Cape Town — With regard to Africa, the International Monetary Fund's engagement historically has been overshadowed by its Washington neighbor and intergovernmental counterpart, the World Bank, which focuses on development and assistance for less developed nations while the Fund specializes in financing. Since the global recession, however, the Fund has expanded its profile across the continent. As head of the Africa Department, Antoinette Sayeh directs IMF activities in 44 sub-Saharan countries. She joined the IMF in 2008 after serving for two years as Liberia's Finance Minister and having worked for 17 years at the World Bank. During the World Economic Forum on Africa last week, she spoke with AllAfrica's Reed Kramer. Excerpts:
Let's start with the latest Regional Economic Outlook, which was released earlier this month. What is the importance of these overviews and why should people take time to read them?
Based on feedback we get, there's a lot of interest in this report. There are not many macroeconomic analyses of sub-Saharan Africa, unlike other regions of the world that have all kinds of reports produced by the private sector on economic issues. So we used the opportunity of having a lot of economic data, macroeconomic data, reported by the governments with the standards that we also have helped improve.
The Fund has done a lot more work with sub-Saharan Africa within the last two to three years, coming out of the large recession, and so every six months or so we step back and take a look at what's been happening and look at the prospects and it is a particularly critical time for the region. The recovery, of course, continues to deepen.
We are fairly optimistic about growth rates for sub-Saharan Africa, building on the five percent that was achieved in 2010. We think this year, 2011, [there will be] five and a half percent growth for the region as a whole. Of course there are differences between the low-income countries and the middle-income countries – the latter doing less well, growing less robustly, and the emerging markets like South Africa growing quite a bit less than the low-income countries.
With the new crisis on food and fuel prices hitting Africa in the midst of a particularly challenging political year – there are 17-plus elections or more in the region this year - it's a good to talk about the policy challenges and how Africa can deal with them. That's why I think the report comes at a good time.
Six months from now we'll have another regional economic outlook with different focus.
What impact are rising fuel and food prices having across Africa?
Between September last year and about March this year, there's been a 40 percent increase in food prices. There's also been a substantial increase in fuel price relative to last year. On the whole year, 2011, we think oil price increases should be about 35 percent or more over last year.
Unlike the food and fuel crisis of 2007-2008, this one may last longer, especially on the fuel side. The last time, we had the major recession come quite quickly, and that helped to bring down fuel prices significantly. This time we think there are structural issues that underpin that price increase. And, Middle East and North Africa political problems have also influenced perceptions of how much oil there will be out there in the market.
Many sub-Saharan African countries find themselves with less fiscal room than they had when they responded to the global recession [in 2008]. They are having to put in place targeted initiatives to mitigate the impact of the food price increases on the poor. To do that, they have to get those resources from somewhere, perhaps from donors. There's a real tension between using that room to start to rebuild your buffers to save for a rainy day in the future or to spend it on very urgent needs now. So that's some of the policy challenges facing the region currently.
The adverse impact of the recession on the poor is documented in the report. With the projected growth, do you expect to see any poverty alleviation?
It depends on policy actions by governments that could allow stronger and more robust and sustained growth. It's very positive that governments generally are focusing more on the quality of growth and are asking themselves how to make growth produce more jobs and reduce income inequalities.
Having said all of that, it's important to say also that the available data on income distribution and its relationship to growth is not entirely clear. First of all there are data deficiencies in a number of African countries. And where there is comparable data, there are some countries that grew robustly and are able to reduce income disparities and income inequalities and there are others where those increased. It's really important to dig deeper into data [before concluding] that growth has not reduced poverty but has actually added to it. It is not necessarily the case. Growth is a very, very important ingredient of efforts to reduce poverty. Without it there is not very far you can go.
Growth has to be sustained, and there are ways to work towards producing more jobs -in a resource-rich country, for example, trying to put in place policies to increase linkages between the natural resource sector and the rest of the economy - to help create demand for labor in the economy.
There are things that can build up the skills of the young population to be able to then take on some of those jobs that could be produced down the road. It's one thing to produce the jobs – you also have to have the skills on the other side that match that demand. So those are the challenges. For the next regional economic outlook we expect to get into some of that more.
What role does foreign direct investment play in stimulating growth?
For most low-income African countries – that is 30-something out of the 44 that my department covers - it plays a very important role. And middle-income countries as well are benefiting from significant inflows of capital. External financing foreign investment in sub-Saharan Africa has increased six fold over the last 10 years or so and has shifted more to private than official. So there has been emerging interest in Africa and flows of capital that are potentially quite helpful. During the recession in the past two years, the picture has been sort of mixed. Some countries have seen a restoration of the inflows that they had before the crisis, whereas in other countries the flow has remained fairly flat. In Nigeria, those flows have actually decreased.
