ECOSOC ROUND TABLE FOCUSES ON FINANCING OF INVESTMENT IN AFRICA

GENEVA, 16 July (UN Information Service) -- An Economic and Social Council (ECOSOC) round-table discussion on the financing of investment in Africa this afternoon featured leading ministers, economists, international civil servants, business people and industry heads who talked about the best way to spur foreign investment, and what workers in Africa could do with the money.

Ndi Okereke-Onyiuke, Director-General of the Nigerian Stock Exchange, said that the international financial institutions gave loans to governments and ignored the private sector.  For meaningful development in Africa, long-term loans were needed.  The organized private sector could utilize the loans, turn them around, and make them more accessible to other people.  It was not that governments should receive nothing.  The private sector needed to be given just a little bit.

Kwesi Nduom, Minister for Economic Planning and Regional Cooperation of Ghana, said one problem was that few long-term funds were available.  Small- and medium-sized enterprises needed access to long-term capital to succeed, and their success was the only way to ensure sustainable development, he said.

Anna Tibaijuka, Executive Director of the United Nations Centre for Human Settlements (Habitat), said poverty meant the absence of food, clothing and shelter.  In Africa, poverty was the biggest problem.  Within that framework, the financing of shelter was one of the biggest challenges.  Africa also faced ignorance and disease, which were causes of poverty.

Françoise Foning, National President of the Association Mondiale des Femmes Chefs d'Enterprises, Groupement des Femmes d'Affaires of Cameroon, said that in the last 15 years, Cameroon had worked without financial assistance because there were only deposit banks -- there were no commercial banks.  Now that had changed, and it was helping businesses run by women.  She asked the United Nations to extend a line of credit in Cameroon.  The United Nations spent a lot of money on experts, she said, but women in Cameroon were experts that it could invest in.

Jean-Louis Ekra, Vice-President of the African Export-Import Bank, served as the chairman, and James Emery, Senior Economist with the International Financing Corporation, served as the moderator.

Delegates asked whether there could be guarantees to businessmen who put their money in Africa, just as there were guarantees to those who invested their

money elsewhere; whether the West truly wanted Africa to develop; rules of morality in international relations imposed by the United Nations and the Western countries; the role that the International Monetary Fund and the World Bank played in investing in private businesses in Africa; assistance with partners to develop the capacity to absorb financing; and safety structures for investors of a regional airline.

Statements

JEAN LOUIS EKRA, Vice-President of the African Export-Import Bank, said the investment and financing sources were generally well known -- foreign direct aid, debt reduction, among others.  The question remained -- how could all these resources be mobilized?

KWESI NDUOM, Minister for Economic Planning and Regional Cooperation of Ghana, said many African countries did undertake promotional activities, but, unfortunately, not many positive results were seen.  There was definitely a crisis in Africa in attracting investment.  The domestic private sector in Ghana remained underdeveloped.  The present Government there was working on an economic stability plan, but the plan was squeezing small- and medium-sized enterprises.  Few long-term funds were available.  Many international financing corporations recommended that African governments privatize, but most of the funds currently went to public expenditures.  It was clear that the best efforts of governments would go unrewarded unless a number of initiatives were pursued -- including prompt action by international institutions to channel assistance to private efforts; the need for the efforts of regional and subregional activities to be better coordinated; and the liberalization of tax incentives.  The United Nations could support efforts in these areas.  Countries needed to be rewarded for establishing a stable macroeconomic environment.  Small- and medium-sized enterprises needed access to long-term capital.  It was the only way to ensure sustainable development.

NDI OKEREKE-ONYIUKE, Director-General of the Nigerian Stock Exchange, said that on several occasions, it had been said that Africa needed to develop through long-term capital.  But what happened was that international institutions gave loans to governments, and ignored the private sector.  And then nothing happened.  For meaningful development in Africa, long-term loans were needed.  The organized private sector could utilize the loans, turn them around, and make them more accessible to other people.  It was not that governments should receive nothing.  The private sector needed to be given just a little bit.  Nigeria had the highest return on investment in the capital markets of the world.  So why didn't foreign interests invest in Nigeria?  Was it because of fear of instability?  Last year, the return on investment in the capital market in Nigeria was 120 per cent.  Where else in the world could you get that?  People spoke of debt forgiveness, but no one would forgive debt to rich Nigerians said to have money in Swiss accounts. Instead, Africa needed to develop its capital markets.

