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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Global Financial Crisis :
Alternative Responses of Africa
Conference organized by
The Coalition for Dialogue for Africa (CoDA)
Tunis, 28 November 2009, African Development Bank
Yves Ekoué AMAÏZO, Ph. D., MBA
Director of The Afrology Think Tank
International Consultant, Finance and International Business Management
Email: [email protected] - Internet: www.afrology.com - www.amaizo.info -
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
AGENDA
1.
2.
3.
4.
5.
Economic Resilience and Development:
Asking the right questions
Impact of the 2008 Financial Crisis on Africa
Reactions of African authorities
Alternative Reponses: Purchasing power
and Economic Prosperity
The Way Forward: Accountable for Agile
and Participative Pacts
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Alternative conception of « Development »
Beyond
Accumulation of
wealth and growth
of GDP or income
Poverty :
Deprivation of basic rights,
Participative process in
generating economic prosperity
DEVELOPMENT AS AN
INCLUSIVE PROCESS
Shared
leadership with
women
(Economic, social, cultural and political)
• BEYOND MARKET AND STATE ROLES:
Both failed in the past
Wealth creation (market)
Equity and distribution (State)
Concentration of Power over
Productive structures
without local re-investment
• BEYOND EFFICIENCY VERSUS EQUITY:
Accountable to values and norms
Legitimacy, democracy
Solidarity and Collective efficiency
DEVELOPMENT AS A
REGULATION PROCESS
(Economic, social, cultural and political)
Undermine the promotion of values
Unilateral diffusion of
a « dogmatic vision of
the markets » or the
« State » without
alternatives of reforms
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
JOBLESS PEOPLE AT GLOBAL LEVEL
(Change in %) 2000-2009 (twice a year)
30
25
20
15
10
5
0
-5
-10
2000, 2000, 2001, 2001, 2002, 2002, 2003, 2003, 2004, 2004, 2005, 2005, 2006, 2006, 2006, 2006, 2007, 2007, 2008, 2008, 2009,
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan Jun Jan
Jul
Jan
Jul
Jan
Jul
Jan
Jul
Jan
Source: IMF, “Protecting People, Promoting Jobs, September 2009, p. 6 (Data are estimations from G20 and 34 countries
(when statistics available).
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
AFRICA SUPPORTS THE GLOBAL ECONOMIC GROWTH,
1991-2014, (Real GDP annual change, in %)
AFRICA
7
6.5
5.4
6
4
GDP (in %)
2
5.7
INDUSTRIALIZED COUNTRIES
6.3
6.1
5.3
6.7
4.9
5
3
WORLD
5.2
4.9
3.1
2.8
2.3
2.9
1.4
1.7
5.2
4
3
3.6
3.2
2.4
1
4.5
5.1
2.6
3
1.7
4.5
3.1
2.7
2.4
1.9
0.6
0
1.3
-1.1
-1
-2
-3
-3.4
-4
1991-2000
2001
2002
2003
Source: IMF, WEO, October 2009, p. 169
2004
2005
2006
2007
2008
2009
2010
2014
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
1. Economic Resilience and
developpement:
Asking the right questions
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
AFRICA AND THE 2008 FINANCIAL CRISIS :
Strategic Awareness, Reformulation of Objectives and Policy Differentiation
 Recurrent crises on the continent :
 Energy
 Food
 Structure of the economy (shared wealth creation)
 Is Africa unable to plan its future ?




Sustainably dependent on Development Aid?
Hostage of the market?
No collective interest in economic sovereignty?
No interest in improving African people’s daily and future
well-being?
 No collective discipline in responding to the 2008 financial
crisis and to structural crises?
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
2. Impact of the
2008 Financial Crisis on Africa
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
AFRICA : GDP GROWTH PER REGIONS, 2000-2010
Annual change in % (ADB/OECD)
9
8.8
8
No economic
recession in Africa
7.6
7.3
7.1
7
7
6.8
6.4
6
6
5.7
5
6
6.1
5.7
5.7
6.1
5.9
5.4
5.2
5.4
5.1
4.9
5.5
5.2
5
4.8
4
5.7
5.5
4.7
4.2
4.2
4.1
4.6
4.2
3.5
4
3.4
4.6
4.5
3.6
2.8
3
2
AFRICA
SUB-SAHARAN AFRICA
SOUTHERN AFRICA
CENTRAL AFRICA
1
EASTERN AFRICA
NORTHERN AFRICA
WESTERN AFRICA
2.8
2.4
0.2
0
2000-2005
2006
Source: ADB & OECD, African Economic Outlook 2009.