Why are you projecting faster growth in lower income countries compared to higher income and middle-income countries?
It's something that we're digging into a bit more. South Africa, for example, growing this year at some three and half to four percent, we think, compared to about the six percent average growth that low income countries are witnessing. South Africa was harder hit by the crisis due to reduced demand for its exports to Europe and stronger linkages to international financial markets. as well. South Africa, which lost a million jobs, is now recovering - but at a slower pace than other countries. And there are questions about whether South Africa can get to the six-to-seven percent growth rates that are needed to make a significant dent in the unemployment problem.
For lower income countries, some of the growth has to do with commodity price increases. Commodity prices are fairly high, and low-income countries that have natural resources are benefiting.
But commodity price-driven growth can be growth without jobs?
It's true especially in natural resource-rich economies dominated by mining. Diamond mines or copper - they're not very labor intensive. They're capital intensive so, by themselves, they don't produce many jobs. The challenge is to create linkages between those mines and the rest of the economy so you generate jobs as a byproduct of their operations. That's what hasn't been done so well in the past.
There are lessons from natural resource management. Botswana has done well at managing its natural resources and in getting to be a middle-income country from being a low-income country at the time of independence. But even there you see big challenges because they currently have significant unemployment.
As Finance Minister, you worked to link investment to job growth. How successful has that been?
The level of youth unemployment in Liberia is very, very striking. You walk on the streets of Monrovia and you just see it. It's a very serious situation. So there's been a focus on that.
A lot of investment deals have been concluded in Liberia across sectors – in timber, in palm oil products, in iron ore mining as well. It's still too early to see the full impact of those investments because of the start-up time. They'll just start exporting iron this year. With agricultural-based investments it's possible to create quite a few jobs - in the oil palm sector and the timber sector. Those are going to start to come on stream also.
Unemployment is still a very big problem in Liberia and across Africa. Clearly countries have to keep the growth going, but it has to be labor-intensive growth.
What is the IMF role in this process?
We work on three broad areas with our member countries. We give policy advice through regular 'Article 4' consultations, as we call them - in some countries every year and some countries every two years. In countries with programs we do every two years because we have a constant monitoring relationship with them in the context of programs. In countries without programs we have an annual consultation where we review the economy and macroeconomic performance and discuss prospects and policy responses that we think are needed. That's a large part of our work.
We also provide technical assistance. Sub-Saharan Africa receives the largest proportion of technical assistance from the IMF. We have technical assistance provided from headquarters in Washington but also from three technical assistance centers located in Africa - in Gabon for Central African countries, in Tanzania working with East African countries, in Mali for francophone West African countries. We're adding one in June for the southern Africa region that will be based in Mauritius, and we're working to open another one for the Anglophone West African countries.
Sign up for free AllAfrica Newsletters
Get the latest in African news delivered straight to your inbox
Your next stop is Mali for the Sub-Saharan Africa Regional Advisory Group?
That's right. Members come from civil society, the private sector, the financial sector. The idea is to step back and listen to people who know Africa well from different perspectives and ask for their input about what the Fund is doing, about the advice we give to countries and how we can make that [advice] more effective.
Having completed both the latest regional outlook and the discussions at last month's Annual Meeting in Washington, how would you sum up Africa's current prospects?
We're fairly optimistic. There has been tremendous progress made in the consensus across sub-Saharan Africa about the importance of macroeconomic stability as an underpinning for sustained growth, and that's a significant step forward. Twenty years ago, there were all kinds of arguments about policies. We've gone beyond that, and now we're asking questions as to how can these policies work more effectively to produce better quality growth. That's a very exciting place for Africa to be.
At the same time, there are huge challenges. The continent continues to be hit by exogenous shocks – the food and fuel crisis of 2007-2008, the global recession of 2008-2009 and now another food and fuel crisis - and all of that in the context of a very political year in Africa this year – some 17-plus elections. The pressures that come from elections in terms of spending and going beyond the budget can be quite difficult.
Looking at what's happening in the Middle East and North Africa, we see some countries having grown robustly over a period of time but not able to address critical social problems, including unemployment of youth and that being a factor in people wanting political changes. Others are watching those circumstances and saying there is more we have to do to pay attention to this issue and really put in place policies that will help growth to do better than it has in the past.
So it's a very good time to deepen the Fund's work and policy advice and technical assistance with Africa, and we're very committed to providing all of what we can if we're asked to so.
Are you enjoying your job?
I absolutely am. It's exciting to work under the fabulous leadership of our managing director [Dominique Strauss-Kahn] and to see our relationship significantly deepen with sub-Saharan Africa under his leadership.
