A long text follows ... but, in my view, worth discussing. There are many issues that were covered both in the International Monetary Fund and World Bank Group Annual Meetings and in the various related events. Sadly ... many items get mentioned ... but most issues remain a point of discussion for ever and ever, and rather little of meaningful change gets done.
But my broad observation is, in itself, dangerous. There are good things that are happening ... some very good things. There are also a lot of bad things that continue unabated. One has to be careful not to "throw out the baby with the bathwater".
I will mention now just one issue that I consider very important .. and relevant in connection with meetings of Ministers of Finance. Other questions that arise based on the transcript of this press conference will be handled separately.
Getting accountability in government has been an issue for many centuries ... and it was improved significantly about 400 years ago with the advent of a system called the Single Treasury Account. The idea was quite simple ... that all the revenues of government would be put in this one account, and nothing would come out of this account until the elected representatives voted for its disbursement. In other words, the Monarch did not have sole control over the funds raised from the subjects. This idea is still the foundation of government accounting in almost every country in the world. This is the reason what the budget legislation is so important because it is this vote that allows the government to disburse moneys including civil service salaries and everything else.
The problem of government bribery and corruption in developing countries and the mis-use of government resources could have been mitigated enormously if the single treasury account concept had been actively supported by the official development assistance (ODA) community and especially organizations like the World Bank, the IMF, the UN and bilateral donors. Instead these organizations supported a "project" management and control model that has proved to be a bonanza to the corrupt while totally sidelining the control mechanisms of the Ministry of Finance.
As a professionally trained accountant, I am appalled at the way this has all played out. The Ministry of Finance has an important responsibility ... and it is disgusting the way rich donors have subverted this core financial control mechanism of government and the public sector.
What is worse is that most development experts do not even realize this has been going on for decades ... essentially since many of these countries became independent around 50 years ago!
The following is the text of the Press Conference given by four African Ministers of Finance last Friday, October 9.
Transcript of a Press Conference by African Finance Ministers at the International Monetary Fund and World Bank Group Annual Meetings
October 9, 2010
Mr. Hon. Albert Besse, Central African Republic
Minister of Finance
Mr. Mohamed Bacar Dossar, Comoros
Minister of Finance, Budget and Investments
Mr. Uhuru Kenyatta, Kenya
Deputy Prime Minister, Minister of Finance
Mr. Samura Kamara, Sierra Leone
Minister of Finance and Economic Development
Webcast of the press conference
MR. DIENG: Good afternoon, everybody, and welcome to the African Finance Ministers press conference. Joining us today, we have four ministers: Minister Samura Kamara from Sierra Leone, Uhuru Kenyatta, Deputy Prime Minister and Minister of Finance of Kenya, Mohamed Bacar Dossar from the Comoros and Minister Albert Besse from the Central African Republic. Each of our ministers will have a very short opening statement, and then we’ll open it to questions. So, without further ado, I’ll hand over to Minister Kamara.
Minister KAMARA: Thank you. As we are seated here, we are representing firstly our respective countries. We are also representing Africa. And at the same time, we are looking at this through the country level, but the regional and global perspective. So we are part of the global economy. Some recognize my name, Minister of Finance for Economic Development in Sierra Leone. Sierra Leone is a post-conflict country. Of course, we are recovering. We’re coming away from humanitarian emergency assistance. We’re now trying to move towards achieving sustainable development as well as deepening our intervention on human development, in particular health and education.
There are serious challenges. We have an agenda for change which is a five-year program, and hopefully we want to look at a successful program. In the agenda, we’re trying to address two things. For the first time, like many other countries in the Third World, we’re addressing the drivers of growth because these economies have never been able to grow substantially, and therefore we want to give a lot of our resources towards achievement of growth. And by so doing, we are looking at infrastructure development; we are also addressing agriculture and food security. Energy is a great challenge, and water supply and sanitation are challenges. On health and education, it’s a question of increasing access to health, access to educational services. So these are very big challenges at the national level. I think we are turning around. We hope the economy will continue to survive and to grow through the implementation of our agenda for change.
