markets including the role of capital markets; exercising prudent fiscal policy to ensure fiscal sustainability, including opening avenues for domestic resource mobilization; and borrowing in domestic currencies to hedge against exchange rate risk.

In addition, there is a lot more that can be done, particularly in terms of structural transformation towards export diversification to avoid over-dependence on one or two key export commodities. African countries need to enhance their competitiveness in global markets and exploit opportunities provided by regional integration and the Continental Free Trade Area.

The denominator (GDP) is just as important as the numerator (debt). Sustainable economic growth both in terms of its composition and the rate have direct implications on a country’s ability to borrow and repay and is hence, expected to play a prominent role in determining whether the rising debt will remain a subject of debate in the foreseeable future.

Dr. Were is Research and Policy Advisor for a joint research project by UONGOZI Institute and United Nations University World Institute for Development Economics Research (UNU-WIDER). The project aims to facilitate the development and implementation of public policies that promote economic transformation and inclusive growth in Tanzania and the Eastern African region.

Disclaimer: The views and opinions expressed in the above article are the views of the author and do not necessarily represent the views of UONGOZI Institute.

A version of this article was originally published in the WIDERAngle blog under a Creative Commons license. Read the original article.

Can Natural Resources jump-start Industrialisation?

By Dr. John Page

At the end of last year, I filmed a lecture that will be part of a Massive Open Online Course (MOOC) on industrialisation in Africa. The course is based on a joint research project between the Brookings Institution and UNU-WIDER called Jobs, poverty and structural change in Africa. The topic of the filmed lecture on natural resources and industrialisation was of more than passing interest to the audience. Tanzania has discovered significant reserves of natural gas while its National Development Plan prioritises industry. For Tanzania the question is: can gas jump-start industrialisation?

Mining. Photo: Unsplash Dominik VanyiThe forthcoming book, Mining for Change: Natural Resources and Industry in Africa(Oxford University Press, 2019), helps to answer that question. It addresses how the revenues and opportunities offered by natural resources can be used to change economic structure. The book features country studies on five African resource exporters — Ghana, Mozambique, Tanzania, Uganda, Zambia — and focuses on three areas of public policy central to industrialisation: understanding and managing the resource boom, the construction sector, and linking industry to the resource. Here I provide some ideas about how policy, and institutional changes, along with public investment, can push the pace of structural change in a resource-rich economy.

Understanding and managing the boom

The early questions posed by a natural resource discovery, ‘how big is the revenue likely to be?’ and ‘when will it come on line?’ are often the questions that are least well understood by politicians and the public. After a new mineral deposit is discovered it can take a decade or more to take the steps necessary for revenue to flow through to public finances. In Ghana, Mozambique, Tanzania, and Uganda, the size of the boom has been overestimated, while the delay in receiving revenues has been underestimated, leading, in the cases of Ghana and Mozambique, to rapid accumulation of debt. In addition, resource revenues tend to be highly volatile. Managing the boom requires educating the public to these inconvenient truths and avoiding the temptation to front load spending.

Because of the long lead time between discovery and revenue flow, countries have a window of opportunity to make decisions about savings rules and public expenditures and lock them in before pressures to spend become irresistible. A resource-abundant economy should never finance an investment project where the return, broadly and carefully assessed, is less than that obtained from holding foreign assets. Yet, all the countries we studied lacked effective systems to prioritise and select investment projects. To improve project selection, governments need to build a cadre of economists trained in project appraisal and make them responsible for project preparation in each spending ministry. The ministries of finance or economy should have a prioritised list of projects meeting the threshold rate of return.

Additionally, in our research we found that public investments were frequently made without adequate provision for the recurrent costs of maintenance. Because lack of maintenance can seriously degrade project returns, a medium-term expenditure framework (MTEF) that incorporates multi-year maintenance plans should be used to create budgets that are more forward looking.

Building roads. Photo: Allison Kwesell World BankThe Construction Sector

The construction sector determines a country’s ability to transform public investments into outcomes, and it has an important direct link to the natural resource sector. The extent to which the domestic economy can benefit from the construction phase of a natural resource project depends on the sector’s capacity to meet the price and quality standards of extractive investors.

A recurrent theme in our country studies is the extent to which firm capabilities — access to material inputs, skilled labour (engineers, technicians, artisans) and access to finance — limit the ability of domestic construction firms to expand production. The majority of construction firms in Africa are micro, small and medium enterprises (MSMEs), and business training (despite an uneven track record) may be one way to improve their capabilities.

