Can the G20 make a difference for development?

By Federico Bonaglia, Senior Counsellor to the Director at the OECD Development Centre

Can the G20 really make a difference for development? The short answer is yes. The long answer is that the G20 can actually do more and should not miss the opportunity offered by the SDGs to deepen its engagement on global development. How can we upgrade the development agenda? In a two-part Development Post, the author explores the first question here. Look for a second submission that delves into the G20’s forward-looking agenda for development.

With the tragic Paris events weighing on their minds, G20 leaders gathered in Antalya last week and reaffirmed their commitment to strong, sustainable and resilient growth for all, including low-income and developing countries. Why does this matter for development and the recently approved Sustainable Development Goals? The reasons are substantial. First, the sheer size of the G20 economies and the transmission mechanisms that link their actions, or inaction, to the development prospects of the rest of the world cannot be ignored. Second, G20 leaders possess convening and agenda-setting power and their like-minded approach to development demands attention. Third, the value of each G20 country’s own respective development experiences can contribute to inform developing countries in their efforts.

Indeed, development has a special place in the G20. Different from other fora, the G20 has not evolved into a pledging platform for development initiatives. Just think of the 2005 G8 Gleneagles Summit, with its ambitious plans to double aid and undertake massive debt relief, or other G7/G8 initiatives on water (Evian), food security (L’Aquila), maternal health (Muskoka) or the Middle East and North Africa transition (Deauville). The G20 countries representing 85% of the world’s GDP are focusing instead on promoting an enabling global environment to spur development and enhance the role of developing countries as new poles of growth[1].

For its part, the OECD has been involved in the design and implementation of the G20 development agenda since the adoption of the G20 Seoul Multi-year Action Plan on Development. And the G20’s own progress reports offer information on whether commitments in the development field are on track. Consider the impact of some of the G20’s actions on developing countries:

Lifting G20 growth: The Brisbane Growth Strategies, which outline structural reforms to lift growth in each G20 country, would raise G20 GDP by roughly 2.1% by 2018 if fully implemented and have potential spill-over effects on developing economies. Lifting the growth of G20 countries – or failing to do so – will ultimately affect developing countries through trade, investment, migration and technological channels.

Coordinating macroeconomic policies: Macroeconomic coordination is likely to have – at least in the short term – a much larger effect on developing countries than structural reforms in G20 countries. While we understand the implications of these policies for the G20, the implications for developing countries, through interest rates, global liquidity and capital flows, have yet to be fully explored.

Reforming the international tax system: Developing countries stand to benefit from the G20-OECD Base Erosion and Profit Shifting (BEPS) project, set to end double non-taxation of multinationals and increase transparency through the automatic exchange of information. G20 leaders’ call to action to strengthen tax capacities by offering officials as Tax Inspectors Without Borders or supporting the strengthening of tax revenue statistics is welcome. These measures will help developing countries harness the potential created by reforms to the global tax system, such as tackling tax evasion and reducing tax loopholes.

Lowering the cost of remittances: Remittances to and from G20 countries account for almost 80% of global remittance flows. G20 countries announced measures to reduce the cost of sending remittances, including enhancing competition among money transfer operators. Globally, remittances totalled U.S. $436 billion in 2014, more than three times official development assistance, and are the largest source of private external finance for several developing countries. By taking steps to promote effective intermediation, receiving countries can further amplify impact.

Boosting infrastructure investment: The G20 was instrumental in placing infrastructure bottlenecks on the development agenda. The actions taken are wide-ranging, from calling multilateral banks to modify their internal procedures and incentives for financing infrastructure projects to identifying priority projects with developing countries. With support from the OECD and the World Bank, the G20 has distilled principles and indicators to help countries mobilise private investment for infrastructure. The G20 is also committed to working with investors and developing countries to better appraise the risks and returns of these investments.