From the African perspective, I’m sure we all have commonalities. We do not quite represent a homogenous group, but in terms of the challenges that face Africa we’re very, very close--challenges of growth, challenges of poverty reduction, these sorts of things. And I think we all have the same agenda, especially relating to food security and agricultural productivity.
Now what is happening to us in the context of the global economy is that there is a widening and deepening of global resource in Africa. Africa has never been in this particular situation. It was not part of the cause of the crisis, but today Africa is part of the solution, and therefore we cannot ignore that. And that’s why at our meetings we all try to exchange ideas, and try and have consensus on how we think we should approach the Bretton Woods institutions in particular since these institutions are at the center of trying to look out for solutions in the crisis that is affecting the world.
At our level, we have taken a position. We are doing correspondence through both we have a memorandum, writing to the IMF Funding Director and to the World Bank President. Tomorrow, we will be meeting them separately to present our case. I hope from there we’ll be able to move.
In terms of the challenges that are facing the global economy at the moment, perhaps you can say one of them is the reform of the IMF. Africa has taken a position. We quite agree with what is imagined. What is imagined is really if we are to follow what happened in [inaudible] some time back. Of course, the quota reform as well as representation, these are two critical issues.
On quota reform, we have a position that we need to have PRGT countries protected substantially, and at the same time we had one country that suffered during the second round, South Africa. We think South Africa also needs to be protected, so that’s a good move forward. But the idea is not to let any other African countries suffer during the third round. So that’s why we are following closely with the permutations that I imagine.
In the case of the World Bank, we are happy that we will now have a third chair in the World Bank, and we have done our permutation, our reconstitution of member countries. We have now filled that chair. The good thing is even though perhaps we may not have been all happy with the outcomes, but the good thing is we have maintained the third chair. There’s a third chair in the World Bank Executive Board now for Africa. In the Fund, we have a second alternate. Hopefully, as the time goes on, we’ll start pushing for another third chair. I think I can stop there.
MR. DIENG: Thank you, Minister Kamara. Minister Kenyatta.
Minister KENYATTA: Thank you. Maybe I begin by joining my colleague in saying that as much as we speak for our respective countries we are also speaking for our entire constituency in the African continent.
And may I begin also by just giving a short overview of the situation in Kenya and say that as many of you are aware we have now passed a new constitution which is now being implemented--a constitution that has resulted in an increase in optimism in terms of our economic outlook, going forward, and a constitution that helps us strengthen our government structures, helps us in terms of establishing firmer and stronger institutions. And all of these, we believe in the medium to long term will result in greater growth in Kenya.
With regard the economic outlook, as many of you are aware, as a result of both the post-election violence and the situation that prevailed with a major drought that affected the Kenyan economy, this was added to by other factors that were well beyond the control of Kenya, largely reflecting the financial or the global financial crisis, and resulted in a downturn from the year 2007, from a growth of approximately about 7 percent. This was reduced to about 1.7 percent in the year 2008-2009, but we are now seeing a strong rebound, and we are expecting a growth trajectory of approximately 5 percent in the year 2010.
This said, we are still faced with a number of challenges--challenges especially with regard to food security, challenges with regard to expectations as a result of the implementation of the passage of the new constitution. But we have addressed ourselves through a number of stimulus programs, as a government that we have instituted.
We have had, and managed to have, the necessary fiscal space in order to create a number of incentives largely targeted at the social sectors, at the health sector, at the education sector, also trying to deal with our issues of food security through increased budgetary allocations towards irrigation, as well as job creation in terms of a number of measures that we are instituting as a government to support our private sector.
As a country, we are strongly and firmly on the path that growth must be private sector led, and towards this regard we also acknowledge statements made yesterday by both the IMF Managing Director and the President of the World Bank, recognizing that the potential that the African continent has and a potential that can only be realized through increased investment, through increased flows of FDI into the African continent.
