Experts seek financing for industrialization in Central Africa
The UN Economic Commission for Africa (ECA) and the Government of Chad are convening government representatives and experts in various development fields from across Central Africa and around the world, to debate and propose a harmonized strategy of unlocking finances for industrializing the economies of Central Africa.
The actors will be meeting from 18 to 21 September 2018 in N’Djamena – Chad within the context of the 34th session of the Intergovernmental Committee of Experts (ICE) for Central Africa. The ICE is the statutory supervisory organ of ECA’s support to member states in the subregion.
The theme for this year’s ICE session – Financing Industrialization in Central Africa – is part of continuing conversations from the previous ICE session in 2017 that harped on the need for countries in the subregion to completely immerse themselves in a Made-in-Central Africa philosophy and practice, which involves moving from a vicious circle of exporting raw materials into a virtuous one of adding value to resources through sectoral diversification and rapid industrialization.
ECA’s Office in Central Africa considers the focus on financing industrialization in Central Africa most timely and relevant for several reasons: Firstly, the decision-makers of the sub-region have renewed their interest in economic diversification and structural transformation as was demonstrated at the CEMAC Heads of State and Government’s Extraordinary Summits of in 2016 and 2017 and the adoption of various national industrialization plans.
However, an ECA report on "Made in Central Africa: from a vicious circle to a virtuous circle" identified lack of funding as one of the main obstacles to economic diversification and industrialization in the sub-region. In cognizance of this, the 34th ICE Session will serve as an appropriate platform to discuss and adopt a common funding strategy to support economic diversification in the region.
Secondly, CEMAC countries have adopted fiscal consolidation measures as part of wider national and regional efforts to mitigate the negative impacts triggered by the drop in commodity prices, improve the efficiency of spending and restore macroeconomic stability.
These short-term measures could potentially limit the fiscal space needed for governments to strengthen productive capabilities and make other long-term investments to structurally transform local economies. This calls for innovative financing solutions.
Thirdly and most importantly, the meeting will help sustain the momentum created during the 33rd ICE Session on "Made in Central Africa: from a vicious circle to a virtuous circle" and the operationalization of the "Douala Consensus" which aims to stimulate economic diversification in the subregion through resource-based and trade-induced industrialization.
Although Central Africa has quite a diverse range of actors in its financial sector, including financial markets as well as a good institutional framework for the sector, the subregion’s credit to GDP ratio (only about 16%, according to recent estimates) is low compared to other regions.
Capital markets are in an infant stage of development, forcing economic actors in the region to rely almost exclusively on the banking sector, which is a very limiting option for mobilizing resources to promote long-term investments in industries. Worse still, even the few banks operating in the sub-region have relatively few branches, making them inaccessible for most enterprises.
Development banks, where they exist, have limited liquidity to play an active role in financing the region’s industrialization ambitions. Other financial actors, such as microfinance and insurance, tend to be small and relatively inefficient to meet the demands of industrial entrepreneurs.
These demonstrate how difficult is accessing funds to finance industrialization which is crucial for the structural transformation and subsequent sustainable development of economies of the subregion.
The N’Djamena rendezvous will provide a platform for intense debates in plenary and breakout sessions on subtopics such as innovating financing for the smooth take of Central Africa’s industrial sector, securing fiscal space for the promotion of industrialization in Central Africa, how to better align infrastructure development with industrialization and several other related issues.
Recommendations from the session would be widely disseminated across government and private sector circles in Central Africa and concretely followed up on by ECA and its partners, within the context of operationalizing the Douala Consensus.
It should be noted that the Douala Consensus is already shaping the redesign of development visions, policies and practices in countries across Central Africa through collaborative work programs between key Government ministries and ECA.