Enhancing global food security: The G20 Action Plan on Food Security and Sustainable Food Systems is the culmination of five years of intense discussions and initiatives. Since its inception, the G20 debated the volatility of commodity prices and lagging agricultural productivity growth. It convened relevant organisations to develop a consensus on causes and possible remedies and established a global monitoring system for food stocks. This plan has the potential to help advance food security in developing countries and globally.

Sharing knowledge: Many G20 development deliverables are global public goods and contribute to knowledge sharing. These are distilled into databases and toolkits to support better policy making in developing countries. Consider, for example, the development of indicators on skills and of toolkits to design inclusive green growth strategies or enhance agricultural productivity.

Assessing the impact of G20 actions on development outcomes is not easy and, to the best of our knowledge, no rigorous attempt has been made so far to that end. Challenges include:

  • identifying relevant G20 actions or inputs and quantifying their magnitude;
  • choosing a baseline, such as GDP growth, well-being or jobs, for the appropriate outcomes to be measured in partner countries;
  • mapping the transmission channels from G20 actions to development outcomes in terms of finance, trade, migration or technology;
  • estimating the net effect of different and maybe offsetting actions; and
  • distinguishing between the G20’s direct attribution versus its contribution to observed outcomes.

Yet, efforts to address some of these concerns have been made. The Turkish presidency released a framework mapping the whole-of-G20 contributions to development. But given such challenges, the yardsticks to identify impact will have more to do with the convening and consensus-building power and the effective implementation of commitments rather than quantitative economic assessments. Closely monitoring implementation and involving developing countries in discussing the G20’s development agenda and its impacts will have to remain a priority for future presidencies.

[1] In 2010, G20 leaders acknowledged that “narrowing the development gap and reducing poverty are integral to [the] broader objective of achieving strong, sustainable and balanced growth and ensuring a more robust and resilient global economy for all.”

 

The Narrative of Development Has Changed

This interview, with Mario Pezzini, Director of the OECD Development Centre, first appeared in “Digital Development Debates” on October 14, 2015. Click here to read it anew

Interview by Frederik Caselitz and Prisca L. Watko

 

The OECD Development Centre serves as forum where policymakers can find solutions to pressing development questions. We met Director Mario Pezzini on the occasion of the Africa Forum held in Berlin this year, where Africa’s future role in the world economy was discussed. DDD had a chance to talk to Pezzini about the challenges facing Africa’s agriculture and how these are being analysed at the OECD Development Centre. Pezzini stresses the importance of considering overall rural development, not just agricultural development for rural communities. He sees the increase in population as a huge opportunity for Africa that could either help solve other problems or become a curse.

The OECD Development Centre brings together many different perspectives from the North and South. What are the most controversial issues and trends currently being discussed? Is agriculture a topic of discussion in the forum as well?

Mario Pezzini: If we go back in time, the North and the South didn’t share a common understanding of what was going on in emerging markets: In the 90s, 13 non-OECD countrieshad a growth rate more than the double that of OECD countries. Between 2000 and 2010, a total of 83, not just 13, countries enjoyed a growth rate more than double that of OECD countries. This resulted in a geographical shift. The geographical absolute centre of the economy, as stressed by the London School of Economics, was between Europe and North America in the middle of the Atlantic Ocean 40 years ago. The same exercise now locates the  very centre between Turkey and Iran. It is moving further east towards China and the South. A shift in wealth is taking place ex normal. Today, the picture is little bit more blurry, but the geography of the world has definitely changed.

A second important point is: What does being a developing country mean today? Are developing countries demanding cooperation and resources in order to follow the same path as developed countries have undertaken in the past? Today we are witnessing a wide range of development paths. There is no doubt that similarities in development do exist, but there are also differences in how development has taken place. We cannot just look back at our own history and say to developing countries: “Copy us and you will be successful”. Ideas and best practices come from everywhere, from developing and developed countries alike. This is the major point we focus on at the OECD Development Centre: The narrative of development has changed, and so has the agricultural sector in development.