And towards this end, we as a country, as a continent, are appreciative of the initiative being undertaken by the government of South Korea, who are now going to assume the chairmanship of the G-20, and the agenda of propelling investment and job creation as being part and parcel of the global economic recovery, with a realization that unless we are able to deal with the issues of job creation, food security, climate change, that the recovery still ultimately remains very fragile.
With regard reforms in the World Bank, as my colleague has said, as much as they are challenges, we must say that indeed we are happy with the creation of the third constituency for ourselves, and we believe that this will result in greater representation for the African continent.
We are also looking forward and actively, as a continent, working towards the next replenishment of IDA where we do hope that the larger players, the more developed and emerging markets, will realize the need for not just a replenishment of IDA but an increase in the replenishment of the upcoming IDA, given the fact that yes, while Africa may be a very small percentage of the overall global GDP the fact that we have been able to achieve the kind of growth rates that we have achieved goes to show the increased potential of Africa becoming a much larger player in the world market. And we need also to acknowledge, as indeed has been accepted by some countries, that global recovery is going to be largely intertwined with increased growth in the developing countries.
With regard to the issue around both governance and indeed the quota with the IMFC, the position that we hold as an African continent is that yes, we do agree that there is need for an increase in quota in order to enable the IMF to intervene as it has. And we are grateful indeed for the quick response that they took in the aftermath of the global financial crisis.
But for this to be able to continue, we do agree that there is need to increase the quota. But that quota should not be at the expense of the poorer countries, especially those on the African continent, and there is need to ensure that the quota of the poorest countries in the world is indeed protected as we move on.
With regard to voice, we must also recognize that voice must not be a factor of shares alone. Voice must also recognize the fact that Africa represents a large number of countries, and we need to look at the voice issue both from a perspective of shares, but also from a perspective of number of countries.
And that is why I support what my colleague has said, that as a continent we continue to support the reforms to protect the quota of the poorest countries, but at the same time to ensure that we preserve a voice also for the countries on the African continent. And towards that end we will continue to push as we go forward for a third chair in order for that representation to be seen through.
Minister DOSSAR: [Interpreted from French.] Good morning. First of all, a few words to give you some background information about the Comoros. We’re in a set of islands off Mozambique between the African coast and Madagascar. The Comoros are a small island state, a small developing island state with some instability in the 90s that ultimately resolved itself in 2001 with the adoption of a new constitution that grants considerable autonomy to the various islands that make up the Union of Comoros, while preserving national unity through a federal system.
Since then, the country has recovered growth and stability back. We witnessed in 2001 democratic change, with free and transparent elections, and a change of government. We’re in the process now of organizing new presidential elections, and we hope that these too will be free, transparent and democratic.
In other words, over the last 10 years or so, our country has experienced relative stability in political terms. Clearly, this has also helped us improve our financial situation, in particularly through our accession to a decision point last June 29. Our country was one of the very last of the continent to reach that stage and gain access to the program which is a very significant challenge for us. We’re supposed to reach the end point, completion, in 2012.
Economic activity, although not very strong, has nevertheless recovered, and GNP growth has grown from 1 percent to 2.8 percent. It’s not very high yet, but it’s on the right path, and we hope that in the months and years to come this trend will be further confirmed.
We’ve also engaged in a campaign to promote our country and open it ever more to FDI, especially from Arab states because we have cultural and historical links to that part of the world.
All of this culminated in the organization last year of a donor conference for our country, with pledges of over $350 million in development projects to be implemented in our country, and this opens up new vistas in terms of improving infrastructure, in terms of developing the private sector and also in terms of boosting the health and education sectors of our country.
Globally, in other words, our situation has improved although there is very much that we still have to do. As I said earlier, our greatest hope now is to witness further democratic change in December because the new president-elect will have a five-year mandate, and we hope that through this change we will be able to consolidate the progress that we have made, not only from a political standpoint but also economically and financially. So that is where we currently stand.
