Low tax burdens, prohibitive conditions for access to loans, weak national saving ratios, unsustainable public debt, narrow funding funnels, negative policy perception indexes and tough operating environments are limiting the cash-flow needed to sustainably fund industrial projects in Central Africa, experts of the subregion have warned.
The experts including national policy planners, seasoned economists and other development practitioners and stakeholders are in the Chadian capital, N’Djamena, where they have kick started insightful debates on ways and means of financing industrialization for sustainable development across the subregion. This is in the context of the 34th session of Intergovernmental Committee of Experts (ICE) of Central Africa. The ICE is the supervisory organ of the work of the Subregional Office for Central Africa of the UN Economic Commission for Africa’s (ECA).
The N’Djamena session comes at a time when “the majority of the economies of our subregion are under structural adjustment as a result of the fall in commodity prices that began in 2014, and this leaves us with little fiscal space to promote long-term investments for our industrialization efforts,” Chad’s Secretary of State for Economy and Planning, Mr. Hissein Tahir Souguimi, reminded attendees.
The situation is dire and needs keen attention and action given that “our financial systems are still unsophisticated and unable to meet the industrialization needs of the private sector; we lack funding for our transport infrastructure, for access to cheap energy, for our technological development,” as Mr. Souguimi pointed out.
Dormant funds – where are the takers?
From an elaborate ECA background study, participants learnt that the financial asset in Central Africa represents only 16.7% of the subregion’s GDP, well below the average obtained in Sub-Saharan Africa as a whole (57%). But surprisingly, the subregion has left some 400 billion US dollars (15% of Africa’s GDP), to lie fallow in the continent’s pension and social security funds.
“The good news, however, is that innovative sources of funding are succeeding elsewhere” and can be adapted to the Central African situation, the Head of ECA’s Office for Central Africa – Antonio Pedro, told the assembly.
“Among these, are the establishment of well-targeted guarantee funds for SMEs, the exploitation of the large purses of institutional investors for the creation of deposit and investment funds able to finance high development impact projects,” he added.
He warned, though, that securing funding for industrialisation is not only about chasing money. It requires investments at macro and micro levels to improve the relevant soft and hard infrastructure, including the quality of the legal and regulatory frameworks and fixing up of other market failures and binding constraints impacting on the competitiveness of companies.
Toward better financial ecosystems
In a high-level panel debate coordinated by media personality Marie Roger Biloa, experts further decorticated the issues around sustainable financing for industrial projects in Central Africa.
According to the Deputy President of the CEMAC Commission – Ms. Fatima Acyl, “we must not wait for all conditions to be right to get down to the business of funding industrialization – countries in the subregion should pool their resources together to address this.”
Dr. Isaac Tamba, Director General of the Economy in Cameroon, said his country’s government was for instance providing substantial funding for new bankable initiatives to transform coffee, cotton, wood, leather and other products but that more needed to be done to have more profitable industrial outfits to enable the spread the tax burden across several industrial entities.
Dr. Rafael Nsue Tung who advises the President of Equatorial Guinea opined that with the limited resources of development banks in the subregion, there is need for more open and transparent systems for raising liquidity through instruments such as debt securities, as the public needs to trust a system to stake their investment in it. He said State loans must be pertinent to and serve development goals, hence the need to audit engagements that officials make in borrowing money on behalf of whole States to finance industrialization.
Meanwhile, Dr. Dominique Njinkeu – former world bank trade facilitator (who now brokers transactions for a private investment fund) said it was necessary to create programs to improve on the capacity of and support economic operators to out there and fish for a panoply of financial instruments not available within the sub-region.
As the ICE session gets into full gear, linkages to the central question of financing industrialization will be made with infrastructure financing and the idea of capitalizing on the resources of the Central African subregion to engineer its own industrial revolution.