Economic partnership agreements (EPA) between the European Union and several African countries are currently facing harsh critique. Many African economies are still monocultures that only sell primary products. Are EPA going to make it even harder for African countries to progress?

Most of these agreements are still under discussion, so the outcomes are not finalised. African countries often lack a local level of services and inputs to develop other types of production.

In many cases, agriculture continues to be based on the family model where a variety of products are grown, but not sold to the national and international markets. The capacity to improve productivity is still weak. How can this mode of production coexist with large-scale farming? How will Africa be capable of further developing rural societies and providing rural support for a different type of agriculture?

This is currently one of the big debates: On the one hand, we have people like Vandana Shiva who support small-scale farming and on the other hand people demanding more investment into modernizing rural economies. Is it possible to modernize small-scale farming as well?

I think that we have to focus on rural development in Africa in general. Agriculture is one important component of rural development, but not the only one. One of the major challenges for Africa, and also a huge opportunity, is the enormous population growth. The population is set to double by 2050. We have seen that China and India benefited from a strong increase in population, which allowed them to enlarge their employment base and improve their societies.In Africa today, there is only one young person for every old person. Population growth will mean there are several young people to support every old person. This will free important energy for growth and development. But what if these young people cannot find jobs, and especially jobs they perceive as decent? Social tensions will intensify. Increase in population is taking place throughout the continent, though more strongly in the centre of Africa, which is exactly the part of Africa where industrial development and the diversification of the economy have been the weakest. It is taking place in urban and in rural areas alike. So the bottom line for rural areas will not just be what to do about agriculture but first and foremost: What will happen to people in general, and youth and women in particular, as agriculture industrializes, as it becomes more and more productive and capable of generating exports? It is likely that its capacity to absorb young people and population in general, will drop in the medium and long term after an initial adjustment. This will likely drive a rural exodus with people leaving for the cities.

If this takes place at the same time and in parallel to manufacturing industrialisation, the population in the cities will increase, but not the number of jobs. We are currently observing jobless growth in Africa. This generates serious social problems in urban areas.  The solution to this problem lies back in the countryside, at least in part. We need to come up with development ideas for rural areas where agriculture is crucial. It is not the only sector though, and therefore other types of employment besides agriculture are needed. So is a different type of agriculture besides large-scale intensive production conceivable? The answer is yes, obviously, because there are different types of agriculture that depend on what is produced, the way it is produced, and the market in which it is sold. Strengthening local markets will be crucial so that more sophisticated products can be sold. Producing sophisticated agricultural products does not necessarily require a large scale and the use of chemicals and pesticides. The big picture is still the transformation of rural areas as a whole and not just of agriculture.

We have talked a lot about conflicts, challenges and differences. But in the evaluations the OECD Development Centre undertakes, what practices do North and South agree upon that can help eradicate hunger?

There is a wide capacity for creating dialogue and exchanging experience – despite how it may seem. When Korea held the Presidency of the G20, it introduced a point called “knowledge sharing” to the agenda of the G20 Working Group on Development.

For a long time we thought that the only factor missing was financing for development. We thought that by investing money we could temporarily compensate the poor and then reduce poverty on a permanent basis. The idea that we could also share some of our success stories only came up later. There is one important condition: Coming together at tables where participants have equal voices. We need to build trust among the actors in order for this to happen. I mentioned some areas in rural development, in regional development, but there are many more policy fields in which this exchange could take place.

One point must be clear though: The learning curve does not just run from North to South. It can also go from South to North. I have a good example: conditional cash transfer programmes (CCT), a very well-known social policy for the poor in which the government gives money to the poor. Funds are given to women instead of men and the requirements are that they send their children to school and to see a doctor. The first three countries to implement it were Brazil with the Bolsa Família program, Mexico with Progresa, and Bangladesh with the Female Secondary School Assistance Program II. Today there are more than 83 countries that have applied this scheme, most recently the US in New York City. So you can easily see that you can learn from all sides.