I wish to add my voice to those of my colleagues who spoke just before me about Africa’s representation in these institutions because there are interests that require representation.
Minister BESSE: [Interpreted from French.] Thank you for this opportunity you’re giving us to address the situation in which we find ourselves today, especially in light of what’s happening in the world. I am the Minister of Finance of C.A.R., a country in the economic and monetary area CEMAC. We are at the center of the continent--623,000 square kilometers north of Congo and to the west of Cameroon.
We have had recurrent crises in the C.A.R. over the last years, both economically and politically. And as of 2003, with the help of the international financial community and of CEMAC, we gradually reviewed our macroeconomic policy framework, rebalanced that totally and negotiated a program with the international financial institutions that gave us access to a decision point within the HIPC initiative. Thanks to that, we gained a clearer understanding of what we needed to do, part of our debt was cancelled, and we mobilized further resources in order to begin our combat against poverty.
As you know, we’re a post-conflict country with a tremendous lot of challenges. We need tremendous investment in infrastructure, but I think that with our closer links and programs managed by international financial institutions we have made tremendous progress. Although the financial crisis reduced our growth from 4 to 2 percent, we’re hoping to be close to 3 percent at the end of the year.
As regards the financial crisis, we did suffer quite a bit because our main exports are timber, diamonds and some coffee, and demand for these goods sagged somewhat with the crisis. And with the impact of a drop in exports, we also witnessed a rise in unemployment.
Politically, we’re in the process of preparing elections that are currently scheduled to be held early next year. We hope they will be democratic and transparent, so that we can resume what work needs doing in order to ensure the development of our country.
At the subregional level in CEMAC, the issues are somewhat the same. CEMAC regroups six countries, but there are five among these six that are oil producers. But they also export other commodities and suffered to some extent because of variations in commodity prices worldwide. But on the whole, growth has resumed. Growth has not been durably impaired by the financial crisis, and things seem to be moving slowly forward.
Prospects for C.A.R., as I said, are linked to major investment projects focusing on infrastructure. As you know, we were recently a conflict country, and there’s a lot to be repaired. But as you know, we’re also suffering the impact of another conflict out of Darfur which borders our country, and local populations from Darfur have resettled on our territory. But today I think with the help of other CEMAC countries the situation on that front has somewhat stabilized, and I think we can view the preparation of the 2011 elections more confidently than we did in the past.
I think that the issue of representation of Africa within the IFIs is extremely significant. The third seat strikes me as being extremely important. I have the feeling that discussions are going in the right direction and will probably further good governance in political terms.
As far as the economy is concerned, I would like to say that in C.A.R. all the reforms that we’ve undertaken with the help of IFIs have yielded good outcomes, and we’re continuing to cooperate with the institutions and looking forward to these elections.
MR. DIENG: We will now take questions. Please identify yourself and your organization.
QUESTIONER: [Interpreted from French.] I would just like to know how you think we should take advantage of the considerable rebound of the economic activity on the African continent as a whole.
And secondly, what are the African positions as to the reform of the World Bank? Not only the representation and the seats within the World Bank, but what about the debt relief, what about climate change and also what about job creation?
Minister KAMARA: As far as the World Bank is concerned, we do--we appreciate the reforms that have come so far. We are looking for deeper representation. We’ve got it, and it is now with us. We protected our chair. And the Bank also has enough programs that will support Africa. They’ve gone ahead in the debt relief. We got a lot from debt relief. We also got a lot from climate change.
And at the moment, the Bank is developing a strategy for Africa, and we have been consulted more than once. The Vice President visited Freetown when we had our African caucus meeting. She made a presentation last year. She also made a presentation. So we’re working with that to develop this African strategy.
But the challenge there is how do we get together and convince the advanced countries to put more money in IDA because that is our window of opportunity. So that’s what we do.