2007
2008
2009
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
THE CRISIS ERODES FISCAL AND BUDGET SPACES
Overall Fiscal Balance including Grants, 1997-2010, en % of GDP
20
20
M AGHREB
SUBSAHARAN AFRICA
WAEM U
CEM AC
SADC
COM ESA
18
16
14
12
10.5
10
10.2
8.5
8.3
8
6.8
9.1
8.1
6.5
6
6.8
5.8
4
3
4.8
2.7
3.2
2
2.2
2.2
1.8
0.1
-0.7
-4
-6
-1.9
-1.9
-2.6
-2.8
1.7
1.3
1.2
0.2
0
-2
2.7
1.1
-0.1
-1.9
-2.5
-2.2
-2.4
-3
-2.4
-2.7
0.4
0.6
-2.1
-2.8
-3.2
-2
-3.4
-4.7
-4.4
-4.8
-4.7
-2.6
-3.4
-4.8
-8
1997-2002
2003
2004
2005
2006
2007
2008
* Maghreb: For 2004: average of Central Government Fiscal Balance: 2000 to 2004
Source: IMF, REO, SSA: Weathering The Storm, Oct. 2009, p. 69. and IMF, REO, ME & CA, Oct. 2009, p. 50.
2009
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
THE CRISIS HITS DEPENDING ON THE ECONOMIC STRUCTURE
External Current Account including Grants, 1997-2010, (in % of GDP)
22
SubSaharan Africa
20
21.2
Oil Resource-Intensive Countries
18
Non-Oil Resource-Intensive Countries
16
Coastal Non-Resource-Intensive
Countries
Landlocked Non-Resource-Intensive
Countries
14
14.2
14
12
10
8
7.2
7.9
6.7
6.3
6
4
2.6
2
0
0.9
-1.8
-6
2.1
1.6
0.6
1.1
-1.4
-3.1
-2.6
-4
4
-0.7
-1.7
-2
2.7
-0.5
0.9
-0.2
-3.2
-2.8
-3.5
-5.8
-3.9
-2.2
-4
-4.1
-4.3
-5.9
-4.3
-7.9
-5.9
-6.7
-8
-6.8
-6.4
-7.8
-7.8
-10
-8.8
-8.3
-11.1
-12
19972002
2003
2004
2005
Source: IMF, REO, SSA, Weathering The Storm, Oct. 2009, p. 79.
2006
2007
2008
2009
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
CONSEQUENCES OF 2008 FINANCIAL CRISIS SHIFTED AND
REDUCING AFRICA’S POLICY AND FISCAL SPACES
Vulnerability
and
Réactivity
External
Resources
Anticipation
and
Resilience
Internal
Resources
CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
3. Reactions of African Authorities
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
SUB-SAHARAN AFRICA VERSUS MAGHREB REGIONS
(Real GDP Growth, annual change in %)
M AGHREB
SUBSAHARAN AFRICA
7
6.2
6.3
6.9
6
5.4
5
5.2
4.8
4.1
4
4.1
3.9
3.9
3
Maghreb region more resilient
than Sub-Saharan Africa
2.9
2
1
1.1
0
2005
2006
2007
2008
2009
*Source: IMF, REO, SSA: Weathering The Storm, Oct. 2009, p. 62. and IMF, REO, ME & CA, Oct. 2009, p. 44.
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
BOTSWANA and SEYCHELLES (most hit) VERSUS UGANDA and MOROCCO (Less hit)
(Real GDP Growth, annual change in %)
Botswana
11
10
Se yche lle s
M orocco
Uganda
10.8
9
8.3
8.4
9
8
7.5
7
7.8
7.3
6.3
6
6
5
5.6
5.1
4
7
4.1
5
4.4
4
3
3
3.2
2.7
2
2.9
1.6
1
0
-1
-2
-1.9
-3
-4
-5
-6
1.
2.