 


 

This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.

Opinion: Starting with Africa

By Erastus J. O. Mwencha, Deputy Chairman of the African Union Commission, and Mario Pezzini, Director of the OECD Development Centre

As world leaders prepare to gather in New York to adopt the Sustainable Development Goals (SDGs), leaders and citizens across Africa already have outlined bold goals for the continent’s economic and human development. Africa’s Agenda 2063 sets out an ambitious vision. It reflects close coordination among the African Union Commission, the UN Commission for Africa, the African Development Bank and the New Partnership for Africa’s Development, because Africa’s solutions need to be homegrown. And it prioritizes the continent’s economic and social transformation by catalyzing industrialization and modernization efforts, people-centered development that values gender equality, responsive and democratic governance as well as peace and security.

The tipping point for Agenda 2063’s vision for sustainable prosperity may very well come as Africans focus on two intertwined drivers of economic growth: productive transformation and regional development. Regional development addresses the broader demographic and spatial dimensions of structural transformation. Development strategies that involve local actors and valorize local assets can unlock untapped potential by better valuing the diversity of African regions and by better connecting them, sowing the seeds for a more sustainable and faster structural transformation.

Africa’s unprecedented demographic change is perhaps one of the best explanations for why productive transformation and regional development are increasingly interconnected in advancing long-term development solutions. As Africa’s population increases—an additional 1.2 billion people will call Africa home over the next 35 years—the dependency rate between old and young decreases. This decrease is an opportunity, but it can also turn into a challenge: More than 29 million young people on average will be entering the labor force each year until 2030 in need of jobs.

Creating those jobs requires a plethora of strategies.

Natural resources need to be better exploited and in a more sustainable way. Botswana used its bargaining power as a major world diamond producer to promote forward linkages between diamond extraction by an international corporation and cutting and polishing by local manufacturing companies. Is this a model on which we can build?

Africa needs to be supported to tap in a greater share of global value chains. At present, Africa produces only 2.2% of the world’s production of intermediary goods. While the opportunities offered by greater participation in global value chains are significant, the impact on job creation in formal enterprises has been limited so far.

Space needs to be created for private sector-led activities to spur greater entrepreneurship. The urban informal sector can have annual capital returns of up to 60 or 70 percent, but economic, institutional and social constraints need to be removed to enable entrepreneurs to enhance their competitiveness, expand their businesses and enter the formal sector.

The public sector needs to be strengthened and empowered to play the part of a policy driver. Given strong population growth and the need to maintain financial efficiency, the role of the public sector as an employer may expand but, in itself, is insufficient. African governments employ about 25 million people aged 30-64, about 10 percent of Africa’s population in this age group, but only 14 million people aged 15-29 or about five percent of Africa’s population in this age group.

In reality, no one strategy for job creation is enough. Rather, the 2015 African Economic Outlook argues that designing an appropriate mix of strategies that is tailor-made to each particular African context offers the greatest promise. Innovative development strategies maximize the diverse potential of different regions.

Realising both Agenda 2063 and the SDGs in the African landscape reaffirms a fundamental truth: Development solutions need to be created by Africans for Africans. At the same time, engaging in robust dialogues and constructive peer-to-peer exchanges of experiences with developed and developing economies—including Germany and other member–countries of the OECD Development Centre—may provide Africans with insights and information to make evidence-based choices that push innovation in development policies and practices.

This article first appeared in Deutsche Welle  on September 8, 2015. Read it anew here: http://www.dw.com/en/opinion-starting-with-africa/a-18702267 


This article should not be reported as representing the official views of the OECD, the OECD Development Centre or of their member countries. The opinions expressed and arguments employed are those of the author.