Institutional and policy reforms can relieve other constraints. Where urban land rights are confused, or construction permits cause delays, governments can act. Policy restrictions on imports and poorly performing institutions, such as customs or the port, can be addressed. With planning, construction skills can be developed locally, and easing the restrictions on movement of skilled artisans within regional agreements can help to relieve bottlenecks.

Linking industry to the resource

Political pressures to ‘localise’ the benefits of a natural resource discovery is a reality faced by all resource-abundant economies. In response, African governments have adopted a wide range of ‘local content’ and ‘value added’ initiatives. Most countries have succeeded in enforcing requirements for the employment and gradual skills upgrading of nationals, but local procurement regulations have been met with less success. Resource-multinational corporations (MNCs), and their first-tier suppliers, often prefer to operate almost exclusively with foreign, second-tier suppliers. In general, local companies are found at the lower end of the natural resources supply chain, in activities such as transport services, catering and security. A ‘missing middle’ of productive small and medium enterprises (SMEs) in industry is a major reason why the extractive companies have difficulty finding qualified local partners.

Integrating local firms into the resource value chain depends on the ability of government and industry to develop effective public–private partnerships. While training can raise the capabilities of local firms to the minimum level needed to allow them to enter the MNC value chains, the government and the resource extraction companies must agree on the design of training, and on the qualification process through which a firm achieves second-tier supplier status. Without buy-in from both parties training will not be an effective strategy. Further, public officials must understand both the requirements of the procurement divisions of the MNCs, and the range of capabilities of domestic firms. A well-designed and properly staffed organization to negotiate and manage local participation— for example, a unit in the office of the head of state or government — can act as the broker between the multinational companies and domestic firms.

Dr. Page is Non-Resident Senior Research Fellow at UNU-WIDER and Senior Fellow in the Global Economy and Development Program at the Brookings Institution in Washington DC.

Disclaimer: The views and opinions expressed in the above article are the views of the author and do not necessarily represent the views of UONGOZI Institute.

This article is republished from the WIDERAngle blog under a Creative Commons license. Read the original article.

Related: Watch Dr. Page’s In Focus interviews on Opportunities and Challenges for Africa’s Industrialisation and Africa’s Natural Resources and Industrialisation.

 

Leadership Essay Competition 2019

1914x900-01African citizens between the age of 18 and 25 years are invited to submit their essays for this year’s Leadership Essay Competition organised by UONGOZI Institute.

The Competition aims to provide a space for the youth of Africa and the next generation of leaders in the region to contribute to important discussions on leadership and sustainable development.

GUIDELINES:

This year’s Competition aims to solicit thoughts on promoting good natural resource management for socio-economic transformation in Africa. The essays should respond to the following question:

“If you were an African leader, how would you promote sustainable use of the renewable natural resources for fostering socio-economic transformation in Africa?”

All essays must be typed. The maximum length is two (2) A4 pages. The format shall be of single spaced, Arial font size 11 with page margins of 1 inch (2.54 cm) for each margin, and sent as a Microsoft Word document.

Essays will be judged on the basis of originality, creativity, use of language and appropriateness to contest theme.

All essays must be written in English.

PRIZES:

A grand prize of USD $2,000 will be awarded to the overall winner.  Up to five winners will be selected.

The winners will receive their awards at a prize giving ceremony to be held during the African Leadership Forum Gala Dinner on 29th August, 2019, in Dar es Salaam, Tanzania. The ceremony will be attended by former African Heads of State and other distinguished leaders from the public sector, private sector, academia and civil society. The overall winner will be asked to read the winning essay at the event.

ELIGIBILITY:

Applicants must be African citizens between the age of 18 and 25 years.

HOW TO APPLY:

Essays should be submitted by email to: submissions@uongozi.or.tz

Applicants must also submit a written Statement of Originality and ownership of intellectual property rights.

The final deadline for submission will be Friday, 21st June, 2019 at 17:00 hours (GMT). The winners will be notified via email during the third week of July, 2019. Feedback will not be provided on individual essays.

Postgraduates of UONGOZI Institute’s Diploma in Leadership urged to be ‘catalysts for change’

Graduation Ceremony for the second cohort of the UONGOZI Institute’s Postgraduate Diploma in Leadership Programme took place on 09th April, 2019 at Milimani City Conference Centre, Dar es Salaam.

