It's not schools or hospitals but…Fiscal rigour…Zzzz

Wednesday, 17 September, 2014

It's not School or Hospitals but…investing in countries' internal financial structures is, perhaps controversially, a rather more advanced version of “Give a man a fish and he can feed himself for a day, but give a man a rod…”

The African Development Bank (AfDB) has granted Guinea US$ 18 million in budget assistance to strengthen internal corporate governance. One of the things CSR21 has observed over the years is that fledgling civil service departments, treasuries and mineral resources departments especially, tend to get stripped of the best people by private sector investors. Then the private sector companies complain when the civil service doesn’t work properly (for them).

While African, or any other, Governments are never going to be able to match private sector salaries, investment in the financial apparatus of developing countries is key for establishing a stable social environment. Efficient tax collection and then re-distribution has been a theme several miners have brought up recently, concerned that contributions don’t reach the visible, regional levels at which companies operate (CEOs seemed to have learnt the lessons of Nigerian Hydrocarbons and the fact that eventually people will start complaining about the lack of fresh water and abundance of gold plated Rolls Royces driving by).

While this assistance programme has probably been on the cards for a while, it comes at a time when the world can see in stark reality what happens to Africa, or anywhere else, when basic infrastructure meets major health crisis.

A question: money spent on Ebola - quite rightly - by outside actors versus regional infrastructure spend in last five years? We will look into this number as, while Ebola has a unique horror to it, mundane killers such as maternal mortality rates and water borne diseases can be addressed by basic social infrastructure build.

The donation and loan agreements to Guinea form part of Phase 2 of the Economic and Financial Reforms Support Programme run by AfDB.  Aly Abou-Sabaa, an AfDB Vice-president, is quoted on budget support:

"Guinea is at the start of a major turning point in its development process. The AfDB hails your Government's commitment to implement ambitious programmes for structural reform to boost economic transformation and fulfill Guinea's significant growth potential."

Looking at this news it seems the cash will be used to help develop infrastructure and cross border investment that actually creates something tangible. But the AfDB initiative is really about risk: mitigating the risk of deploying capital, badly needed in countries like Guinea, to form the infrastructure bedrock of inclusive growth for the future.

Last week we wrote about 100 plus developing nations lobbying the UN to legislate on sovereign debt risk, following a New York judge’s decision to nix an Argentinian bond re-negotiation. One of the points we made was that if you want the UN to pass judgment on “Haircuts” (sovereign debt reductions), some form of oversight or regulation should be adhered to in terms of national fiscal policy. Do the UN and the AfDB talk to each other? We are sure they do. So could there be an opportunity to begin to support national treasuries of nations in a more joined up way?

ENDS

http://www.afdb.org/en/news-and-events/article/guinea-the-afdb-is-providing-18-million-in-budget-support-to-improve-the-management-of-public-finances-and-the-business-climate-13502/