IN a bid to bolster private investment in Africa, Rebeca Grynspan, the Secretary-General of the UN Conference on Trade and Development (UNCTAD), has stressed the necessity for African nations to initiate sincere conversations with credit ratings agencies. Addressing concerns over perceived risks, Grynspan highlighted the pivotal role of such dialogues in fostering a conducive environment for investment.
Speaking at a High-Level Roundtable focused on global financial architecture reforms, Grynspan emphasised the urgent need for reforms underpinned by the provision of long-term and affordable financing to Africa. She advocated for the establishment of more robust and effective multilateral development banks to attract private investment.
‘We need banks that are better in the sense that they have to draw in private investment,’ stated Grynspan. ‘Even if they are bigger, they will not be enough; we need to crowd in private investment,’ she told the Roundtable at the recently concluded annual Conference of Ministers, organised by the UN Economic Commission for Africa (ECA),
A significant reform proposed by Grynspan involves channelling the International Monetary Fund’s (IMF) Special Drawing Rights (SDRs) through multilateral development banks. Notably, the African Development Bank has presented a credible and robust programme for the implementation of this strategy.
‘Africa’s allocation of IMF’s SDRs remains disproportionately low. With a population of 1.2 billion people, the continent received only $33bn, accounting for just 5 percent of the total issuance of $650bn in 2021,’ she added.
Meanwhile, African nations are implementing innovative measures to boost domestic resource mobilisation and attract investment. Zimbabwe, for instance, has introduced taxes on mobile money transfers and levies on unregistered informal businesses operating within buildings. Additionally, the country has developed a framework to leverage carbon credits.
‘We are implementing innovative measures to boost domestic resource mobilisation,’ said Mthuli Ncube, Zimbabwe’s Minister of Finance and Investment Promotion. ‘These include a 2 percent tax on mobile money transfers, a levy on owners of buildings from which unregistered informal businesses operate, and a sugar content levy on beverages.’
Other nations, like Cabo Verde, are exploring avenues such as green and blue bonds to unlock climate financing. Adalgisa Vaz, Cabo Verde’s Secretary of State for Business Development, proposed that African financial institutions take a leading role in risk assessment to address credit risk perceptions effectively.
‘We need to deal with credit risk perceptions,’ Vaz emphasized. ‘It’s time that African financial institutions like the AfDB, Afreximbank, and insurance firms started taking a lead role in risk assessment.’
Senegal is directing investments towards renewable energy and offering tax incentives to firms adopting green policies. Minister of Economic Affairs, Planning, and Cooperation, Doudou Ka, highlighted the government’s commitment to sustainable development and its efforts to penalise polluters while rewarding environmentally responsible businesses.
‘As a government, we are directing investment towards renewable energy,’ Doudou Ka said. ‘We are also offering tax incentives to firms that implement green policies, with penalties for polluters.’
As Africa navigates the complexities of global financial systems, concerted efforts towards reform and innovative financing mechanisms are deemed crucial to unlocking the continent’s economic potential and fostering sustainable development.