Minister BESSE: [Interpreted from French.] I would just like to add some elements to what was said earlier. We know that we are working in the subregion. I was talking about CEMAC earlier. We have a regional economic program within CEMAC to work on investments, for example, and we believe that today whichever country we are dealing with--of course, the situations vary from one country to another, but we have to take this into account in our regional structures. But we do know how to adapt things to each particular country in terms of investments. And of course if we have surpluses we want to use them in different fields--health, education and so on.
A question was raised about our involvement in the program. When we have reached the decision point of HIPC, it’s true that when we reached the completion point the debt was totally cancelled for some countries. The question is how to encourage development in those countries where the debt relief was not full. So this is in a way an answer to the question, and yesterday we were talking about different possibilities to relaunch development in those countries. In terms of climate change, we have been able to set up a fund to fight against climate change, and I think that this is an issue that is being dealt with. A number of investments have been made in this respect.
Let me come back to the Central African Republic. We have the Congo Basin that covers just about the five countries of CEMAC, and the six countries of CEMAC. Of course, the question is how to get, how to find the appropriate funds in order to carry out those innovative projects, in order to have new financial initiatives in order to finance this fight against climate change. This is what I had to say about the question raised.
MR. DIENG: Thank you. We’ll take another question, at the back of the room.
QUESTIONER: Last year, news broke of a crisis within the Bank of Central Africa that is in charge of the safer denomination for Central Africa, with the result that in May the IMF suspended disbursements to that bank. I understand that it has quite recently resumed those, and I wondered if Minister Besse could comment on the effects of this crisis. I understand two officials have been forced to leave the employ of the bank, and whether there are going to be any more actions against them. And what structural reforms and other reforms and measures have you taken to assure the people of Central Africa, the Central African region, of the effectiveness and accountability of systems within that bank?
Minister BESSE: [Interpreted from French.] Yes, thank you. Yes, this has also been covered by the media, and it’s a real issue. But you have to remember that as of January 2010, when there was a summit of the heads of state of CEMAC in Bangui. So this is a matter that has been followed by the highest authorities of the state.
So what happened at the central bank in terms of governance since then? I personally chair the Monetary and Economic Union for Central Africa, and I took part in various decision-making summits that concern this matter, and we have tried to change the whole team at the head of the bank. The IMF was quite right in its approach to safeguarding our major institutions. They intervened with great rigor. But we had a major program of reform in force even before December 2009 that had been negotiated with them, and some number of prerequisites were defined.
I was mandated after the suspension of disbursements to meet the Managing Director of the IMF with two other ministers and the governor, and we really answered all of the specific questions that were raised regarding the connection between the central bank and its international partners. And as you know, the program for CMAC on the IMF part was restored.
We have, by now, covered 97 percent of what was required of us, and I think that we now need to go on closely--we’re going to go on closely monitoring the whole issue at the ministerial level, and we’re going to further strengthen control structures within the central bank. We have strengthened the capacity of the internal controls. We’re still extremely attentive to the situation, to make sure that there are no further incidents like the ones that happened last year, and we hope that we will therefore in a position to avoid further program suspensions because let me say that that was a bit of a shock to us.
QUESTIONER: Three questions: One, with regard to the ongoing reconfiguration of representation of countries on the IMF/World Bank Board, please help us understand how will this affect disbursements to African countries, and especially with regard to concessionary lending that most Sub-Saharan African countries have been getting.
My second question is on growth and employment in Africa. We are talking about growth rebounding in Africa, but we do not seem to be putting emphasis on, or rather, even when we do, we’re not giving figures of employment.
I was looking at the World Economic Outlook report that the IMF released on Wednesday, and many African countries do not have unemployment figures indicated. And when I asked the IMF they said the respective countries, including my country, Kenya, did not have figures of unemployment. So how are we going to tackle this problem of joblessness in Africa if we do not even have the numbers, if we do not know the unemployment rates in Africa?
