Maputo — The General Director of the International Monetary Fund (IMF), Christine Lagarde, on Thursday told an international conference in Maputo that "Africa's achievements are remarkable, and the overall outlook for the continent is optimistic".
The conference, entitled "Africa Rising: Building to the Future", has been organised by the Mozambican government and the IMF, and is attended by finance ministers and governors of central banks from across the continent.
In her opening speech, Lagarde declared that Mozambique "epitomises this positive spirit", with its average growth rate of 7.4 per cent a year sustained over two decades, one of the fastest growth rates in sub-Saharan Africa.
"Many steps have been taken to reduce poverty and increase life expectancy", she said. "These are the fruits of years of institution-building and sound economic management". She believed that the recent discoveries of enormous natural gas and coal deposits in Mozambique "offer a unique opportunity to further build on these gains and make growth more inclusive".
She pledged that the IMF would stand beside Mozambique. "We have been working together providing both financial support and policy advice", she said. "We have also supported Mozambique's reform agenda with stepped up technical assistance and capacity building efforts".
Lagarde admitted that some IMF approaches in the past had been misguided. In what is the nearest thing to an apology the IMF is likely to make, she said the fund had "moved away from the legendary Structural Adjustment Programmes", which she described as "laundry lists of what had to be done".
"We have listened, we have learned and we have responded", she said. "We have reformed our lending instruments to increase access and flexibility for countries in need; extended our zero interest policy; and streamlined conditionality".
Lagarde claimed the IMF has "tailored our policy advice to better address the very specific challenges facing the region".
Despite the strong growth in sub-Saharan Africa, "poverty remains stuck at unacceptably high levels", she admitted. "If the global crisis has taught us anything, it is the importance of making the benefits of growth more broadly shared. When everyone benefits, growth is more durable".
Africa's mineral resources, if properly managed, "offer unparalleled opportunities for economic growth and development", Lagarde said - but "in too many countries, rents from extractive industries are captured by just a few".
She pointed out that mining "can account for an important share in output and export earnings, but often contributes relatively little to budget revenues and job creation. This corrodes the fabric of the economy and its social cohesion".
Lagarde called for "strengthening the institutional and governance frameworks that manage these resources", adding that "transparency can help increase accountability - and help that these resources are harnessed for the benefit of all".
She warned that Africa, as "the youngest continent in the world", faces an enormous demographic challenge. By 2040, Africa will have the largest labour force in the world - a billion people of working age, more than China and India combined.
"Channelling this increasing reservoir of human capital to productive sectors offers unrivalled economic and social opportunities", Lagarde said. "To take full advantage of them will require skilful management and vision".
Some estimates, she continued, are that a one per cent increase in the population of working age can boost gross domestic product by 0.5 percentage points. But to achieve this, decent jobs need to be created in the productive, formal sector of the economy.
Lagarde noted that currently only one in five people in Africa have formal sector jobs.
"This must change", since the informal sector is a recipe for "low incomes, low prospects and low productivity".
She was convinced that more Africans can be employed in formal sector jobs, if there is "wider access to quality education, health care and infrastructure services". Particularly key was ensuring that girls have full access to education - Lagarde said that, on some estimates, the gender gap in education causes development countries losses of 90 billion dollars a year.
Lagarde argued that it is also crucial to close Africa's "infrastructure gap". She noted that "over the past three decades, per capita output of electricity in sub-Saharan Africa remained virtually flat. Only 16 per cent of all roads are paved, compared with 58 per cent in south Asia. These shortfalls represent huge costs to businesses - and to people".
Despite the "daunting costs" of closing the infrastructure gap, she argued that it had to be done, since "high quality infrastructure can be a magnet for foreign investment. It can accelerate diversification and job creation, and support further regional integration".