The Ceremony was officiated by the Deputy Minister of State, President’s Office – Public Service Management and Good Governance (PO-PSMGG), Hon. Dr. Mary Mwanjelwa (MP).

Launched in 2017, the one-year Programme aims to develop leadership competencies with a focus on Making Strategic Choices; Leading People and other Resources; and Excelling in Personal Leadership Qualities. The Programme, jointly delivered by UONGOZI Institute and Aalto University Executive Education of Finland, offers 10 modules, combining in-class workshops with online individual or group assignments.

In her remarks, Deputy Minister Mwanjelwa commended graduates for their determination and commitment, which was paid off with the award of diplomas. She further commended UONGOZI Institute for mobilising the necessary resources and expertise to deliver the Programme.

She explained how the Programme aligns with the Public Service Reform Programme (PSRP) that aims to improve accountability, transparency and resource management for service delivery. Furthermore, Deputy Minister noted that the PSRP, being implemented by the PO-PSMGG, requires “well-organised, skilled, ethical and dedicated public servants” in order to achieve the aims of the initiative.

The Diploma recipients were urged by Deputy Minister Mwanjelwa to put the knowledge gained from the Programme into practice: “We expect you to make strategic choices, lead people and other resources, and excel in personal leadership qualities.”

She added, “We do not expect you to turn a blind eye to corruption. You need to serve as catalysts for change since you had the opportunity to be part of this Programme.”

On his Part, Prof. Joseph Semboja, CEO of UONGOZI Institute stated, “The first Graduation Ceremony held on 21st March, 2018 saw a total of 32 senior leaders from the Tanzania Police Force graduating. Today, 33 senior leaders from various ministries and public institutions will be awarded their diplomas.”

Prof. Semboja further stated that the Institute continues to collaborate with various stakeholders to ensure the sustainability of the Programme.

“For the third cohort, we have introduced cost-sharing, and we are pleased with the positive outcome,” he expressed.

35 participants from the third cohort also attended the occasion. The cohort includes senior leaders from public, private and civil society organisations within Tanzania. The cohort commenced its first module on Reflective and Inspiration Leader on 09th April.

Deputy Minister Mwanjelwa
The Deputy Minister of State, President’s Office – Public Service Management and Good Governance (PO-PSMGG), Hon. Dr. Mary Mwanjelwa (MP) delivers Keynote Address.

 

Prof. Semboja
The CEO of UONGOZI Institute, Prof. Joseph Semboja delivers opening remarks.

 

Pekka
The Group Managing Director of Aalto University Executive Education delivers his remarks. 

 

Beatrice
One of the Graduates, Ms. Beatrice Kimoleta receives her diploma certificate.

 

Mongella
One of the Graduates, Hon. John Mongella receives his diploma certificate.

 

Participants during the ceremony
Participants during the Ceremony.

UONGOZI Institute facilitates Seminars for Parliamentary Leadership

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UONGOZI Institute was privileged to facilitate two leadership seminars for Committees of the National Assembly of Tanzania.

The first seminar, organised in collaboration with the United Nations Development Programme (UNDP), took place in Arusha from 25th to 26th March, 2019. Those participating included 16 members of the Parliamentary Privileges, Ethics and Powers Committee. The second seminar, held in Dodoma on 30th March, was organised for 26 members of the Administration and Local Government Affairs Committee.

The sessions jointly covered the theoretical aspects of leadership; ethical leadership; personal leadership; emotional intelligence; and managing conflicts of interest.

Collaborations of this nature are important to UONGOZI Institute as they continue to enhance the Institute’s philosophy on achieving sustainable development through competent leadership.

 

Third Cohort of Postgraduate Diploma in Leadership assessed

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On 18th March, 2019, the third cohort of UONGOZI Institute’s Postgraduate Diploma in Leadership Programme embarked on a new journey by undertaking a personality assessment. Participants were assessed using DISC, a behaviour assessment tool which centres on four personality traits: Dominance, Influence, Steadiness and Conscientiousness.

The assessment offered specific insights into their interpersonal communication abilities. This helps identify how to maximise particular strengths to improve personal performance.

Launched in 2017, Postgraduate Diploma in Leadership Programme aims to develop leadership competencies with a focus on making strategic choices; leading people and other resources; and excelling in personal leadership qualities.

The programme, jointly delivered by UONGOZI Institute and Aalto University Executive Education of Finland, offers 10 modules, combining in-class workshops with online individual or group assignments.

