Rebeca Grynspan: Remodelling financing for Africa needs will from IMF, World Bank

The Secretary-General of the United Nations Conference on Trade and Development Rebeca Grynspan spoke with Vincent Owino on how Africa can better deal with its trade difficulties as well as restructuring of the financing model for the continent.

African leaders have been pushing for a new financing model to better address the continent’s problems. What changes would you suggest to the financing structure?

I absolutely agree with the African leaders. Africa pays eight times more for loans than Europe and four times more than the US. Their interest rates are too high. You need more investments coming from multilateral sources at scale for climate change transformation, energy transition and for the new investments needed for diversification of the African productive structure.

Multilateral development banks have to leverage the private investments needed for the continent but that is not happening. Only two percent of the renewable energy investment is coming to Africa. It doesn’t make sense in terms of your need and the universal access that you still need to achieve.

There are concrete recommendations and solutions for that, which have gone to the G20, the UN, and through the voice of, for example, President William Ruto, to the international community. What we need is the political will on the boards of the IMF and the World Bank, to take the decisions that are needed for that to change.

Read:Ruto wants $500bn credit line set aside for weak economies

The latest Economic Development in Africa report says the continent’s integration in global supply chains has been slow. How can this change?

I think Africa needs a long-term view to get out of the trap of selling only raw materials. Initially, it looks like a blessing, since they have the materials in their land, and they do not have anything else that they think could add value to that extraction. But the truth is, even if they do not have it in the first instance, they can build it, but for that they need a strategy, technology access and human capital and resources — the enablers that will increase Africa’s integration in the global supply chains.

About continental integration, the AfCFTA implementation has been painfully slow. What is your view?

Coming from Latin America, you see the glass as half empty, but I see it as half full. Because to have 54 countries sign the agreement and 46 of them ratify it for me is a huge achievement.

It is the basis on which you can build. Integration is not easy. It needs perseverance and it’s understandable that it’s not as fast as you might want, but it is difficult to converge different blocs within the continent and also change the rules, Customs, and technical norms.

Read: Here is the biggest hurdle to AfCFTA take-off

Having taken such a step forward gives a lot of hope, but the truth is, you need to maintain the political will. And in this, I have to say that the East African Community is a very important place, because they have been a positive and constructive voice towards the continental free trade area.

At UNCTAD, we have someone in the secretariat working and helping with whatever we can provide. We are good at certain things that are important for the free trade area. These are logistics, maritime ports, development for connectivity, digital, norms or origin, and investment facilitation and agreements. In those areas, we are ready to help and support the continental free trade area.

African countries seem to prefer PTAs with the West to regional trade agreements. Why is this a problem and what should be done to change it?

It is definitely a problem because it’s very difficult to integrate if the good conditions are somewhere else. What is the incentive to go for integration in that case? You will have to lower the non-tariff and tariff obstacles to integrate, and I know this is a worry for ministers of finance because trade taxes are a very important part of the financing package for the countries.

But if you see the expected expansion of trade within the continent, you can have the formula for the gradual convergence in terms of tariff decreases. There are ways to do it, but you have to put it in the open. Fear is not the best adviser. We need to address the problem of financing. We need to finance the transition to lower tariffs.

High trade costs in Africa also hampers continental trade. How can they be reduced?

Well, I know that the secretariat has been working on connectivity, infrastructure, and logistics investments for the continental free trade area. So, the important thing is to look at the financing models that will be adequate to take this forward.

Read: Leaders push for new global financing model that fits Africa

The problem is that when you have several countries being part of the same infrastructure project, you have to divide the costs. You also have to see what benefits there are for each country because the loans are not given to countries as a hub, but individually.

So, the multilateral development banks have to learn from other experiences that have been done. For example, in Central America, where we had the connectivity project in energy, the financial models were adapted to that modality, and I think that should also be done in the African case.