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African Economies Remain at Risk of Contagion from Global Financial Crisis, Zoellick Says

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  • Economic growth rates remain at risk from food, fuel and financial crises
  • Africans must take the lead in the continent’s development
  • Jobs, governance, infrastructure, regional integration, support for small- and medium- sized enterprises, all key to Africa’s success

ADDIS ABABA, February 2, 2010 – African economies remain in significant danger of contagion from the global financial crisis and will need to sustain reforms and receive increased funding support as they rebound from the triple crises that have reversed the robust economic growth of the last two decades, the World Bank’s president said Tuesday.

“Africa’s perspectives will be improved by Africans themselves, not by foreigners, development partners or rich countries,” World Bank Group President Robert B. Zoellick told over 200 journalists in 22 African capitals via video conference from Addis Ababa.

The prerequisites for success abound. They include finding practical and efficient ways to provide jobs, especially to ex-combatants soon after peace deals are reached in post-conflict settings; initiatives to stem corruption and bureaucratic red tape; efforts to improve infrastructure and the investment climate; and efforts to boost support to small- and medium-size enterprises. Success will also be fuelled by a deepening of regional integration; an amelioration in the management of global public goods such as energy; and a better effort at tapping into the innovative and creative genius of Africans.

Zoellick said his institution has led by example, ensuring that African countries design and implement their own development programs; and ramping up donor support to mitigate the impact of the food, fuel and financial crises on a continent hardest-hit by a reversal of private capital flows, a tightening of public budgets, a fall in commodity prices, and a shrinking of revenue from tourism and remittances.

Last year, the World Bank provided a record US$88 billion in development financing, of which some US$7.8 billion—a 36 percent increase over the preceding year—was to Africa, including US$3.6 billion for infrastructure and a fourfold increase—to US$1.7 billion—in funding to agriculture.

“In the face of the crisis, we did more, not less,” Zoellick said, as he appealed for a robust replenishment of International Development Association (IDA), the soft-lending arm of the World Bank which provides grants and zero-interest loans to poor countries, half of them in Africa, and a recapitalization of the International Bank for Reconstruction and Development (IBRD).

The contagion from what started as a crisis in the United States’ subprime mortgage sector poses a real threat of rolling back gains in poverty alleviation in Africa that had been fuelled from 1997 to 2007 by healthy growth rates ranging from 5.9 percent to 8.1 percent for a group of countries accounting for about 65 percent of Africa’s population. Growth during that period was a break from a past marked by the economic collapse of the decade 1975-1985 and the stagnation experienced between 1985 and 1995.

World Bank funding has been directed at safety net programs, attending to the basic needs of the poor; helping to diversity agriculture; and has helped build or sustain partnerships with local banks in order to guarantee the flow of credit to small and medium-sized enterprises, which are the engines of growth, job and wealth creation.

The World Bank is funding initiatives by African governments to spend more on job-generating projects; on efforts to limit the opportunities for corruption, including through eGovernment projects; and on initiatives to deepen the transformational impact of ICTs (information and communications technologies) on education, health and service delivery.

Zoellick told reporters that the World Bank is also exploring ways of working with China to develop industrial zones across Africa.

The World Bank president acknowledged that China is playing a significant role in developing Africa’s infrastructure, and stressed the importance of investments that create jobs locally, maintain debt at affordable levels, and engender inclusive development.

Zoellick cited Australia and Canada as countries where mining had avoided the emergence of enclave economies such as those created by the oil, gas and mining sectors in most countries.  He advised African governments to strive for similar performance by promoting transparency and accountability through the EITI process and by ensuring that maximum benefit flows to the majority of citizens.

Zoellick praised the collaboration between the World Bank and the African Union, as well as sub-regional organizations such as ECOWAS and COMESA, and expressed the hope that Bank shareholders (member governments) would ultimately reach a decision on extending grant-funding to such organizations.

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