Private Sector Development and Domestic Resource Mobilization
Date: Wednesday 8 June 2011
Venue: Lisbon Congress Center
Time: 11:00 a.m. - 1:00 p.m.
Mr. Tendai Biti, M.P., Minister of Finance, Zimbabwe
Mr. Jalloul Ayed, Minister of Finance, Tunisia
Prof. Njuguna Ndung'u, Governor, Central Bank, Kenya
Mr. Noah Greenhill, Senior General Manager: Marketing and Business Development, JSE Securities Exchange South Africa
Mr. Jean Baptiste Compaoré, Deputy Governor, BCEAO, Senegal
Mrs. Nonkululeko Nyembeziheita, Chief Executive Officer, ArcelorMittal South Africa (AMSA)
Mr. Arnold Ekpe, Director General, Ecobank, Togo
Mr. Patrick Smith, Editor, Africa Confidential
Africa’s near term economic outlook remains very positive, despite the recent adverse effects of the global economic crises. Over the last decade, productive internal structural reforms, progress in regional integration, improved political climate and reduced conflicts have combined with a largely favourable external environment – in terms of higher commodity prices and increased resource inflows - to spur economic activity. Moreover, the considerable improvement that has taken place in the business climate has enabled private sector activity to generally respond positively to government programmes.
However, the global economic crisis has shown how uncertain external flows are for African governments.
Several countries faced reduced export revenues; considerable uncertainty was experienced with regard to future foreign investment and aid inflows, while high levels of indebtedness remained a concern. In fact the global economic crisis has given a new impetus to dialogue on domestic resource mobilization in Africa to effectively and sustainably bridge the persistent development-financing gap.
The recent global uncertainty poses important challenges to fiscal policies in Africa and more so in the most vulnerable African countries. Public finances are under additional strain in Africa as aidproviders are facing significant fiscal shortfalls at home, and are forced to take severe fiscal adjustment measures.
Various factors have amplified the importance of increasing domestic resources in Africa, not necessarily by increasing taxes but by improving the efficiency of the tax administration and the broadening of the tax base through a vibrant private sector. Indeed, as the UnitedNations’ Monterrey Consensus on financing for Development acknowledged earlier in 2002, external financial resources for development are inadequate towards meeting the MDGs. The Monterrey Consensus stressed the necessity to develop new strategies by mobilizing domestic resources.
The attractiveness of Domestic Resource Mobilization (DRM) is quite apparent. DRM avoids the restrictions and conditionality often present in financing from external sources and is also likely to support increased domestic ownership of the development agenda. DRM also hedges against the potential volatility of access to external resources such as FDI and export earnings. Increased DRM through a well-functioning financial system will contribute significantly to private sector expansion.
Indeed, global development success stories indicate that better mobilization of a country’s own resources and less dependence on aid and other foreign finance, are key for sustained, strong and shared growth.