SADC Ministers of Finance (AfDB Governors) have held a consultative dialogue (LINK: https://fb.watch/dgm1FRz-am/) with the President of the African Development Bank, Dr. AKINWUMI ADESINA and his top management team. Zambia’s Minister of Finance and National Planning Dr. SITUMBEKO MUSOKOTWANE co-chaired the session and delivered the statement on behalf the SADC. This is at the on-going annual meetings of the African Bank Group.
1. Bank’s support to the SADC Region
SADC appreciates the support of the African Development Bank. In recent years, the Bank’s support to SADC at regional level has been increasing, covering several sectors including response to the COVID-19 pandemic; resource mobilization mechanisms through operationalization of the SADC Regional Development Fund; identification and development of value chains especially in the mineral sector; preparation and development of projects; macroeconomic stability and financial integration; trade and transport facilitation; and fisheries. However, there is still need to support the region to build resilience to shocks through, among others, quality infrastructure and strengthening the region’s capacity in addressing disaster risk related issues, such as humanitarian operations.
2. Climate Change and Just Energy Transition
The Governors of the SADC Region welcome the role and commitment of the African Development Bank to support its Regional Member Countries through the New Deal on Energy for Africa (NDEA) strategy. As you would know, Mr. President, the SADC Region relies on coal-based energy. It is therefore important that the solutions be based on the recognition of the important emphasis that the energy security and just transition play in our climate response, and the need for also meeting economic, environment and social development objectives. The main objective should be to ensure a just transition for the communities and workers that have historically relied on these coal-based value chains and other fossil fuels for their livelihoods. This calls for a new development model to address these challenges without leaving anyone behind whilst we transit to renewable energy.
Furthermore, the scale of the challenge means that partnerships including with the private sector and development finance institutions will be indispensable in achieving desired outcomes. This should not only demand driven but also proactive action of DFIs including this Bank to propel countries. We therefore welcome the initiative by the Bank to work with external and internal partners to mobilize financial resources for the South African Just Energy Transition process and hope more will be done for the rest of the region.
3. Economic Governance and Public Debt
Zambia and other countries in the region are undergoing debt distress caused by both domestic and external factors and hence are undergoing debt restructuring processes. We, therefore, request for deeper and decisive support by the Bank for debt restructuring efforts in the region.
The introduction by the G20 and the IMF and World Bank of the DSSI and Common Framework for Debt Treatment gives a comprehensive framework for ensuring a return to debt sustainability. We however feel that the role of the Bank has not been forthcoming to the fullest on three fronts1) advocacy for all creditors to participate in the debt restructuring process 2) a clear position from the Bank regarding its participation in burden sharing
3) knowledge management by building capacity in debt management and reforms.
On economic governance, our governments have tried to put in place measures to support economic transformation and reforms. What remains of being essence is the support by the Bank in areas such as structural reforms including subsidy reforms by putting up best practices, public financial reforms by putting in place modern and more transparent laws and economic management regimes including enhanced reporting on economic data.
The AfDB will need to be responsive to needs of private sector so that transformation can take hold through various Bank initiatives such as SME support, credit guarantees, PPPs and others. We welcome the US$2 billion credit guarantee facility signed with the United Kingdom Government and request this be deployed in our regions expeditiously to leverage private capital, especially in manufacturing (agro-processing and value addition) and infrastructure development.
4. Zimbabwe Arrears Clearance with the Bank Group
Zimbabwe’s external debt overhang has become a serious impediment to overall development agenda and the social and economic transformation of the country. We hope that the Bank can take the lead in rallying up the international community in advocating for debt relief and arrears for Zimbabwe. This situation is not only a Zimbabwe problem as it is affecting the overall development of the SADC region. Even as the Bank is moving forward with championing the AU 2063 Agenda, it is important to note that the development aspirations for the continent can only be met if we are ensured that no country is left behind including countries such as Zimbabwe. In this regard, we ask that the Bank start an accelerated process to support Zimbabwe’s arrears clearance process to support the restoration of the country’s economic recovery especially in light of the ravaging effects of the recent Covid-19 pandemic.
5. Bank’s support for Public Private Partnership (PPPs)
We welcome the adoption of the Bank’s Public Private Partnership (PPP) Strategic Framework for the period 2021-2023. We hope that the new approaches set out in this document could only be beneficial for the development of public infrastructure as well as the effectiveness and efficiency of the PPP mechanism in Africa. In this respect, we would like to request sustained support from the Bank for the implementation of the PPP mechanism. For example in the case of Madagascar, even though they had already initiated the PPP process since 2014, no concrete project has succeeded due to cumbersomeness of upgrading and application of legal and regulatory frameworks. Furthermore, we always hope to be able to count on the legal support of the ALSF in all the negotiation processes.
6. Reassessment of Low-Income Countries
We would like to call upon the Bank to revisit its assessment methodology for graduation from one category to the other. For example, the Government of Lesotho was assessed in July 2015 by the World Bank and qualified to a low middle-income country. As a result, Lesotho got classified as a GAP/BLEND country in line with its per capita income assessment. This led to changed borrowing terms with the World Bank that was coupled with getting access to the International Bank for Reconstruction and Development (IBRD), while also Lesotho lost access to Grants from the World Bank. The Government of Lesotho ’s borrowing terms with the World Bank group were then changed upwards but were matched with significant increase in her resource envelope with the World Bank (from around USD20 million per annum approximately translating to USD80 million per annum over a period of 4 years as per Country Partnership Framework (CPF) cycle) to approximately USD100 million per annum translating to approximately USD 400 million per 4-year CPF).
Unfortunately, while the AfDB Group under the African Development Fund window fully adopted and implemented the World Bank terms without matching them with equivalent increment on the resource envelope. The resource envelope of Units of accounts (UA) 15 million for the 3-year Country Strategy Paper (CSP) remained the same but the lending terms increased. Lesotho finds this decision by the Bank concerning and as such we strongly recommend to the Bank to reconsider this decision. We strongly believe Lesotho’s resources envelope allocation by the Bank should have improved and matched the new status. We, therefore, propose that the bank reassesses its approach and methodology towards assessing the risk profile of low-income countries like Lesotho so that they are better enabled to achieve their development agenda. In addition, and in line with the decentralization of the Bank, local presence would be beneficial through a Liaison Office.
7. Engaging Small Middle-Income Countries
We appreciate the Bank’s support to small middle income and island countries. We would like to encourage the Bank to continue finding innovative ways to engage small middle-income countries. In terms of the balance sheet, small middle income and island countries have low risk profile. The Bank can, therefore, use that to leverage and expand its lending to these countries to rebalance its risk profile and improve its balance.
We would also like to call upon the Bank to support member countries to develop Economic Participation Agreements within the region. The European Union has done it with a few countries, and we believe it is a good model which can be adapted to the Bank’s context. We believe this is important to support regional integration and achievement of the Hi-5s in general.
Delivered on behalf of SADC:
(Original Copy Signed)
Dr. Situmbeko Musokotwane, MP
Minister of Finance and National Planning
