Nontobeko Mlambo spoke to the International Monetary Fund’s Deputy Managing Director Antoinette Sayeh who recently attended a high level conference co-organised with the African Union on the Promotion of Good Governance and Fight against Corruption. It follows on from the recent publication of a book titled – Good Governance in Sub-Saharan Africa: Opportunities and Lessons learnt that highlights the region’s tremendous progress made in recent years to improve the standards of living of its citizens. Despite these wins, millions of people still face extremely difficult conditions, living in poverty and without access to sufficient public services, especially health care and education. These challenges have been made worse by the economic impact of the Covid-19 pandemic.
The region also faces other emerging crisis like the effects of climate change and conflict. The book suggests that the task of policymakers will become even more complex as they contend with the effects of climate change, digitalisation, and the fourth industrial revolution associated with automation and new technologies.
How does the IMF define good governance and what are some of the indicators?
The fund is focused on governance as it pertains to the most effective use of public resources, ensuring they contribute to shared and lasting prosperity of the people. Good governance is often associated with a few key elements:
First, a high level of political commitment to good governance and transparency. This can be seen in a number of ways, for instance by how budgets are formulated and presented, the degree of independence of the central bank from political pressures, a commitment to declaring the assets of key public officials, or a willingness to publish timely audits and follow up on findings.
Second, respect for the rule of law and property rights. When investors invest in a country, they will do so only if they are confident that the government will respect contracts and enforce property rights.
Third, efficiency, transparency and public oversight of investments. IMF research highlights that when there is not enough government oversight on the public procurement process, project costs tend to be higher. This is especially crucial given the need to scale up public investment in infrastructure in Africa.
Fourth, access to information. This is one area civil society organisations and journalists have consistently emphasized. This allows citizens to be informed and to hold governments accountable for their actions.
Finally, let me add innovation and technology as the fifth element, given its role in helping governments deliver on these priorities more effectively. We saw this during the pandemic when for instance Sierra Leone launched online applications to improve the government’s ability to track services like food delivery or Togo used technology to identify the needy and deliver direct cash transfers.
The book Good Governance in Sub-Saharan Africa – Opportunities and Lessons identifies three countries – Botswana, Rwanda, and Seychelles – as strong performers in Sub-Saharan Africa. What can other African countries learn from them?
The book discusses reforms across a wider set of Sub-Saharan countries such as Nigeria, Comoros, the Democratic Republic of Congo, Madagascar, in addition to the three countries you mentioned. There are a few lessons from these countries. For instance: for biggest impact, reforms should be tailored to country circumstances – depending on the challenges they face, the resources they have, and the capacity of their national institutions.
They also highlight that sustained progress in improving governance and accountability – and ultimately, the lives of people – is possible regardless of the level of economic development. Take for example, Cabo Verde. Its ranking in the Corruption Perception index of Transparency International is higher than many advanced countries, including those with per capita income 10 times higher.
Finally, good governance is not something that countries have or do not have. It is an ongoing process – a commitment to ensure the best decision is taken every day for the benefit of the people. Progress in governance is determined by leadership commitment, institutional design, and the behavior of public and private institutions.
Why is it that most governments in Sub Saharan Africa have failed to promote good governance?
Many African leaders have actually been stepping up to the challenge. We saw it when Botswana developed a good policy framework to prudently manage the wealth from mining resources; or when Zimbabwe, Mauritius and Ghana recently strengthened their anti-money laundering frameworks.
There are other examples too – from improved performance of the customs’ administration in Madagascar, to the introduction of information and communication technologies in government in countries like Mauritania. During the Covid-19 emergency, we have seen rigorous audits issued in Malawi, Cameroon, Benin, Mali and South Sudan. Important transparency initiatives, like the Extractive Industries Transparency Initiative, have become critical sources of public information relating to natural resource management in countries like Nigeria and Republic of Congo.
Of course, such improvements are uneven and inconsistent across the region – we have much work ahead of us, as African citizens rightly keep reminding us. The big economic opportunity before Africa is its demographic dividend. To earn that dividend, however, we need to meet the aspirations of the new generation. And a critical element to doing that is ensuring that public resources are used effectively and contribute to shared and lasting prosperity of the people.
Most countries in Sub-Saharan Africa are drowning in debt, does the IMF suggest other ways and give support to countries instead of them resorting to taking up more debt?
Debt vulnerabilities have increased in a number of countries in the region, but the situation is country specific. In countries at high risk of debt distress, the key priority is to preserve debt sustainability through prudent borrowing policies, while at the same time keeping some fiscal space for key spending priorities such as critical investments in priority sectors (health, education, infrastructure), or social spending to protect vulnerable groups.
For countries where debt is unsustainable, there is an urgent need to accelerate the effective implementation of the G20 Common Framework for debt treatments. So far, progress has been slow for the three countries that have applied for debt treatment under this framework (Chad, Ethiopia, Zambia). But last week, we got positive news with the forming of the official creditor committee for Zambia. The IMF will continue to promote improvements in the framework to encourage more rapid and fairer debt resolutions.
The fund is also helping countries avoid getting to the stage where they need debt restructuring. Since the start of the pandemic, we have provided financing corresponding to 1.5% of Sub-Saharan Africa countries 2021 GDP – more than 13 times our average annual lending of the last decade – mostly on concessional terms. The regions’ poorest and most vulnerable countries also received two years of debt service relief of about $800 million. And last year’s allocation of the Special Drawing Rights – the largest in the history of the IMF – provided $23 billion to countries in the region, corresponding to 1.2 % of the regional 2021 GDP.
We are also helping countries close financing gaps exacerbated by the spike in food and energy prices. For example, a new three-year programme for Mozambique for US$456 million was approved in May and the IMF Executive Board has just approved an augmentation to the existing programme for Senegal by US$171.5 million. And we are in active engagement with several other countries.
But policymakers will also need to create more fiscal space by mobilising domestic revenue, enhancing the effectiveness and efficiency of spending, and managing public debt vulnerabilities. The IMF remains ready to support countries in this process through our policy dialogue and capacity development.
What is the IMF doing to call countries with corrupt governments or bad governance to order?
Poor governance and corruption have a negative impact on economic growth; they distort public spending and undermine domestic revenue mobilisation – an estimated tax revenue losses globally of US$1 trillion. Which is why the fund has been working with countries on this issue for over 20 years.
In 2018, with our enhanced framework on governance and corruption, the IMF has stepped up its efforts – increasing the candor of our assessments, ensuring evenhandedness across members, and emphasising outcomes. We focus our efforts on reducing vulnerabilities to corruption by strengthening governance in six core state functions: central bank governance, financial sector governance, fiscal governance, market regulation, rule of law, and anti-money laundering.
In our policy dialogue with countries, we look at the strength of their anticorruption framework – especially whether it is aligned with the specific issues confronting a country – and work with them on reforms to strengthen governance and anticorruption frameworks. But we also go beyond policy advice. At the request of country authorities, we also provide technical assistance and training to policymakers in this area, coordinated by our six capacity development centres on the continent.
Our work during the Covid-19 pandemic reflects how we are actively working with government in Africa to improve governance. For example, among the 39 countries in sub-Saharan Africa that have received pandemic-related assistance, nearly all committed to publishing special ex post audits of pandemic related spending; two-thirds have either already done so, or the agreed deadline is pending. For countries receiving emergency assistance with multi-year IMF financing arrangements, we continue to closely engage on longer-term structural governance and corruption matters.