How the private sector can advance development

By Lorenzo Pavone, OECD Development Centre EMnet Co-ordinator; Kate Eklin, Policy Analyst; Myriam Grégoire-Zawilski, Programme Assistant; Josep Casas, Trainee

The Millennium Development Goals (MDGs) launched in 2000 centred on addressing basic human needs throughout the developing world. The recently adopted Sustainable Development Goals (SDGs) for the post-2015 era focus on economic growth, social inclusion and environmental protection as interconnected dimensions of broader global development. Unlike the MDGs, achieving this new set of ambitious goals calls for bolder action from diverse actors across society, whose collective efforts outweigh what they could deliver individually. And the private sector is not least among these actors. Why? Business-led initiatives, such as research and development partnerships, knowledge-sharing platforms, technology and skills transfer, and infrastructure investment have the potential to kick-start development, enable productivity gains, generate better quality jobs, strengthen skills and promote technological advances. Continue reading

Industrial Policy: Not a bad word

By Annalisa Primi, Senior Economist and Head of the Policy Dialogue Initiative on Global Value Chains, Production Transformation and Development at the OECD Development Centre

Today, economic transformation is a concern in OECD and non-OECD countries alike. The Action Plan for Accelerated Industrial Development in Africa, included inAgenda 2063 or the Africa Union’s vision for the continent’s development, states that:”No country or region in the world has achieved prosperity and a decent socio-economic life for its citizens without the development of a robust industrial sector.” Similarly, the United Nations Economic Commission for Latin America and the Caribbean has long called for diversifying production and promoting innovation to achieve higher equality in the region. Chile, an OECD country, is aiming at raising productivity by promoting the creation of domestic innovative enterprises. The national corporation for industrial development (CORFO) is investing in improving technology transfers, start-ups and social innovation. Continue reading

How to continue the shifting wealth momentum

By Carl Dahlman, Head of the Thematic Division and Head of Global Development Research at the OECD Development Centre and Martin Wermelinger, Economist at the OECD Development Centre

Strong growth over much of the past decade has substantially boosted developing countries’ share of the global economy and accelerated per capita income convergence with richer countries. We call this process “shifting wealth.” However, productivity is still lagging and growth is too low to allow continued convergence. Low productivity also challenges more inclusive and sustainable development. This blog argues that developing countries have many opportunities to boost productivity.

Non-OECD countries’ weight in the global economy is today above that of OECD countries in terms of purchasing power parity, a measure of what money will buy in different countries. This is remarkable especially since their share stood at around 40% just 15 years ago. This change in relative economic size of developing versus developed countries is being led by the BRIICS, particularly China and India. Together, these two countries account for almost one quarter of global GDP.

Non-OECD countries already surpass OECD countries in share of global GDP

fig1.PGD

Despite the momentum towards convergence, several lower middle-income countries, such as India, Indonesia and Vietnam, and countries in the upper middle-income bracket, such as Brazil, Colombia, Hungary, Mexico and South Africa, would fail to converge with the average OECD income level by 2050, given their average growth rates since 2010. In fact, the growth differential between OECD and non-OECD countries has narrowed dramatically relative to the pre-2008/09 crisis period. Their challenge is deepened by the recent slowdown in China, where rapid growth has up to now benefited its neighbours and suppliers, in particular natural-resource exporters.

Growth slowdowns can be associated with significant slowdowns in productivity growth. Over the past decade, productivity growth made only a marginal contribution to economic growth in many middle-income countries. It was also insufficient to significantly reduce the very large gap in productivity with advanced countries. In Brazil, Mexico and Turkey, the gap even widened. In contrast, China recorded impressive growth in productivity: around 10% annually in labour productivity in manufacturing and services.

“So, how can countries boost productivity?”

Factors associated with moving up the value chain, expanding inclusive and environmentally sustainable development and promoting effective governance are all part of the strategic mix to drive structural reforms and boost productivity. This mix includes:

Diversifying continuously into higher value-added market segments in agriculture, industry and services:Diversification is particularly important in middle-income countries that are seeing rising wages as well as those rich in natural resources.