ANNA TIBAIJUKA, Executive Director of the United Nations Centre for Human Settlements (Habitat), said poverty meant the absence of food, clothing and shelter.  In Africa, poverty was the biggest problem.  Within that framework, the financing of shelter was one of the biggest challenges.  Africa also faced ignorance and disease, which were causes of poverty.  There was a question about how to finance housing mechanisms.  Many programmes established by governments had not survived.  Most of the people who owned assets in Africa could not use those assets.  The central business district of the African capitals -- Lagos, Nairobi and Johannesburg -- were trying to resemble the central business districts of Tokyo, New York and London.  Beyond the business districts, the rest of the cities were being excluded.

FRANÇOISE FONING, National President of the Association Mondiale des Femmes Chefs d'Enterprises, Groupement des Femmes d'Affaires of Cameroon, said Cameroon over the last three years had increased deposits by almost 40 per cent.  Credits to the private sector at the same time had increased by the same proportion.  Short- and medium-term enterprises accounted for 98.5 per cent of that total.  Despite obstacles, opportunities did exist, and investment policies were bearing fruit.  The economy there was still young, and it needed innovation.  There was a need for development banks in Cameroon.  Growth was currently financed through commercial operations rather than development.

In the last 15 years, Ms. Foning said, Cameroon had worked without financial assistance because there were only deposit banks -- there were no commercial banks.  Now there were commercial banks, and that was allowing women to get into business.  The United Nations could help Cameroon by establishing a credit line under any conditions.  The United Nations spent a lot of money on experts, but women in Cameroon were experts it could invest in.

Discussion

Participants asked a series of questions about, among other things, whether there could be guarantees to businessmen who put their money in Africa, just as there were guarantees to those who invested their money elsewhere; if the West truly wanted Africa to develop; rules of morality in international relations imposed by the United Nations and the Western countries; the role that the International Monetary Fund (IMF) and the World Bank played in investing in private businesses in Africa; assistance with partners to develop the capacity to absorb financing; safety structures for investors of a regional airline; the privatization of land-title registries; extortion and bribery affecting foreign direct investment in Africa; opportunities to encourage the growth of domestic savings; how the international community could assist African countries with local savings; and the brain drain from African countries to international organizations.

Responding to the questions, Mr. EKRA said that when countries were coming out of armed conflicts, the need for international financial institutions was high.  There was an awareness within the institutions of the importance of supporting countries in that situation.

Mr. Ekra also said that small savings instruments were one of the great untapped reforms that had yet to happen in Africa.  The pension system was run publicly.  There was a clear role for a much more broad-based system, and there

needed to be more institutions, such as micro-financing institutions.  The African Export-Import Bank was supporting many of these institutions.

Mr. NDUOM said Air Afrique was a government-owned airline, and a regional airline that was proposed would be a private institution.

Regarding domestic savings, he said Ghana was hoping to mobilize such long-term savings towards retirement.  It was having difficulty getting the World Bank to support it, however.

There was a lack of due diligence, he said, on the part of the Bretton Woods institutions.  When money was lent, of course, the institution receiving the money had responsibility, but the lender also had a responsibility in continued assessments of how that money was being used.  For example, Ghana had been held up as a shining example of World Bank success.  But when the present Government took over earlier this year, it had found very poor examples of how billions of dollars had been put to use.  Several weeks ago, Ghana was fined $39 million by the IMF for misuse of funds by the former Government.  But the IMF had a seat in the office of the former Government, and it should be asked: "Where had the IMF been?"

Mr. Nduom also said there should be a question asked on whether the West really wanted Africa to develop.  It was gut-wrenching to wonder what previous leaders had done with the millions and millions of dollars that had been provided by the international institutions.  A big responsibility lay with leaders to make sure the funds were used properly.

Ms. OKEREKE-ONYIUKE said she could give investors guarantees for those who put money in her stock exchange, because there were hard-working, mature managers there.  The practice was transparent.  Without long-term funds, there would be no development, regardless of how much money was borrowed from the IMF or the World Bank.  Money could be lent to governments for social services, but half of that money should be given to develop the long-term markets.

Ms. TIBAIJUKA said the United Nations role was to facilitate the wish of the African nations, if they wanted to develop.  Once they decided they wanted to develop -- and they had done so recently -- they would establish their priorities.  The priorities right now were food, clothing and shelter.  For financing investment, Africa needed to define its priorities.

Ms. FONING said she encouraged international organizations to study how they could work with the new commercial banks in Cameroon.

* *** *