My third question is Kenya-centric. The World Economic Outlook report projects that Kenya’s economy will grow by 4.1 percent. Finance Minister Uhuru Kenyatta just said that the projection is over 5 percent growth rate. Kindly help me understand why there’s a difference in these projections. Thank you.
Minister KENYATTA: Thank you, and as I address that question I’d like just to make a brief comment on one of the issues that was raised earlier by a colleague.
That is to say that indeed I want to agree that one of the ways in which we can address ourselves to the kind of rebound that we’re seeing in the region is through increased regional trade, and to say that if we take a look at the East African Community for example, one of the reasons why we were able to be resilient, despite the downturn in terms of demand for our products from the developed countries, was the increase in regional trade that took place.
Towards that end, we are working as a region towards further strengthening this. We have now the Common Market which is in place as of the end of July 2010, and we are also working in order to improve infrastructure, so that this increased inter-regional trade can continue to play the role that it has played. There is that recognition, and therefore the need to further develop and strengthen the infrastructure in the region.
With regard the issue of disbursements, this is one of the key issues why we are saying we need to protect the quota of the poorest countries in the world, because we need to also ensure that with regard to disbursements and access to much needed finance is indeed protected, and that is not reduced with the ongoing discussions with regard both quota and voice reform.
Voice reform is also important to ensure that the voice of Africa continues to be heard, and I think that is the position we have taken as an African continent. And therefore the need for another chair to ensure that the voice of Africa continues to be heard, not necessarily in terms of representation, in terms of quota, but in terms of both size, population, but more importantly number of countries that are on the African continent.
With regard to the issue of growth and employment, I think I mentioned in my own statement that there is a recognition that growth will continue to be fragile unless we are able to equally handle the major challenges of unemployment and food security. This continues to be an emphasis. Let me speak especially for the Kenyan government, that a lot of the programs that we’ve been trying to initiate are programs that are aimed first and foremost at increasing opportunities for job creation. This is the reason we are focusing a lot in terms of infrastructure, in terms of the energy sector, in terms of expanded infrastructure with regard to technology, the fiber cables that we are laying. All this is aimed at reducing the cost of doing business, increasing the attractiveness of both Kenya, East Africa and indeed of the African continent, and as an investment destination because, like I said, we are great believers that the ultimate sustainability of our economies must be based on private sector-driven economy and hence the investment in some of those sectors.
With regard the projections that we have, you will recall growth projections. We did have in our fiscal year 2010-11 a projection of 4.1 percent. But the kind of trends that we are seeing in terms of both the tourism subsector, the agricultural subsector as well, the manufacturing and construction, give us an indication that if that kind of trend continues through the third and fourth quarters, we are likely to see a growth rate of around 5 percent. So we are hoping that we will be able to achieve a much higher level than we had previously anticipating, assuming the third and fourth quarters continue as along the same path we saw in the first and second.
QUESTIONER: What is the unemployment rate in Kenya?
Minister KENYATTA: Well, sorry, that was another. Indeed, we have a need to strengthen our own statistics, and that’s another area that we are all looking at. We need to be able to strengthen our ability to gather these statistics and we are investing in that particular side as well.
But we must also recognize that as we strengthen the gathering of these statistics the formal sector in many African countries--and let me be more Kenya-specific, the formal sector that is normally captured does not take into account the informal sector which is today one of the largest single employers in Kenya. And this is why together with the central bank, together we are working on a process of financial inclusion by bringing a lot of the people in the informal sector and mainstreaming them into the formal sector. This will enable us to capture a lot of people who are currently not being captured through the formal statistics that we currently are using.
So we believe strongly that financial inclusion will help us in achieving a much greater level of capturing those who are actively engaged in the informal sector and are currently not being captured, as we go about our statistics collection, as well as strengthening the capacity of, for example, the Kenyan Bureau of Statistics in being able to capture some of this data that had previously not been captured.