Innovating by using global knowledge and developing domestic capabilities: Middle-income countries have significant room for technological catch-up. Besides better integrating in the global trading system and tapping foreign knowledge through trade and foreign direct investment, countries also need to develop capabilities to innovate new products and processes to better suit their own needs. This can be done by licencing technology; obtaining technology, designs, production and management assistance from foreign buyers, consulting firms and technical experts; learning from foreign education and training; copying and reverse engineering products and services; and undertaking domestic R&D.

Developing skills: In many middle-income countries, improvements in educational attainment and deeper integration into value chains have often been insufficient to ensure the competitiveness of the labour force. This suggests that education policies need continuously to adapt the supply of skills to the economy’s changing needs.

Reforming product and financial markets: In many middle-income countries, the development of competitive, innovative businesses is often constrained by an inadequate regulatory environment.

Fostering competitive service sectors: The domestic service sector can grow to meet the demand of the growing “middle classes.” Increased use of services, like engineering, R&D or marketing services, also improves the competitiveness of manufacturing. Moreover, some knowledge- and information-intensive services, such as ICT, and business services can help to improve the efficiency of the economy and can be themselves a source of export earnings. Emerging digital services such as big data analytics and the Internet of things are likely to have game-changing impact on inclusive and sustainable growth.

Growing inclusively: Development challenges are about much more than just economic growth. Many emerging and developing economies have been capable of reducing poverty over the last two decades. At the same time, however, income inequality is increasing in many of these economies. Moreover, the Arab Spring and rising social tensions in other developing economies make clear that social cohesion and equality of opportunity to more broadly share the benefits of economic opportunity deserve greater attention. This also requires identifying regional competitive edges and increasingly tailoring public services to local needs. For example, productive employment and firms can emerge in any region provided they nurture environments conducive to entrepreneurship.

Investing in “greener” growth: The problems of environmental damage caused by growth also raise issues of environmental sustainability. Diversifying into less energy-intensive sectors and adopting energy-efficient technologies would reduce vulnerability to fluctuations in energy prices and changes in regulations and preferences.

Developing capable and effective governments: Better training of government officials and improved coordination across government ministries are essential to ensure effective planning and implementation. Bold changes in strategies may be politically difficult and costly, though less so than no change. Effective communication strategies and the right timing and sequencing are critical to obtain support by multiple stakeholders to implement reforms. China’s rapid rise had been in large part due to its determined, target-oriented government with a vision to address changing economic challenges. It made bold reforms that were possible through effective organisations and procedures to implement the necessary steps. Other countries with more democratically-organised governments need to engage in effective consultations with key stakeholders to build support for necessary reforms and to develop capabilities to implement those reforms.

“Though “shifting wealth” has become more complicated, it can continue.”

A current period of low commodity prices, a slowdown in China as the global growth engine and political turbulences in larger emerging economies mean that other developing countries can today less easily free-ride on the bandwagon to global convergence. Yet, developing countries have a number of practical opportunities to tap their own strengths to advance structural reforms and boost productivity and inclusive, sustainable development.

Africa, a European Priority

By Mario Pezzini, Director of the OECD Development Centre, and Romano Prodi, former president of the European Commission and former United Nations special envoy for the Sahel

How should Europe view Africa? One day the headlines are optimistic: it’s the fastest growing region of the world, with an expanding middle class. The next day, tragic news about terrorist attacks and uncontrolled pandemics paints a far more sombre picture.

It is these two sides of a single, quickly evolving reality that we must understand in order to find an answer.

Thanks to world demand for its raw materials, to its demographic dynamism and to the growing demands of its middle class, the African continent has been becoming wealthier since the start of the 2000s at an average annual rhythm of 5.1%. This is double the rate of the previous decade and three times greater than in the countries of the Organisation for Economic Co-operation and Development (OECD) over the last 10 years.