POLICY BEST PRACTICES (Morocco and Uganda)
AFRICA NEEDS TO CONVERGE
-7
-8
-8.7
-9
-10
-10.3
-11
2005
2006
2007
2008
2009
*Source: IMF, REO, SSA: Weathering The Storm, Oct. 2009, p. 62. and IMF, REO, ME & CA, Oct. 2009, p. 44.
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
CONVERGENCE AND MACROECONOMIC STABILITY
POLICY SPACE:
Stability first, recovery later
1. Growth of GDP per capita
> 2,25 %
2. Inflation
< 6%
3. Volatility of exchange rates
<6%
4. Balance surplus
• 4.1 Fiscal balance
• 4.2 Trade Balance
• 4.3 External Current Account
5. External Debt
< 60 % PIB
6. Debt service and grace period
7. Additional concessional loans
8. Limit to Capital flights
9. International reserves
10. Domestic Debt paid
11. Focused/Targeted subsidies
12. Regulation of the banking sector
13. Diversification of strategic partners
14. Taking advantages of global recovery (terms
of trade, global trade, commodities prices,
capital flight, financial resources...)
PRIOR TO RECOVERY
1.
2.
Recovery of global trade
High Fiscal and budgetary deficit must be
reoriented into Productive structures
3. Support of the Monetary policy
4. Effectiveness of policy responses including
stimulus packages in support to Purchasing
power
5. Confidence and Trust among Banks and
financial institutions
6. Stability of Commodities’ prices
7. Specific measures for vulnerable people
8. Rejecting a Tax on financial transactions if
used to cover Toxics financial assets
9. Organizing a new Watch system on future
crises (in reference to 1970, 1975, 1982,
1991... Crises)
10. Establishing a mechanism and process of
Accountability
11. Regulation and redistribution principles with a
renewed State based on Public-private
partnership (Bottom-up approach)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
4. Alternative Reponses:
Purchasing Power and Economic Prosperity
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
RESILIENT ECONOMIES IN AFRICA IN 2009
(Real GDP, annual % change)
 All Africa Economies are Resilient to the 2008 Financial Crisis
 Except 9 countries

1. Botswana (Diamond, GDP: -10.3 % - GDP/cap -11,4 %
2. Equatorial Guinea (Volatility of oil price, GDP: -5.4% - GDP/cap: -8.1%
3. Gabon (Oil prices and electoral campaign, GDP: -1% - GDP/cap: -2.4%
4. Lesotho (Lack of diversification, GDP:-1% - GDP/cap: -2.8%
5. Madagascar (Political crisis, GDP: -0.4% - GDP/cap: -3%
6. Namibia (Lack of diversification, GDP: -0.7% - GDP/cap: -1.6%
7. Seychelles (Contraction of Tourism, GDP: -8.7% - GDP/cap: -8.9%
8. South Africa (Food shortage and too much linked to global market, increasing
inequality and violence, GDP: -2.2% - GDP/cap: -3.2%
Zimbabwe not on the List, GDP: 3.7% - GDP/cap: 3.7%
Source: IMF, REO, SSA Oct 09, p. 62 and MECA, Oct 09, p. 44
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
RESPONSES AND NON-RESPONSES OF AFRICAN AUTHORITIES
The “Triple A”: Anticipation, Agility et After-crisis
ANTICIPATION :
Stability First
1. Integration in the budget
(2009): Re-Launch the
economy based on the
consumption
 Preserving Purchasing
Power
 Increasing revenues for
economic agents
 Fiscal stimulus
2. Increasing Public Investment
(infrastructure and
Construction works)
3. Acceleration of the pace of
disbursement of public
expenditure (National and
international projects and
programs)
4. Identification of main losses of
resources (financial)
AGILITY :
Preserving Productive Structures
1.
2.
3.
4.
5.
6.
7.
Public-Private Strategic
Watch Comittee
Market and Value chain
analysis Studies on sectors
directly hit by the crisis
Support/Stimulus Plan for
Productive enterprises with
the objective to preserve
jobs
Alternative Markets Studies
and Strategic diversification
of partners
Support to the Banking
sector in order to retrieve
Trust and confidence in the
financial communauty
Specific/Target Measures
for vulnerables people
Selected Tax holidays
1.
2.
