The fall in commodity prices has posed a significant shock for the countries in Africa, newly appointed Chief economist for Africa Region at the World Bank, Albert Zeufack says the continent is in a critical moment which should be seen as an opportunity. CNBC Africa’s Naija247news followed his perspectives on Africa.
How best do you think the Continent can truly diversify its economy?
ZEUFACK: We need to increase productivity in the Agricultural sector, which would free up some resources to contribute to other sectors and also the need to improve the management of our cities. Urbanisation has the potential to be a spring board for economic diversification but this means that our cities have to be more liveable, more connected, create space for density and agglomeration efforts. Our cities have to be better managed. Also, Macro policies are very important. We need to realise that a Country cannot export with an over-valued exchange rate especially when exports are in the low-wage low skill manufacturing, the exchange rate management is absolutely critical. The World Bank is working with different Countries to make sure those opportunities for diversification take place.
Talk us through your economic growth for Africa for 2016
Zeufack: Sub-Saharan Africa remains one of the fastest growing regions in the world. For 2016, we project that growth will remain subdue at around 3.3percent and this slowdown is driven by lower commodities price and a slower than expected growth in China, rising borrowing costs and some developments in domestic shocks in some economies across the country. For 2017 and 2018, we expect average growth to be around 4.5 percent and this pickup would be driven by stabilization in commodity prices and slow recovery of demand in global markets and continuous momentum in a number of net oil importers across the continent such as Cote D’Ivoire, Ethiopia, Rwanda and Senegal. More importantly, it should be noted that Africa is resilient and this crisis should be an opportunity to step up reforms on the macro sectors and also step up structural reforms to diversify sources of growth in Africa.
Currently across Sub-Saharan Africa, tax revenue accounts for less than a fifth of the continent’s GDP, so there is no doubt that there has to be some scale up in that space. How best do you think that governments across Africa can go about this? In Nigeria at the moment, taxing the informal sector is a policy that the authorities are pushing forward; do you think that is the way to go?
ZEUFACK: In a number of economies across Africa, domestic revenue as a percentage of GDP remains below 15percent, in some countries, just near 12 percent and it is obvious that we need to step up efforts to increase tax collection, increase the efficiency of tax administration and also widen the net. What we are suggesting is that we need to discern between the need to widen the net and a push to actually discourage initiative and that’s extremely important. There are a number of sources of additional domestic revenue mobilization in African countries and we need to look at the taxation of natural resource sectors and into all directions and also address the reasons why some firms remain in informality. We need to improve the business climate to allow some firms move into formality and therefore contribute to the tax effort.
Do you think enough is being done by the government in terms of educating people on what taxation is about, the benefits therein before we even think of taxing the informal sector?
ZEUFACK: In the 80s, there was a similar effort of taxing the informal sector across African Countries and we need to look at the outcome of that effort; In some cases, these actually end up increasing corruption because tax administrations were not up to the task and the efficiency of the tax system was not taken into consideration, so it is important to discuss taxation and expanding the tax net towards the informal sector through those lenses. It is mostly important to discuss the efficiency of tax administrations.
Let’s look at the role inter-trade can play in this whole equation, do you think Africa’s growth projection would look better if Africa begins to buy Africa?
ZEUFACK: I had the opportunity of sitting in at all delegation meetings for the World bank and IMF last month and one issue that came across quite strongly was the issue of economic diversification and its transformation which is linked to the need for African countries to start creating well-paying and productive jobs, so there is undoubtedly the need for African Countries to start transforming some of their natural resources and adding value to create more jobs in Africa.
What quality of human resources do you think the continent requires to achieve its development aspirations?
ZEUFACK: There is need for a push to increase skills that are specific to some industries in Africa but overall the level of education that is needed to start that transformation may not be the biggest constraint, it is important for governments to strengthen vocational training, to provide more specific skills for enterprises to prosper.