The third cohort includes 35 senior leaders from public, private and civil society organisations within Tanzania. Participants began their first module on Reflective and Inspiration Leader on 09th April, 2019.

Proposed Mining Regulations to pave the way for Social and Economic Transformation in Tanzania

On 11th February, 2019, the Minister of Minerals, Hon. Doto Mashaka Biteko (MP) officiated a two-day Stakeholders’ Workshop to discuss the Proposed Mining (Mineral and Gem Houses) Regulations, 2019 in Mwanza.

Jointly organised by UONGOZI Institute and the Ministry of Minerals, the Workshop aimed at broadening the knowledge of relevant stakeholders, and developing a common understanding on issues related to the mining sector and how best to enhance its contribution to national economic transformation.

The Workshop gathered about 100 District Commissioners, Directors of Local Government Authorities, District Administrative Secretaries, and Artisanal and Small-Scale Miners from twelve regions of Tanzania, namely Dodoma, Arusha, Geita, Shinyanga, Mara, Manyara, Kagera, Tabora, Singida, Mbeya, Morogoro and Ruvuma.

In his address, Minister Biteko underscored the significance of the Workshop to his Ministry and country as a whole.

“The Ministry of Minerals’ main goal is to ensure that the extractive sector contributes to the social and economic growth in our country,” he stated.

He went on to note the timeliness of the workshop, given the misinformation and misconceptions revolving around the mining sector.

He urged participants to pay attention and contribute to the discussion to get a better-understanding on the proposed mining regulations, and subsequently share that knowledge with the public.

Minister Biteko further said that Tanzania has so far managed not to become a victim of the resource curse. He said in order to remain on the same track, leaders must ensure the following; transparency in the management of mineral revenues, citizens’ participation in decision making and implementation of development plans, mineral revenues invested in sustainable projects such as infrastructure and education, and public awareness on the natural resource management value chain.

On behalf of the CEO of UONGOZI Institute, Mr. Kadari Singo, Head of Executive Education stated that for about five years the Institute has been implementing programmes that aim to enhance natural resource management and local content participation in the country.

“As a part of these programmes, we have offered training and technical support on natural resource management to the Government Negotiation Team and key ministries, to ensure the sector reaps substantial benefits,” he stated.

He added, “This Workshop intends to raise awareness of the intended establishment of Mineral and Gem Houses and solicit views on how best to establish and operationalise them.”

Minister Biteko
The Minister of Minerals, Hon. Doto Mashaka Biteko (MP) delivering keynote address. 

 

A group photo with some Local Government Authority Leaders
A group photo after the Opening Ceremony with Directors of the Local Government Authorities.

 

Participants
Participants contributing to the discussion.

UONGOZI Institute and REPOA launch Programme to aid Government with Sound Economic Policies

UI_REPOA-1024x693Dar es Salaam, 20th December 2018: UONGOZI Institute and REPOA have launched a new programme that aims to support the Government to design and implement policies to improve the economy and business environment in the country.

The programme officially known as ‘Evidence – Based Policy Making on Economic Governance in Tanzania’ will be co-implemented by the two institutions during a five-year period.

The announcement was made today at the Julius Nyerere International Convention Centre during a half-day workshop to identify focus areas for the programme to ensure relevance in improving economic governance in the country. The workshop gathered 50 policy, planning and research senior officials from various Government ministries, agencies and institutions, as well as the private sector.

The CEO of UONGOZI Institute, Prof. Joseph Semboja said, “The programme aims to support the development and implementation of appropriate Government macro-fiscal policies and a conducive business environment that is built on a sound and evidence-based analytical work, wider and more informed policy dialogues on the requisite economic governance and a competitive industrial structure.”

According to Prof. Semboja, the programme is customized to meet the Government’s ambitions of meeting sustained economic growth driven by economic transformation (productivity), industrialisation and trade expansion; as well as instruments for sustained economic growth, which include, trade, investment and economic governance.

On his part, the Executive Director of REPOA, Dr. Donald Mmari said their collaboration signifies a stronger partnership in leveraging efforts in supporting the government towards a more dynamic approach in its industrialization journey, in particular, implementing the National Five-Year Development Plan 2016/17 – 2020/21, which carries the theme ‘Nurturing Industrialization for Economic Transformation and Human Development’.

“Tanzania has enjoyed a GDP growth rate of 6.9% during the last 10 years. We therefore believe that with the kind of informed research that this programme is going to produce, the national economy will be able to grow to double-digit numbers,” said Dr. Mmari.