3.
4.
5.
6.
7.
AFTER-CRISIS
Re-Launch the Economy on
alternative basis
Change of economic paradigm
(Shared economic growth,
economic prosperity and
contractual solidarism)
Keeping economic fundamentals
under control
Insuring financing of SME and
Micro-economic activities
Increasing public investment
(infrastructure and regional
integration)
Plan MLT for most hit sectors
Increasing Purchasing Power
and salaries
Institutionalization of coordination
and negotiation with private
sector and civil society
organizations (more participative
approaches)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
EFFECTS AND IMPACT OF THE 2008 FINANCIAL CRISIS
RESILIENCE
1. Limited dependency on demand volatility
(commodities)
2. Not/less hit by previous crises (energy/oil,
food)
3. Macro-economic fundamentals in green and
stables (GDP, Inflation, Budget deficit, trade
surplus, surplus of external current account,
increasing reserves, debt service limited to
country’s affordability...)
4. 4th trimester 2008: Economy growth falling,
significant decline and deficit of external
revenues, tax revenues and external
resources (FDI, IP, ALA (African leaving
abroad, Diaspora), Grants, Technical
Assistance), Negative Trade balance,
domestic debt not paid, job destruction…)
5. Resilience en 2009/2010: smooth recovery
6. Buffer Initiatives in support of purchasing
power
7. Increasing role of State regulation and
redistribution
NON-RESILIENCE
1.
Fall of Global Trade (-11,3 %) and contraction
of global demand
2. Fall of selected commodities’ prices usually
exported by Africa
3. Fall of fiscal income/ Descreasing earnings
4. Scarcity of Non-debt generating resources and
increasing aggressive conditionalities
resources (limited capital flow)
5. Drying of the easy access to credit
6. Fall of remittances of African leaving Abroad
(ALA)
7. Deterioration of main macro-economic
indicators
8. Weak level of productive structures, of financial
institutions and support institutions including on
transactions
9. Accountability process inexistent
10. Regulation and redistribution principle of the
State not transparent, nor efficient
11. Lost of both Policy and budget space with
relevant fiscal space and economic sovereignty
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Over production Crisis
Ad hoc or Short-term
Approaches
Pressure of the
environnement
Strategic and systemic
Approaches
CRISIS OF THE SUSTAINABILITY OF
PRODUCTIVE STRUCTURES
Too much time devoted to:
"managing" the State and its
services, repairing externalities
associated with a nonconducive environment
Opportunities from
the environnement
Frequent accidents in the
life cycle of products,
services and of productive
structures in Africa
Production Crisis
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
CUMULATIVE VULNERABILITIES:
FIXING FRAGILITIES
1.
2.
3.
4.
5.
6.
Purchasing power
Productive capacity
Technology content
Transaction and logistics
Regulation and business environment
Ownership enforcement and protection of “traditional land
ownership”
7. Administrative constraints and corruption
8. Access to finance (weak MLT Finance) and access to market
(non-tariff barriers and lack of quality infrastructure)
9. Domestic Debt balance at the expenses of the private sector
10. Benchmarking/Positioning with appropriate measurements
criteria (regional average)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
SUB-SAHARAN AFRICA, 1997-2010
Growth of GDP per capita, (annual change in %)
10 years of GDP per capita: above average
 2009 = -0.9 % GDP per cap.
