Serving as the World Bank’s Vice President for Africa since Senegal’s former Minister of Economy and Finance allocated a record amount to the African continent in 2015. He assesses the continent’s current situation and contends that the fall in commodity prices represents an opportunity for African countries to diversify their economies and speed up reforms.
Leaders League.In 2015, the World Bank allocated a record amount to Africa ($11.6 billion). Can you tell us why?
Makhtar Diop. Firstly, it should be noted that 10.2 billion of this amount concerns the concessional portion. Secondly, this record allocation is due to the very high demand in African countries. Naturally, this is also related to the fall in commodity prices.
Leaders League.What dynamics underpin the flow of investment to Africa today?
M.D. Over the last five years, there has been a strong flow of foreign investment, specifically in the commodities, natural resources (oil, gas and mining) and especially gold sectors. With the drop in commodity prices, the challenge is to maintain direct foreign investment flows while opening them up to other sectors. The economic environment requires greater diversification in African economies.
Leaders League.What is required to attract more private investment in the continent?
M.D. It is a combination of several aspects – but innovative start-ups and the right conditions for SMEs are potential avenues.
Today, the African private sector is facing several challenges, first and foremost that of funding.
For start-ups, the most difficult tranche – nevertheless essential to job creation – is obtaining between €100,000 and €1 million in funding. Banks need to take more risks within this margin. Conditions also need to be created to ensure the death of a company does not mean the death of the entrepreneur, who must be able to get back up and take other initiatives.
As for SMEs, long-term funding is also problematic, since the banking system offers mainly short-term funding, which leads to unwelcome effects in sectors like agriculture and manufacturing. In local markets, the value chains do not enable SMEs to maximise their profits, thereby forcing the countries to resort to imports.
Lastly, logistics are essential and logistics costs are quite high in Africa; they need to be reduced. Another crucial factor is that of available energy. Even when energy is available in Africa, it remains extremely expensive. All these issues are taken into account in the programmes we are implementing at the World Bank to meet these challenges.
Leaders League. Notably, the World Bank has implemented a programme for women…
M.D. This commitment is based on a very simple observation: you cannot run with just one leg. Depriving women of opportunities means withholding opportunities for economic growth. Beyond the consideration of moral and social justice aspects, which require that all people should have the same rights and duties, from a purely economic perspective, we can observe that when women do not have the same opportunities as men, that has a direct impact on growth. For example, when there is a lack of teachers or engineers and women are unable to get into these professions, that talent is unavailable to the country and cannot help to create conditions of growth.
Leaders League. In your opinion, what will the Africa of tomorrow look like?
M.D. The Africa of tomorrow is first and foremost one with a more diversified economy. There will be greater transformation of natural resources across the continent. For example, look at gas: it used to be exported while the continent was experiencing a shortage of electricity. Why don’t we use it for our own development? With these initiatives, we can create much more added value. For example, in the Côte d’Ivoire, 50% of cocoa production was processed into chocolate on-site. That should and will be the aim of African economies.
Leaders League.Are you an “Afro-optimist”, then?
M.D. Yes, by definition. I am naturally optimistic and have every reason to be! Although there are certainly challenges to overcome, we can equip ourselves with the means to overcome them, through brave choices for which African countries are ready. There is no other place on Earth that represents such a source of growth today. Investing in Africa makes sense for anyone with a long-term vision. Moreover, the first to arrive in Africa will have an advantage over the rest. My advice: come to Africa!