Monrovia — Finance and Economic Development Minister, Mr. Samuel D. Tweah says there is no doubt that enabled investment is the future.
Addressing the fifth US-Africa Investment Forum and Policy Dialogue, a backdrop to this year’s African Business Leadership Awards Tuesday, Minister Tweah however noted that neoclassical theories of incentive-compatibility and institutions, investments may not flow into Africa commensurate with the size of the continent’s development challenges.
“These Investment flows would have to be enabled by a combination of needed institutional reforms and other quasi-economic or diplomatic factors,” Minister Tweah averred. “The situation may differ form one country to the next but the consensus is unmistakable that the next century in Africa is the century of Private Investment.”
Minister Tweah expressed optimism that the dialogue at this year’s forum will do full justice the opportunities and challenges in the Africa investment landscape and provide a clear blueprint for transformative actions.
Minister Tweah hailed Dr. ken Giami, Publisher and CEO of the Africa Leadership Magazine for the recognition and opportunity to speak at this year’s program under the theme, “A Necessary Realigment”.
Minister Tweah expressed thanks for the role the Magazine continues to place in stimulating transformative business leadership and highlighting business and investment challenges and opportunities confronting the Continent.
The US-Africa investment provides ample opportunities to shed critical light on how US-AFRICA relations can potentially impact investment and other development outcomes in Africa.
This year’s event is virtual because of a global pandemic that has taken almost 1 million lives and affected more than 32 million people.
Chronicling US-Liberia ties, Minister Tweah declared that the world is at a watershed moment in both the relations among nations and in the possibilities for delivering greater prosperity for the peoples of different regions. “The Government of the United States has played an exemplary role in preserving world peace and upholding the economic consensus that issued from the Second World War. America can impart a new sense of mission to galvanizing a new consensus that will reverse Africa’s investment woes. The United States still enjoys the deepest bond with most African countries and I believe US-AFRICA diplomacy and relationship can situate African investment challenges at the top of the global agenda.”
He explained that the financial crisis of 2008 that originated in the United States proved that the US remains the bastion of the global economic order. He pondered: “How does US investment and trade change the dynamics of African development? What should be done to unlock resources from American Pension Funds, for example, to close the African Infrastructure financing gap, which the African Development Bank has put at between 70 to 107 billion United States Dollars per year. Closing this financing gap should pre-occupy policy wonks and experts concerned about Africa’s transformation. US-AFRICA relationship should concerned itself with this development.”
Minister Tweah described US Government’s Millennium Challenge Model is particularly critical to helping countries improve governance in exchange for receiving support for expanding the private sector. “This model is seriously focused on private sector expansion and we look forward to seeing the next generation of transformation happening under the MCC. Liberia presently has an MCC compact addressing challenges in electricity and road sectors and is working to qualify for a second Compact.”
He said the USAID’s new vision of Journey to self-reliance has essential elements of the MCC model, which looks to unlock private sector potential. Our partnership with the USAID will address key private sector challenges in the coming years.
US-Liberia relationship, he told the ceremony, will play a key role in bending the arc of development in Liberia. “Freed slaves from the United States established Liberia in 1847. Black Americans do not make much of this historical connection with Liberia for a variety of reasons. It is up to the Government of Liberia to exploit this rich history in building a vibrant tourism sector in the post-COVID-19 era. With COVID-19 all over the world, visitors and tourists from the Unites states to Liberia would no longer fear epidemics as they once did when the word Ebola was pronounced. US-Liberia investment dialogue should concentrate on these game changing dynamics beyond normal patterns that have defined Liberia’s relationship with the United States in the of the last 100 years. Our Government will explore these paths in the coming months and years.”
Minister Tweah recalled that more than 75 years ago, a global crisis that wreaked far more disastrous consequences redefined the globe and availed an economic consensus that remains predominant today. “Amid the impact of COVID-19 and the sheer possibility that its severity across continents could approximate alarming death rates and paralyze economies around the world, especially economies in Africa, the world appears to be hankering after a new kind of paradigm or global weltanschauung.”
Today, the MoF minister said, world leaders, heads of international organizations, think-tanks, economists and policy experts are chattering loudly at various conferences, in various forums and discussion groups on the importance of framing a new and different economic consensus that can deliver results that might enable countries, particularly low income and developing countries, to better withstand the shocks from economic crises with orders of magnitude significantly greater than the Great Recession of 2008, or from global health pandemics whose impact might dwarf the impact of the Spanish Flu of 1918, which took more than 50 million lives and affected more than 500 million people.
While these discussions might seem like normal, Minister Tweah averred that perennial talk after a major crisis which will soon buckle under the weight of the business-as-usual paradigm, the discussions this time have a certain seriousness to them. “One feature of this seriousness is the reality that more than half of the world’s population may now be acclimating itself to wearing face masks for the foreseeable future. If anything, the wearing of face masks is a constant reminder that something is seriously amiss in our world, and as a consequence, something radical, more meaningful and more epochal has to give.”
The minister said in 2014, the world witnessed an explosion of a different kind of pandemic, the Ebola Viral Disease, which had always been on the African continent but which had not not shown the particular virulence observed in the Mano River region of West Africa. “Unlike COVID-19, the 2014 Ebola outbreak was confined to three countries:Liberia, Sierra Leone and Guinea. Billions of dollars in emergency assistance flowed to the three countries. The death toll from this Ebola epidemic stands at more than 11,200, about 37 percent the current death toll from COVID-19 in all of Africa. Despite this massive tragedy that was Ebola, the world largely saw Ebola as an African problem or a West African epidemic.”