 Losses: 4 % of GDP per capita growth
Direct increase of Poverty
6
GDP per capita (growth in %)
5
4
5
4.1
4.2
4.8
3
3.1
2.9
2
1
1.9
1.8
0
-0.9
-1
1997-2002
2003
2004
2005
2006
2007
2008
Source: A partir de IMF, REO, Subsaharan Africa. Weathering the Storm, October 2009, p. 64
2009
2010
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
EROSION OF
SOCIAL CAPITAL
ECONOMIC GROWTH
WITHOUT
JOB CREATION
DEINDUSTRIALISATION
CANNOT BE THE
ANSWER
AFRICA SHOULD DEFINE
ITS OWN STRATEGY
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
PRODUCTIVE SECTOR: UNESCAPABLE SECTOR FOR PROSPERITY
Economic
Countries with No
variable of
Policy Room
Adjustment in the
(Budget constraints)
global Market
Debt
Generating
Resources
Productive
sector
Social Safety
Nets
Non-Debt
Generating
Resources
Economic Growth
Economic
Countries with
with Job
Growth with Job
Policy Room
destruction/No
(budget initiatives)
Creation
Job Creation
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
BUILDING POLICY AND BUDGET SPACES:
Focusing on productive structures and
looking for economic resilience
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
TOWARDS AN AGILE AFRICA
 Macro-economic policy in support to productive and
commercial structures and capacities
 Standing apart from policies moving against the
interests of African peoples
 Re-orienting resources towards economic
sovereignty, convergence and regional integration
 Diversifying strategic partners
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
5. The Way Forward: Accountable
for Agile and Participative Pacts
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Revisit the Development paradigm:
Economic Transformation and sustainability
Providing Collective
Responses to Climate
Change
Attracting countries
with savings surplus
towards regional
investment
Development of Productive
Structures and Decent Job Creation
(capacities, capabilities and smart partnership)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
AFTER 2009 :
CONTRACTUAL SOLIDARISM
Institutionalizing Public-Private Partnership including
civil society




AFRICA: Losses of 3,5 % of Economic growth in 2009
Afrocentricity: Moving towards an African economic
prosperity paradigm
Favoring a responsible and coherent fiscal policy
Pact to support purchasing power, shared wealth
creation and economic prosperity in Africa




At all levels: intra-national, national, sectoral, sub-regional,
regional and continental
Urgent and Short-term measures/initiatives (1-3 years)
Medium and Long-term measures (3-7 et 10-25 ans)
Anti-palliatives Mesures (anti-poverty trap)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
ALTERNATIVE PROPOSALS
2008 financial crisis as an opportunity to change
URGENT AND SHORT-TERM
MEASURES
MEDIUM AND LONG-TERM
MEASURES
1. Adopt a new role of State as
regulator
2. Limit debt service to 7% of
national budget in order to
gain some Policy space
3. Pay Domestic Debt as a
priority as a support to
SME/SMIs
4. Reduce transaction costs and
main factors costs
5. Implement the African
Productive Capacity initiative
approved by all African Heads
of States and NEPAD in 2004
6. Accelerate the convergence,
the harmonization and the
monetary discipline subregional
1. Include the Pact of Purchasing
Power in the on-going national
budget
2. Direct African sovereign toward
investment in productive
structures and infrastructure
3. Operationalize the African
Monetary Fund, the African
investment Bank, the African
Central Bank and the African
common currency
(decentralized areas)
4. Prepare market studies for
alternative and strategic
diversification of partners
5. Establish the Diaspora Bank
6. Re-launch African Economy
using specific measures on
raising the consumption as part
of the proximity economy
approach
ANTI-PALLIATIVES
MEASURES
1. Request changes of the
Objectives of the Millennium
Development Goals: from
poverty reduction to shared
wealth creation and decent jobs
2. Request that all international and
African institutions provide
statistics on the whole Africa as a
continent
3. Create counter-power institutions
on strategic watch
4. Increasing transparency on
information related to profits
generated in Africa
5. Create an Dispute settlement
structure related to « contractual
solidarism »
6. Boosting the agglomeration of
competencies in Africa
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Recovering economic sovereignty space:
Financing African economy with new priorities
NON-DEBT GENERATING
RESOURCES
(Trade surplus, Remittances of
Diaspora, Grant, Diversified
Technical Assistance)
NON-EXCESSIVE
CONDITIONALITIES
RESOURCES
(Foreign Direct Investment, Portfolio
Investment, Domestic Debt be honored
in real Time)
Fiscal revenues based on Government
accountability and Responsibility
before African People (Tax payers)
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
To
Industrialized
Economies
ECONOMIC
RESILIENCE
From
FRAGILITY
Dynamic
Productive
Structure
Development of
Capacities &
Capabilities
(institutions &
accountability)
Productive
Sector
Diffusion of
Technology
Content +
Social safety
nets
Competitive
Business environment
From Least
Industrialized
Economies
Government
Commitment
Decent Job
Creation
To
AGILITY
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CoDA - Global Financial Crisis: Alternative Responses of Africa
Tunis, 28 November 2009
Discussions ?
Thank you !
34