Wednesday 4 September 2019

The Madness of G20 Policy Matrices for Africa


African governments do not drive the preparation processes of the G20 summits despite their participation as observers during those events. Africa remains “on the table” of the G20 instead of sitting at the table for global agenda-setting and rule-making (Leininger, 2017)[1], although the AAG is co-chaired by South Africa (with Germany) and the UN Economic Commission on Africa (with ACET and the OECD) also participates in the Compact with Africa (CwA). Whether “countries are displaying ownership of the commitments made, unlike in the case of structural adjustment programmes that were externally imposed”[2] (Sidiropoulos, 2019)? Doubts are validated by a close look at the CwA policy matrices for each of the CwA countries.
The guiding principle of CwA policy matrices is: “Improve framework conditions for private investment (domestic and foreign)”. In reality, the African CwA partner countries have been subject to a bewildering array of government actions and specific targets required from them. The table below refers to the policy matrices of the early implementation phase of the Compact initiative. They are far from reflecting the comprehensive task load required from the governments in African countries participating in the Compact initiative.
Table: Required actions, targets and foreign institional partners in 1st CwA Policy Matrices
- numbers, early 2018 -

Ethiopia
Ghana
Senegal
Government actions
26
22
28
Targets
16
34
28
Foreign ´partners´*
26
32
23
* International and foreign bilateral development institutions. Multiple entries included.

The table picks three countries: Ethiopia, Ghana and Senegal. But the problem of bureaucratic overburden and quasi-colonial interference is general. For all twelve CwA partners combined, the total number of each required government actions and policy targets as well as involved foreign partner institutions easily sums up to 300 in early 2018. In many cases, the number of required actions, targets and partners has been rising with each update of the country matrix.
The proliferation of policy actions required from the twelve CwA partners in each of the country policy matrices can be blamed for the fact that CwA country governments have been confused and thus fail to own the compact initiative[3]. The CwA iniative is rather owned by multilateral agencies, especially the World Bank´s IFC. They push their themes and indicators without G20 leaders bothering about prioritisation nor considering the severely limited government management capacities of most CwA partners. Multilaterals struggle to obtain mandates. It is no coincidence that each multilateral organisation tries to push the work areas and indicators that they ´own´ into the CwA country policy matrices.
Clearly, the intentions and postulates of the 2005 Paris Declaration and Accra Agenda for Action have been forgotten and ignored. The old burden imposed by prolific donor missions and meetings on the administrative elite in Africa has been resurrected by the Compact. The imposition of government actions and policy targets may be perceived as benign from a Western perspective; yet they have a post-colonial taste.
What is listed below is biased toward quantifiable, monitorable targets in the initial policy matrix for Senegal. The table, far from being comprehensive is annexed here to provide some flavour. Yet little is discernible in the policy matrix that would support the need for structural transformation via sectoral, rural-urban or informal-formal shifts. Finally, it is also noteworthy to point to potential inconsistencies and policy conflicts.

  • Macro stability trumps social cohesion in the CwA design. But is this a sustainable reform sequence?
  • Post- tax business profitability is to be raised to attract private inflows. But how does this policy target rhyme with an increased “tax take” postulated to mobilise domestic resources?
  • The policy target to slim down Senegal´s bureaucracy sits uneasily with the overload of ´Government action´, ´Indicators and targets´ & “Partners’ support” (euphemism for international organisations and bilateral aid agencies) stipulated in the policy matrix.
  • To safeguard Senegal´s public debt sustainability can interfere with the required bond market development to attract institutional investors. Likewise, promoting PPPs (and other blending instruments, such as guarantees) to facilitate infrastructure lending to the private sector can undermine sustainable fiscal space through the build-up of public contingent liabilities




  • APPENDIX



    Senegal Policy Matrix 28.02.2018

    Government action
    Targets 2019
    Indicators 2019
    1. Macro
    Reduce fiscal deficit
    < 3% of GDP in 2019
    3.0%

    Ensure debt sustainability
    Reduce current account deficit
    Policy Support Instrument program with the IMF to support the PSE
    IMF: “Broadly satisfacory”
    - but (single) public tender issues,
    - two of the
    six structural benchmarks (SBs) set for the PSI 7th review missed: (i) delays in the payment of taxes via mobile phones; and (ii) limited progress in lower tax expenditures.

    Improved tax collection
    Tax ratio >20% by 2020/22
    20.4%

    SEZ law
    50-year income tax holiday replaced with a 15 percent tax rate with no exemptions
    Done. CIT rate of 15%, exemption from the CEL, from import taxes and duties.

    Performance of public services
    - Improve from 10th to 8th in the Mo Ibrahim Governance rank
    - Improve to at least 50 in all percentile rankings of the WB Governance Indicators
    - Still 10/54.



    Not reached. Slipping in gov´t effectiveness, inter alia.
    2. Business
    Investor protection & disputes resolution
    - Reduction of trade dispute resolution timeframe from 680 days to 500 days
    - Fully operating Commercial Court implemented by 2019
    - Fully operating Electronic Register of Guarantees by 2019
    - n.a.




    - Dakar Commercial Court established.


    -n.a.

    Project preparation & use of standard clauses in PPP
    Double the share of FDI: from 3% of GDP in 2015 to 6% in 2020
    Trend FDI/GDP remins flat. Last observation 2018: 2.6%.

    - Simplify land registration procedures and transfer of ownership
    - Simplify and harmonize taxes and charges levied by local authorities
    - Electronic payment of fees for the administrative acts and taxes
    - Strengthen competition policy and practices in key sectors (telecoms, agribusiness, etc.)
    - Improve from 142 (2017) to 132 (2019) in the Registering Property indicator in Doing Business
    - Improve from 144 (2017) to 134 (2019) in the Enforcing Contracts indicator in Doing Business
    - Improve from 174 (2017) to 150 (2019) in the Paying Taxes indicator in Doing Business
    - Review of national competition framework vis a vis UEMOA
    - Enhanced competitive practices in key sectors, opening up markets for private investment
    Registering Property: easier => Rank = 118.



    - Flat: Rank = 142.




    - Flat: Rank = 171.




    - The inability to meet the PSI ceiling on the share of public procurement using sole source suggests that procurement could bestrengthened.
    3. Financing
    Attract institutional investors
    Support to the regional pilot project for market development (in CFAF) for long-term bonds; adapt regulatory texts by 2019
    1/7/19: Baobab Senegal issues bond for a total FCFA 10 billion (€ 15.2 million) subscribed at 100%, at 7 years, with a coupon of 7.50% per annum.

    Create a risk mitigation fund by issuing bonds
    Fully functioning mitigation fund, with a USD *** million initial capital, by end 2018.
    ?

    Address structural issues impeding lending to SMEs
    Reforms to require data to be shared with credit bureau (drawing on example in Cote d’Ivoire) and make collateral easier to recover.
    ?
    Sources:
    https://www.doingbusiness.org/content/dam/doingBusiness/country/s/senegal/SEN.pdf


    [1] Jutta Leininger (2017),"On the table or at the table?" G20 and its cooperation with Africa, in: Global Summitry Vol. 3 (2), pages 193–205.
    [2] Elisabeth Sidiropoulos (2019), “South Africa’s Changing Role in Global Development Structures – Being in Them but Not Always of Them”, DIE/GDI Discussion Paper No. 4/2019, page 30.
    [3] ACET (2019), Independent Review by The African Center for Economic Transformation, Compact Monitoring Report, April