The oil-producing nations are the first to benefit from this favourable context: forty years after becoming independent, Angola is thus in a position to propose aid to its former colonial power, Portugal, which has been weakened by the economic crisis. But other countries less rich in raw materials, like Ethiopia, are also seeing their situations improve. The continent’s new fortune is largely due to the re-emergence of China over the last three decades, which has carried 83 developing countries to per capita growth rates at least two times superior to those of the OECD countries.

STRONGER, MORE INCLUSIVE GROWTH
Still, even if we can salute Africa’s improved performance, we would be wrong to be satisfied: it needs stronger, more inclusive and more durable growth. With very low income levels as a starting point, most African economies are progressing at a rhythm that lags far behind the 30 years of 10% growth that China has just experienced. Their savings rates remain far below those of Asia’s economies at the time when they took off, and the economies of many African countries are still dependent on external financial flows.

Furthermore, growth in Africa is still creating too few jobs. On the eve of the Tunisian revolution of January 2011, all of the economic indicators were very strong; none managed to tap into the frustration of a population lusting for freedom, and especially of young, educated people without jobs, excluded from the benefits of growth. On the continent as a whole, fewer than 10% of young people have decent jobs, the rest working either in the so-called informal sector or without pay on family farms.

The continent’s institutions, first and foremost the African Union, have made the correct diagnosis: current growth is not sufficient; what Africa needs is economic and social transformation. This will not flow naturally from the current episode of growth. Public strategies and policies will be necessary to encourage economic diversification, enhance competitiveness and promote activities that are better able to create jobs and value on African soil.

DIVERSIFICATION OF INDUSTRY

Governments are gradually putting in place these strategies, in which the considerable natural resources of the continent have an essential role to play. But there is still much to be done: on average, spending on exploration for these African mining resources is 13 times less per square kilometre than in Canada, Australia or Chile.

Moreover, the exploitation of these resources and the revenues they generate should serve to trigger a diversification of African industry and exports. Here again, the challenges are considerable, notably due to the small size and fragmentation of the internal markets of numerous African countries.

We can applaud the surge in African trade – which has increased more than fourfold over 10 years – but African participation in the global trade in intermediate goods, a good indicator of the ability of countries to reap the benefits of international trade and global value chains, is barely more than 2%. Africa remains largely a provider of raw materials, which will go on to gain added value in Asia or the countries of the OECD.

Finally, nascent economic wealth does not automatically translate into well-being for the population. The establishment of stable and efficient institutions that can guarantee peace and prosperity is a long-term process. Thus public services on offer – in health, education, security, justice, etc. – do not follow growth curves, in Africa or elsewhere. An illustration is the inability of the countries affected by Ebola to respond to the health crisis – including Sierra Leone, which according to recent predictions should experience double-digit growth in 2015. It would be wrong to view this as merely the effect of poor governance and misappropriation of funds. These phenomena exist, but even when efforts are sincere, progress takes place only slowly.

The taxes collected by African states, which must finance these public services, are in many cases derived mainly from royalties paid by multinational companies in the energy, agriculture or mining sectors. As for the taxation of local business, all too often it strangles small and medium-sized enterprises, while too many ‘informal’ transactions, including large ones, go untaxed. This is not a solid foundation for a social contract between a state and its citizens.

The economic transformation should enrich African businesses, workers and consumers so that they become, through fair taxation and efficient public policies, the first providers of their own well-being.

Europe cannot be content merely to hope for these changes. It must dig into its financial, human and technological resources to adapt its capacity for co-operation to Africa’s new strategic and economic circumstances. More than financial aid, what is needed is the sharing of experience, technology and knowledge. Europe must assume its solidarity with the project of transforming the continent: Africa is far too close to us to be considered a foreign affair.

This article first appeared in Le Monde on October 14, 2014. Read it anew here in French http://www.lemonde.fr/idees/article/2014/10/14/l-afrique-une-priorite-europeenne_4505633_3232.html and above in English.