5 Takeaways from the AU’s Specialized Economic Committee Meeting

5 March 2019

by Bhaso Ndzendze

Despite two decades of increase in Africa’s economic growth, with 7 of the fastest growing economies in the world being in the continent, it still exhibits symptoms of low productivity as it relies mostly on exporting primary products (resource extraction and agricultural commodity production). In addition, this growth has not translated into employment creation, poverty eradication and inequality reduction. It is an old song, but it rings no less true today: African economies must diversify away from primary production to bring internal development as well as to improve their economic position vis-à-vis the rest of the world. Economies overly focused on primary production are risky because they tend to lack diversity and are vulnerable to fluctuations in global commodity prices. Against this backdrop, and indeed with these sentiments, African economists convened in Yaoundé, Cameron, on the 4th and 5th of March under the umbrella of the African Union and with a ministerial component (with ministers of finance from all over the continent represented).

This was the 3rd The Specialized Technical Committee (STC) on Finance, Monetary Affairs, Economic Planning and Integration. The 2018 STC was held under the theme, ‘Domestic resource mobilization: fighting against corruption and illicit financial flows.’ In that meeting, the member states noted that “these issues have been the major obstacles for growth on the continent as annually an amount of US$ 50 billion that could contribute towards Africa’s development is being lost through tax evasions, corruption, financing of criminal activities, smuggling and trafficking in minerals, wildlife, among other issues.” In this regard, member states agreed on building strong institutions and promote good governance to reduce illicit financial flows so as to channel these resources towards continental development programmes.

Building on previous STC Meeting, the theme for the 2019 STC is ‘Public policies for productive transformation’, as it aims to offer a platform to deliberate about the right mix of public policies which have the potential to transform African countries into productive economies. This will include defining the relevant capacities that will be required for the effective designing and implementation of the policies so they can accelerate inclusive growth and sustainable development.

‘Public policies for productive transformation’

Product diversification is of paramount importance as measures of diversity make strong predictions about future GDP growth. It is also widely recognized that increased productivity is achieved in countries that were able to modernize their activities and create advanced export goods. This comes against the backdrop of most of the African continent’s Heads of State and Government of the African Union having signed the historical African Continental Free Trade Area (AfCFTA), with the aim of removing or reducing the barriers and constraints associated with trade.

The agenda for the meeting was packed with presentations and discussions on regional integration (including specific discussion on the African Multidimensional Regional Integration Index, and a Briefing on the Status of regional integration in Africa), the delivery of a progress report on statistical development in Africa, the Statute of the African Union Institute for Statistics (STATAFRIC) and the African Statistical Training Centre (PANSTAT). There was also tabling of progress reports on the establishment of African Union financial institutions, the status and progress report of the Committee of Finance Ministers, an update on the establishment of the African Continental Free Trade Area, Agenda 2063 (including an implementation report for the validation, monitoring and evaluation framework and domestic resource mobilization strategy [DDR]), an update on the population report, reports by the experts group on the refinement of the convergence criteria of the African Monetary Cooperation Programme (AMCP). Finally, there was a proposal for a monitoring framework and a peer review mechanism for macroeconomic convergence, as well as an African Credit Rating Agency.

There are a lot of them, which can lead to apathy and an appearance of paralysis by analysis for some onlookers, but these discussions and reports are hugely important. Resolutions reached at the meeting are expected to be forwarded to the African Union summit in July for consideration and approval. While the critique might be that they are, like most multilateral frameworks, toothless and have no enforcement mechanisms, they nonetheless play a critical role in gauging the continent’s progress in what it has committed itself to. If the complaint is that the AU talks too much and does too little, it stands to reason that there should be a platform to assess the obstacles to effectiveness, as well as to determine from the ‘little’ that has been done, what has worked and what has not. The Specialised Technical Committees facilitate such a process. Further, they serve as a platform for best practices transfers from region to region.

Five takeaways from the agenda

Firstly, the AU is working towards greater economic integration but is troubled by sovereignties. Perhaps inevitable for any undertaking of such a magnitude, this is hinted at by the uneven patterns of ratification, and the disjuncture among the major powers. Secondly, the regions are still seen by the AU as the most reliable enforcers (at least in comparison to the continental body) of AU policy. Thirdly, the focus on DRM, a credit rating agency shows an AU taking the Kagame Report seriously and looking to diversify away from foreign assistance as much as it can. Presumably, also, the principal target audience for the African-ran credit rating agency would be African major corporations and investors; this is a major indicator of the AU seeking to enlist the private sector. A fourth takeaway from the meeting, and in relation to the previous point, is that the AU sees economics and politics as interconnected (hence last year’s focus on corruption), as indicated also by the peer review mechanism for macroeconomic convergence, as well as the credit rating agency which would both derive their benchmarks from Africa itself, by also flagging threats to a favourable business environment by Africans themselves. And finally, contrary to the perception of the AU as a document mill, churning out policy documents, the agenda of the Technical Committee shows that the body is actively reviewing adoptions and tracking their effectiveness.

There were some omissions from the agenda, however. The creation of a climate conducive to entrepreneurship, and one capable of tapping the prospects and promise of the fourth industrial revolution (with the continent’s present ratio of engineers standing at 35 per million people compared to 168 for Brazil, 2,457 for the European Union and 4,103 for the United States) ought to have gotten some special attention. In the same vein, the meeting ought to have been more cognizant of blockchain and virtual currencies. For its part, the European Union (EU) has sought to harness this phenomenon by integrating blockchain education into its curriculum. This is in keeping with an example set by the US – where the demand for blockchain engineers has increased by 400 percent since late 2017. Africa cannot afford to be outside this trend.

Also meriting discussion were the Strategic Partnerships which the group has undertaken. While calls for a coordinated a foreign policy of engagement with the external players, from the traditional (US, UK, France, Germany and the rest of the EU), the semi-traditional (China, Russia, Japan, and India), to the emerging (Turkey, the United Arab Emirates, Latin America and an increasingly internationalising Israel), there still persists a need to articulate such a policy in technical, non-rhetoric terms. The group could have also tabled discussions on current global economic developments outside the continent, including the opportunities to be reaped and the negatives to be anticipated and countered. From Brexit to the trade war between the US and China, and the planned Russia-Germany gas pipeline, and the slowdown in the Chinese economy, the world economy is undergoing major stress tests. True, the continent needs to focus primarily on Africa, but the continent is part of a larger global dynamic – and history has shown that Africa, due to its asymmetrical integration to the global economy, has tended to be on the receiving end of global occurrences not of its own devising. Indeed, a global recession is anticipated by some quarters; whether or not it will materialise, how the continent may go about fortifying itself against this deserved special attention.

Furthermore, the body’s work needs to have some level of continuity. The designation of 2018 as the year of combatting corruption falsely gives the impression that it is an issue which can be resolved within 12 months, and a couple of meetings. The Committee’s work in this regard is especially important and deserves tabling at every possible chance.

Apart from a passing headline in The East African about current goings-on in the continent (it is indeed a busy week, with border disputes between Rwanda and Uganda, a Portuguese ministerial visit, and a joint Ethiopia-Eritrea delegation to South Sudan), and a few Chinese outlets, the events did not prove much of a media draw. This is a pity, for much of the AU’s most important work takes place in these unglamorous settings. The work of the Committee needs to be more covered, as it is more important in many ways than the Heads of State and Government summits of January which barely touch on the specifics.