Minister BESSE: I’d like to add something regarding employment because jobless growth corresponds to what? You can do all sorts of computations, but what does it mean for the population? It means that there are no prospects. We need to work for our population, but employment has a [inaudible] training. For countries that are post-conflict countries, such as mine, this is a major issue. But quite clearly the government is working to try to resolve this and in essential sectors such as education, health care and agriculture as well, which is another extremely important sector for us. A country such as mine experienced famine in 2008. So we need to strengthen intervention in these areas.
And there is real employment in these sectors, although very often the actual extent of employment is not covered by statistics. The innovative initiatives are normally taken into account in modern statistics.
But you have to understand that our government is working to make sure that our whole population benefits from the improved economic situation, to better job prospects that have to be supported by training initiatives, but the government can’t be the sole employer. The private sector has to intervene as well, so as to support the work undertaken by the public authorities and industry. Thank you.
MR. DIENG: Thank you, Minister Kenyatta. We are running out of time, so we’ll take two or three questions at a time now. Here, at the end of the room.
QUESTIONER: The question is regarding the resource sector of the whole African continent. What we are seeing is that more and more countries are coming at a different sort of resource taxes. Like in Australia, they recently introduced a resource tax, and Canada is also following the same way. In 2007, Zambia came up with a copper tax which was taken off the next year. What are the chances, or how do you guys see that this trend is going to be more and more evident in the African continent, number one? And question number two, what sort of impact do you think it may have on FDIs or foreign investors?
MR. DIENG: Thank you. We’ll take a second question.
QUESTIONER: [Interpreted from French.] Let me say something, introduce some clarification. It’s true that the third seat has been granted, but what is the actual trend at the IMF because there is talk of going down from 24 seats to 20, and we’re talking about a third seat for Africa. So could you tell us a bit more about what trends are at play?
MR. DIENG: Maybe you can take that one, Minister Dossar.
Minister DOSSAR: [Interpreted from French.] Yes, you know that in the past there was an arrangement that allowed to increase the number of seats from 20 to 24. This was an agreement that was extended year after year, but this time around the United States opposed the extension, and they requested that legal counsel look into this and that the Europeans renounce one or two seats in favor of French-speaking Africa. As far as we can tell today, the Europeans seem willing to do something along those lines. So we do hope that our European partners will free seats to allow for permanent representation of French-speaking Africa rather than have to live through year after year the negotiation of a transitional situation.
MR. DIENG: I will ask Minister Kamara to say something on the tax issue.
Minister KAMARA: Yes, I’m not sure whether the situation in Zambia is replicated in other countries, but I think the general challenge for our economies, as we try to attract quality investment--mind you, you want to avoid these fly-by-nighters. You want quality investment. What type of fiscal regimes? What incentives, incentives package? Many of them come and request incentives packages, this sort of thing. Now that is a delicate balance in taxation for investment.
The other choice as a country is to get your taxes up-front. You frontload your taxes, or you backload? If you frontload, you might just deter, you might discourage investors. Investors will go away, this sort of thing, especially when many times the accruals are not very certain.
The business plans that are drawn by investors, many of them do look into these national stock exchanges. They develop a very robust business plan to sell shares, to sort of marry a lot of shareholders, irrespective of what the resources are on the ground. We have seen that happening. And of course in the end the interest in making capital is very good there. Therefore, tax incentives should be reflected in that cash plan, that business plan, and make the project look so, so, so impressive for outside investors.
So this is the challenge that we have--how to create this balanced between them. You don’t want to lose revenues and fall out at the formative stage. But a good thing is that African capacity for negotiated investment is now improving considerably. So in the case of Sierra Leon, where we don’t have the capacity we seek international technical assistance to help us in negotiating. So I think this is where we are.
I don’t think I can talk for Zambia. Now I read about it, so that it will not be replicated in Sierra Leone.
MR. DIENG: Thank you. We’ll take a final round of questions. Here, at the back of the room.
QUESTIONER: The problem of statistics is one of the major problems, to know the number of, the rate of jobs and joblessness. So how do you really calculate real growth?