The major focus of the programme will be designing and implementing policies that can improve macro fiscal policy in the areas of budget credibility, debt management, public expenditure management and financial accountability, and Inter-governmental fiscal relationships.

Regarding business environment, the programme aims to contribute solutions on the constraints to the ease of doing business, constraints to private sector growth, and the aspect of competitiveness.

During a presentation at the workshop, a Researcher from UONGOZI Institute, Dr. Godfrey Nyamrunda stated that in terms of the set of institutions, policies and factors that determine the level of productivity and competitiveness; Tanzania has scored 47.2 out of 100. The country has also been ranked 116 out of 140 economies assessed by The Global Competitiveness Index 2018.

Dr. Nyamrunda said that the Programme aims to support the Government of Tanzania and other development stakeholders to address some of the challenges through a combination of research and analysis, the dissemination of research outputs and informed policy dialogue.

Other key stakeholders that will play a key role in the programme include the Bank of Tanzania, University of Dar es Salaam, University of Oxford and Christ Mckillen Institute (CMI).

Prime Minister Majaliwa officiates the first-of-its-kind Leadership Programme for RCs and RASs

Opening-1024x475Fifty-two Regional Commissioners (RCs) and Regional Administrative Secretaries (RASs) from Tanzania Mainland are participating in a one-week intensive leadership programme from Monday 3rd December, 2018 to Friday 7th December, 2018 in Dodoma.

The leadership workshop, which has been organised by UONGOZI Institute in collaboration with the President’s Office, Regional Administration and Local Government (PO-RALG), was officiated by Hon. Kassim Majaliwa Majaliwa (MP), Prime Minister of the United Republic of Tanzania, on 03rd December, 2018. Two Ministers were in attendance, Hon. Capt. (Rt.) George Huruma Mkuchika (MP), Minister of State, President’s Office, Public Service Management and Good Governance; and Hon. Selemani Said Jafo (MP), Minister of State, PO-RALG.

In his address, Prime Minister Majaliwa urged the RCs and RASs to use the Programme as an opportunity to strengthen their leadership capacities and competencies.

He stated, “The topics incorporated in this Programme are essential and applicable. It is my anticipation that after this workshop, you will better understand your roles and work together effectively to achieve the national development goals.”

The Prime Minister further asked the RCs and RASs to pay attention and contribute to the discussions during the Programme. He added, “Through discussions, you may note issues on policies and laws that impede your efficiency; in this case, do not hesitate to submit your recommendations to the Government.”

The Prime Minister instructed the RCs and RASs to implement the following upon their return to respective Regions; increase efficiency, ensure work plans are developed and implemented, maintain peace and harmony in respective areas, organise meetings to discuss legal issues, address land disputes (including farmer-herder disputes), manage farmers’ associations to ensure farmers reap the benefits, manage public resources and consider value for money when implementing development projects, manage risks and internal control systems, ensure availability of social services, ensure regular school attendance as well as the protection and welfare of female-students, and to follow instructions from their seniors.

The Prime Minister further emphasised that RCs and RASs must act in accordance with leadership ethics and values. He said, “You must set an example for others to follow. Also, you should always apply best participatory approaches and aim to foster citizens’ development.”

On his part, Prof. Joseph Semboja, CEO of UONGOZI Institute underscored the objective of the Pro0gramme.

“Experience and lessons across the world have shown that for a country to achieve sustainable development, good leadership must be in place,” he stated.

He added, “This Programme is the first of its kind designed for RCs and RASs, which aims at strengthening their leadership competencies and enabling them to work towards the realisation of sustainable development for the country and eventually, the continent.”

Prof. Semboja further stated that the Programme will focus on three key leadership competencies, namely Making Strategic Choices and Decisions, Leading People and Managing other Resources, and Exceling in Personal Leadership Qualities.

Prof. Semboja added that the workshop is a continuation of a collaborative initiative between UONGOZI Institute and the PO-RALG, which intends to reach as many Regional Administration and Local Government leaders as possible to strengthen their leadership competencies and increase efficiency. Similar leadership development programmes were organised for District Commissioners and Directors of Local Government Authorities, and delivered in five phases between May, 2017 and October, 2018.

The five-day workshop will cover several key topics, including Personal Leadership and Emotional Intelligence, Harmonious Political-Administrative Interface, Strategic Communication, Protocols and Etiquettes, National Defense and Security matters, Management of Public Finances and other Resources, Procurement in the Public Sector and the Control of Illegal Drugs.