He said, the three countries were largely left to their own devices in dealing with the economic aftershocks of Ebola. “The Liberian economy plunged to a GDP growth rate of negative 2. 17 percent, recovery from which has been buffeted by subsequent macroeconomic headwinds and now by the Corona pandemic. While the three countries received billions in emergency assistance, their respective healthcare delivery systems remain unable to cope with any serious epidemic, and their respective economies have never received any serious Post-Ebola economic or investment stimulus to compensate for the impact from Ebola.”
The minister lamented that barely six years after Ebola, the world is now staring the brink of a potential economic precipice and is hopefully groping toward a more serious thinking about framing a Post-COVID-19 Economic Consensus. Thus, he said, the Fifth US-AFRCA INVESTMENT FORUM AND POLICY DIALOGUE avails a fresh opportunity to explore the horizons and possibilities of changing the investment and development trajectory in Sub-Saharan Africa.
In the last 75 since the end of the Second World War, Minister Tweah said, momentous events have occurred and with them tremendous changes have been wrought in our world. “We have seen the Vietnam and Korean Wars. We have seen the onset of the Cold War and its demise with the fall of the Berlin Wall in 1989 and the end of Soviet Communism. We have seen Africa plunge into nearly two decades of conflict and violence for much of the 80’s and 90s under the aegis of brutal dictatorships, but we have also seen the continent climb from these maladies to the post-millennial era of democracy and economic growth, even if the growth has been sporadic in different regions, buffeted by macroeconomic instabilities . During these decades, we have seen China rise from a per capita GDP of 185 US dollars in 1977, to a per capita GDP of nearly 10,000 US dollars in 2018, lifting more than 700 million people out of poverty in the last four decades, the greatest poverty alleviation feat in recorded history! We have also seen Latin America and the Caribbean move from a per capita GDP of about 1400 US dollar in 1977 to about 8500 US dollar in 2019.”
Despite these seismic events and the changes they have engendered, Minister Tweah said, Africa has changed very little. Per-Capita GDP in Sub-Saharan Africa moved from USD 462 in 1977 to a meager USD 1500 in 2019. “This means Africa is presently where Latin America was more than 40 years ago. In the last four decades, Africa has made some progress but has remained in virtually the same place place.”
The Minister further explained that an abundance of economic evidence and analyses have purported to show why Africa has not grown and developed as fast as or as much as other continents or regions, and why the continent remains at the bottom of the economic ladder. “The reality emerging from all these analysis is that global investment capital has not flown into Africa in the way it has flown into other regions of the world. In 1990, Nobel Laureate Robert Lucas explored reasons why capital has not flown to Africa or developing countries despite the huge potential for economic returns to those investments. This criticism has been dubbed the LUCAS PARADOX in neo-classical economic literature. Among economists, the predominant explanations for the LUCAS PARADOX revolves around the quality of institutional governance in Africa or developing countries.”
Minister Tweah explained that there is no gainsaying the importance of institutional quality in the form of effective property rights, investment friendly policies and regulatory frameworks, strong anti-corruption governance and a stable and predictable policy environment. However, I argue that this lack of capital flows, which explains Africa’s lack of infrastructure development, without which the continent’s private sectors will be left in the lurch, cannot alone be explained by institutional factors of empirical studies. For example, Sub-Saharan Africa’s share of Public Private Investment is the lowest in the world and is concentrated in four countries– South Africa, Nigeria, Kenya and Uganda. This fact may appear to suggest that these countries are the best on global indices of Government effectiveness, regulatory quality or anti-corruption. I can hear choruses across Africa saying ‘so true.’
What this means, Minister Tweah continued, is that the factors underpinning Sub-saharan Africa’s ability to attract global capital flows or PPPs may lie beyond empirical findings in economic papers and will require a complex array of approaches, among them undeniably the need for countries to continue to upgrade and improve their investment climates.
Additionally, he added, the most fundamental critique of the current economic or investment consensus is that while it has identified the lack of capital and investment flowing into Sub-Saharan Africa as a major culprit, enabling or catalyzing these these flows has not occupied a particularly high niche in the drive for global solutions. “For example, Official Development Assistance, which should help solve this problem, has itself been puny relative to sub-Saharan Africa and has been spent in ways that do NOT solve the binding constraints for private investment on the continent. In last 60 years, Africa has received a mere three percent of what is classified as Official Development Assistance, with assistance going to other regions of the world. So the first issue is this: to the extent ODA is supposed to untangle complexities for investment flows in Africa, the share of ODA going to Africa to achieve this purpose is insignificant. More than USD 33 trillion in ODA has been spent in all regions of the world since 1960 and Africa has received only a paltry USD 1 trillion. The second problem is that this USD 1 trillion has been spent in a way that has not enhanced Africa’s ambition from private sector expansion.”
As the world grapples for change and new answers to Africa’s investment challenges in the Post-COVID-19 era, Minister Tweah said the world must begin to ask the fundamental and hard questions. “First, why is the share of resources that should help Africa’s development so small relative to other regions of the world? If Development assistance is smaller, of course we should expect outcomes accruing to that development assistance to be equally smaller.”