And the second thing is that Africa has said there is growth, but on the ground the poverty level is a big challenge. So how do you explain the two situations?
Minister KENYATTA: Let me put it this way. I appreciate what my colleague is saying there, and I appreciate the question, but at the same time we also have to recognize the fact that as much as the quality of statistics may not necessarily be the best in fact. If you heard the debate that was going on in the IMFC today, there was a big argument between developed and emerging countries as to how do we, and are they, going to calculate the size of the global economy and hence the quotas that should be assigned by each, with the emerging markets having a different perspective to the numbers that had been tabled.
But ultimately, we have to have a base that we use, and the base that we have is indeed based on the formal economy that we currently have registered, on the exports that we have, on the manufacturing and services sectors that we have.
But I would tend to believe a little bit opposite from what you said because if we were to take into account the informal sector, and I wanted to use the example of Kenya.
If we were to take on board the informal sector, I believe the growth projections that we would show would be much large than is actually projected by the formal numbers because there are a lot of people involved in the informal sector that are not captured. If you take a look, for example, at our farming community--and this is a debate that we were having yesterday--we would normally consider our small-scale farmers to be peasant farmers living from hand to mouth. Yet, we do have a large number of farmers who are actually commercial farmers, with tea, with coffee and other products that they take to market, and they actually farm on a commercial basis. These again are numbers that are not fully captured. So I believe that once we continue strengthening of our own data, improving and strengthening the agencies assigned with the statistical data collection, we may see that the kind of projections that we’re showing are actually not lower, but rather higher, than we had previously projected.
MR. DIENG: [Interpreted from French.] Thank you. Minister Dossar, you could maybe take the question on the connection between growth and poverty.
Minister BACAR DOSSAR: [Interpreted from French.] This question is related to employment. We all want growth that is emerging in our countries that leads to better and higher employment. This is a slow process. We are just feeling the growth in our countries. So we have to be patient. And as my colleagues who just talked before me said, we have to make efforts in order to support the private sector, so that he can come and replace the public sector. And also we have to further encourage the private sector to promote jobs and job creation in our countries. I think this is the best way to fight poverty, to give opportunities to the populations. I believe that we do have a strong potential in our countries. Africa’s attractiveness adds to further improving the future, so as to attract capital inflows and greater, much greater investments on the African continent.
Minister BESSE: [Interpreted from French.] Let me add a few words here. I would like to thank the lady who asked this question on statistics. It’s of extreme importance. We have to count, and then we have to measure. If we don’t count, we can’t measure. You have here finance ministers from African countries, and when you go into the informal sector it’s very difficult to count. So it’s a good thing to try and further improve our statistics, so that really everything can be taken into account.
My colleagues talked about one particular sector which is of major importance and where efforts are being made. When you go through our countries and you see that there is some improvement in the quality of life, but it’s difficult to measure. So this is why we need these better statistics, in order to find answers to all the problems we are faced with.
It’s difficult for a statistician to go and see a farmer and ask him or her to count the number of baskets that he harvested, for example. This is difficult, but we will further increase our work in this respect, so that we are soon able to both count and measure.
MR. DIENG: Thank you. We have run out of time. I will give the floor to Mr. Kamara for the concluding remarks of this press conference.
Minister KAMARA: Well, on behalf of my colleagues, and certainly of Africa as a whole, I will need to thank you for this opportunity. We hope you will go back and help us sell Africa to the rest of the world because we need it. The media is a very important partner in development, and therefore what you write, what you perceive in development, the type of information that you quote I think means a lot to us. It also means a lot to the outside world because you want to inform them, this sort of thing.
Therefore, I will only urge you that we are all open. As ministers of finance, we are open. Our ministries are open. All of our ministers are open for information. I’m sure you can get our email addresses from the coordinator here. So we want to thank you very much for the opportunity.
MR. DIENG: Thank you. This brings an end to our press conference, and we’ll post the transcript later on the IMF web site.