International financiers establish a Sh1.2 trillion emergency fund to support trade and investment. / Courtesy: google pics
International financiers ramped up efforts to stave off economic recession in Africa with the establishment of a $15 billion fund to support small and medium-sized enterprises that have been the main drivers of growth in the continent over the past decade.
The fund, an initiative of the African Development Bank (AfDB), the French Development Agency (AFD), and Development Bank of Southern Africa, will support intra-Africa trade, boost lending to agribusiness, and finance key infrastructure that supports businesses across the continent.
Other contributors to the fund are the European Investment Bank, the German Financial Cooperation, the Islamic Trade Finance Cooperation, and the World Bank.
Dr Donald Kaberuka, the AfDB president, said Africa was looking for a private sector-driven response independent of the public sector.
He said the scope and magnitude of the global economic crisis demands that Africa seeks innovative ways to support its vibrant private sector, especially at the micro-level.
“This is the first time that Africa is facing a crisis whose origin is external. Such a crisis calls for a different response,” he said.
Under the plan, AfDB will use an emergency liquidity facility worth $1.5 billion to support countries that have been hit hardest by the global financial crisis and need immediate cash injection.
An additional $500 million trade finance line of credit will be available to agribusinesses and microfinance institutions.
Financing agreement Under the financing agreement reached at a conference in Dakar, AFD will contribute $3.1 billion to finance SMEs and infrastructure projects throughout the continent.
AFD plans to raise $1 billion through the African Agriculture Fund to boost agricultural productivity by supporting private companies and cooperative co-societies.
The Development Bank of Southern Africa’s $4 billion contribution will be spent on infrastructure development and finance training to the tune of $50 million.
Dr Kaberuka said the European Investment Bank will support infrastructure and energy projects through the Africa Infrastructure Trust Fund — an initiative of the European Commission.
The German Financial Corporation will contribute $1.4 billion to support finance and private sectors while an additional $1.1 billion from the KfW Bankengruppe will target infrastructure initiatives.
Over the next five years, the Islamic Development Bank Group will support new investments on the continent to the tune of $250 million, while maintaining its annual commitment of disbursing $150 million in credit lines for African enterprises.
The World Bank Group is expected to contribute $1 billion for trade financing as well as help banks boost their capital, while the Multilateral Investment Guarantee Agency pledged up to $2 billion of investment guarantees for infrastructure development, SMEs support and financial sector development.
The proponents of the initiative reckoned that these efforts, backed by improved governance, will reduce the humanitarian toll of the global economic recession on Africa.
“We (Africa) are paying the price of globalisation, everyone will feel the effects of the crisis, but what we need now are emergency responses and practical solutions that can prepare our economies for the shocks,” said Nathalie Gabala, head of regional development organisations in Africa at Standard Chartered Bank.
Sceptics, however, argued that while the plan looks good on paper, its real worth would be determined by how closely it is followed given the many competing interests and priorities that governments and institutions have across the continent.
There is also the issue of capacity, the governments may have different levels of capacity and so there may not be a uniform response to the challenges posed the financial crisis resulting in different levels of success.
Besides, it remains to be seen whether the pledges will be met and how fast the cash outlays will reach the most exposed sectors in Africa’s fragile economies.
But that Africa is taking its destiny in its own hands with the pragmatic plan of emerging stronger out of the global economic crisis is an indication of a region ready to stake its claim in the global economic arena as a partner.
“At the moment the contributions may not seem much, but such practical and quick responses are crucial,” says Ms Gabala.
While there are concerns that the $15 billion may not be enough to support all the African economies exposed to the global recession, participants say the response is timely given the rapidly evolving nature of the global economic crisis.
What may have started out as a crisis facing the developed economies is rapidly changing to one that will hit the world’s poorest regions hardest.
The overwhelming consensus among participants in the Dakar conference is that if unchecked, the global economic crisis could become a social and political crisis in Africa undoing any economic fundamental gains made over the years.
Deliberations At forums such as the Dakar conference, what typically tends to happen is that the key challenges that are thought to be of interest to all the participating stakeholders are tabled and discussed.
This is usually done through keynote addresses by selected speakers which are then discussed in cluster groups or workshops.
Resolutions from the cluster groups are then put to the plenary for formal adoption.
If they are not adopted at this stage then the final outcome or the final contents of the agreement may either be put forward for further discussion at a ministerial level through inter-ministerial dialogues of those countries in attendance or it may even be put forward at an intergovernmental heads of government meeting to be adopted at the highest of levels.
PAYE Tax Calculator
Note: The results are not exact but very close to the actual.
