EMTA sponsored an Africa Workshop to explore “Financing African Development Post-HIPC: What Role for the Private Sector?” at UBS’s offices in London on November 5, 2007. The Workshop brought together traders, investors and other Africa experts in the private sector financial community, including sovereign advisors, rating agency and trade association representatives; members from the donor community from both international financial institutions (IFIs) such as the IMF, World Bank and the African Development Bank and from G7 Finance Ministries, including the U.S. Treasury; and representatives of key African central banks, including Nigeria, Kenya, Zambia and Ghana, for a broad-based discussion about how African governments can best tap foreign sources of funding so badly needed for development and not end up with an unsustainable debt build-up.
The objectives of the Workshop were several-fold. In the first instance, EMTA provided a forum for an exchange of views among the official sector, private sector and African governments, on a variety of issues affecting government access to private sector financing. Next, the Workshop was an opportunity to change perceptions and build confidence between the private and official sectors generally, or at a minimum promote a clearer understanding of who stands where on the issues. And finally, the Workshop was organized so that participants could make recommendations for re-defining roles and aligning incentives of sector participants in recognition of each sectors comparative advantage and goals with respect to their engagement in Africa.
Workshop participants had all been invited to attend due to their unique expertise and interest in the issues, and the meeting took place under the Chatham House Rule. A summary of the discussion and the conclusions of the meeting is being drafted by Clifford Chance, LLP, under the supervision of Andrew Yianni. This report will be widely circulated amongst African governments and the donor community and be made available to EMTA members as soon as it is available.
The meeting consisted of two plenary discussions to address issues of common concern among the constituents, followed by break-out sessions to discuss specific issues, ending with a final plenary session where the group received reports from the break-out sessions.
Clay Lowery, Assistant Secretary for International Affairs of the U.S. Treasury, who has spent much of his career looking at issues affecting Africa, delivered the opening remarks, in which he broadly outlined the greatly improved economic performance of many African economies and highlighted the U.S. government’s support for increased private sector financing in Africa as a necessary driver of continued growth.
The first two plenary sessions were moderated by Martin Wolf, Chief Economics Commentator for the Financial Times. Mr. Wolf ably led a refreshing and very frank exchange among the 70+ participants during these plenary sessions by combining wit, authority and expertise.
The first Plenary Session considered the following issue and questions:
“Post-HIPC Africa presents unique challenges for both development and finance. At a moment in which many funding models, old and new, are being explored, what are the optimal financing strategies for African countries with specific basic infrastructural needs? How can African economies benefit from the diverse financing options presented by donors, the market and other players, such as China? What are the most pressing issues which must be addressed before African economies can take advantage of increased market finance? How do African governments and those representing their interests; the private sector (international bankers and fund managers); and the official sector policy community, see the issues?”
The discussion began with short presentations on the perspectives of the various constituents. For the African perspective, we heard from Francois Ekam-Dick of Iroko Securities, supported by comments from the African central bank representatives; for the private sector perspective, Richard Segal of Renaissance Capital and Alex Garrard of UBS commenced the discussion, supported by other representatives of the private sector, notably Jan Dehn of Ashmore Investment Management and Moctor Fall and Graham Stock of JP Morgan; and for the official sector perspective, Charles Blitzer and Benedicte Christensen led the debate. A general discussion followed, which was designed to bring the positions of the various participants closer together.
In Plenary Session 2, participants were asked to consider how to make the markets work for Africa. Specifically, the group was given this issue and set of questions:
“Now is a moment of transition and opportunity for African governments, official sector policy makers and private sector investors. Although much progress has been made to improve debt management and governance, address corruption and develop regulatory frameworks in many African countries, major challenges remain. African economies must engage the markets to meet development financing needs but can only do so effectively if continuing weaknesses and accompanying negative perceptions are addressed. How can incentives be aligned and roles re-thought to make the most of this unique moment? Where do responsibilities fall between the African governments, private investors and official sectors to address these challenges and how can the burdens of risk be shared? What innovative mechanisms, models and policies can be brought to bear on these challenges?”
The objective of Plenary 2 was to assign specific issues for the subsequent break-out sessions to discuss in more detail. Much of the discussion centered on the changing roles of the IFIs, and ways they might promote an increased role for the private sector in Africa, with specific discussion on the World Bank’s GEMLOC initiative and queries about how the African Development Bank might direct some of its local currency financing back to the local markets.
The break-out sessions then covered four topics:
A large number of participants, including representatives from the Zambian and Nigerian Central Banks and several fund managers, exchanged concerns in the session on Improving Local Markets. This session was tasked with addressing how to improve the breadth, depth and liquidity of the African local markets; prioritizing actions for development and reform; and applying lessons from other EM markets to promote development of African markets. Discussion included the disincentivizing role of taxes and the thresholds of returns required to maintain market interest.
A large group of participants, including a number of key traders and investors, IFI and G7 Finance Ministry representatives participated in the session on Financing Development: Private Sector – Public Sector financing. This group considered issues associated with African governments accessing international markets, including addressing concerns of the IFIs about avoiding a new debt bubble and ensuring effective use of funds, and exploring innovative private sector-public sector structures and mechanisms to encourage private sector flows (e.g. GEMLOC Fund and OPIC Africa Bond Fund). This discussion exposed a number of differences between the various constituents in both defining the issues of concern and addressing them. Surely this topic will be addressed again in future encounters between the private and official sectors.
A smaller group of experts discussed Market Sustainability: Creating conditions for increasing private sector investment in the private sector. This session looked to the future to identify policies to promote private to private investment, which all agreed is the real path for effective and sustained economic growth in Africa. Topics the group addressed included looking at the role of sovereign benchmarks and corporate ratings to encourage private to private investment, and promoting international standards in governance, accounting and disclosure amongst African corporates.
Finally, the smallest, but by no-means least important group, looked at Official Sector -Private Sector Communication and Cooperation to discuss how the sectors can better share information that reflects each sector’s expertise, and whether more formalized, or at least more regular opportunities to communicate and coordinate could be instituted.
The group then reconvened in Plenary 3, which was chaired by Andrew Yianni of Clifford Chance, to hear reports from the break-out sessions.
The day wrapped up with Moctar Fall of JP Morgan, who delivered very inspiring closing remarks with a plea to the group to begin to put into practice some of the recommendations and suggestions that were developed throughout the day.
By all accounts, the Workshop achieved its objectives, and EMTA looks forward to working with the Workshop participants and others to continue to provide a forum for the discussion and resolution of issues related to financing African development. These issues are important for Africa, but are also important for EMTA and the Emerging Markets industry as a whole, as more and more EMTA members seek opportunities in this new credit frontier.
For questions about the Workshop, please contact Starla Griffin at sgriffin@emta.org.