Exclusive Interview with Vera Songwe, executive secretary of UNECA
What are UNECA’s current priorities in its mission to promote economic and social development across Africa? The organisation’s new executive secretary spells out her objectives to African Business.
You’ve released a number of statements since taking office as executive secretary of the United Nations Economic Commission for Africa (UNECA) last August. What are the big ideas – what are the big projects you want to get involved in?
First of all, ensuring the good work African countries have done to bring their macroeconomic environment into shape and have stable credible macroeconomic trajectories continues. There is a growing concern around our debt-to-GDP levels but I think that with the need to grow fast many countries are investing more. To continue to invest you need to raise revenue. We caution about macroeconomic stability, but we need long-term growth. So where is the balance?
Going contrary to received wisdom, which is either you are doing counter-cyclical or pro-cyclical policy, we are trying to see whether Africa can do both, which is basically saying we are going to continue to grow but we going to be very fiscally disciplined.
To do that you need to raise more resources. Can we take African countries to a 30% tax-to-GDP ratio? So the first point is macro-economic stability, the second is how can you raise the resources?
There are a number of ways in which we can do it. One is collecting better taxes. A second is innovative ways of financing. Is there dormant capital within the continent that we can use for investment and regulate in a way that works?
And then there is the whole issue of bringing more of the private sector into solutions for the continent. We know that with the growing youth bulge if we do not find jobs for the youth we will never achieve the growth we want and we may be risking instability.
And finally we are thinking about continuing the work around governance. The African Union has picked anti-corruption as the big pillar of its agenda for 2018. That’s something we also want to do. We also want to build stronger institutions for peace.
In terms of domestic resource mobilisation, how can African economies better leverage monies trapped in banks? What is the main strategy for mobilising resources on the continent?
There are three things that we will be working on. The first one is increasing the tax base. We have a large informal sector on the continent but we also have a large sector that just does not pay taxes even though they can. Most of our countries are stuck with decisions around fiscal policy and tax that were taken 15 years ago, coming out of structural adjustment. Our economies have substantially changed since then.
Can we look again at the agricultural sector? There are pockets there that could contribute to the fiscal basket. Are we taxing all of the service sector? Many countries are rebasing their GDP. As we do that we should also look at getting more money into the tax base. We need to be sure we’re capturing everything.
The second thing is looking at dormant areas of capital, at pension funds and insurance. A few countries allow pension funds to invest in their countries, one or two in cross-border investments. We would like to see if it is possible to do more and have a lot more cross-border investment.
Deepening capital markets is another way of doing it. There are not many functional stock exchanges on the continent.
We are now looking at creating ratings agencies, because part of raising capital is getting a better sense of risk assessment. We are very dependent on sovereign risk ratings, but we do have corporates that could be rated equally well, so helping them understand how they get risk ratings is something we are looking at.
ECA has done a lot of work on illicit financial flows. How can we ensure that we can get some of the resources back? We have base erosion and price shifting that is happening particularly in the mining sector. Can we stop that? We need the governance systems in our countries to improve so we don’t allow transfers of our resources that are not legal.
How has your work in the private sector informed your new role as policy chief?
In the private sector you realise very quickly how much policy is needed to make the private sector work. Each time a business goes into a country you need to understand the tax regimes, whether you can take the capital out and stability of contracts, so there is a lot of policy around that.
Working very closely with the AU – we’ve just done the Continental Free Trade Agreement – you don’t work for one business in one country. If there are some good ideas that can engender businesses across the continent then we put them forward. Having coordinated policies across the continent ensures that we have better trade and better foreign direct investment, but more importantly that intra-African trade goes better.
Take open skies policies, the common market for air transport. Those kinds of policies are important because the private sector doesn’t come unless you have them. In some sense maybe it’s working backwards, but it’s ensuring you create that space to attract the private sector. But you need to do it together, because the public sector alone does not know what the private sector needs.
Africa is new and I think with all the innovation that is happening, we can do things much faster. But you need to come to the continent to try it and we need policy which will allow you to do that.
How are your relationships developing with the leaders of the African Union (AU) and the African Development Bank (AfDB)?
The relationships are fantastic. We have the joint secretariat for what we call the three African agencies. You could say that the AfDB is the financing arm, the AU is the policy arm and the ECA is the research arm. We do the analysis and recommend the policies, then the governments put it in place and the AfDB finances the result. That’s putting it simply. All of us do a little bit of all of that.
At the ECA, as part of the UN, we have the sustainable development goals (SDGs). The AU has Agenda 2063. How can we bring those together? The AfDB funds either one of those agendas, but we have done a lot of work to show the two agendas are the same. What we want is prosperity for everybody – as the UN general secretary says, leave no one behind.
The SDGs are a much broader remit – it’s a development remit and a peace remit – so we are doing a lot more work that allows us to work a lot better and faster together.
We have relatively new leaders, relatively from the same generation, relatively working towards the same goals. I think the fact we have global agendas like the SDGs, climate change and Agenda 2063 allows us to all feed into that, so we don’t all have to create something new.
We are essentially working towards the same goals but with different comparative advantages. But we meet very regularly and we’re working very well together as bodies for the betterment of the continent.
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