Prof Mthuli Ncube’s speech to AfDB boards of governors – Fulltext

Speech by the minister of finance and economic development, Hon. Prof. Mthuli Ncube during the 2019 annual meetings of the boards of governors of the African Development Bank Group: Malabo, Republic of Equatorial Guinea

1.    It is my pleasure to participate at the 54th Annual Meetings of the Boards of Governors of the African Development Bank and the 45th Annual Meeting of the African Development Fund here in Malabo, Republic of Equatorial Guinea.

2.    Let me start by extending my heartfelt gratitude to the Government and People of Equatorial Guinea for warmly welcoming me and the hospitality extended to my delegation since our arrival.

3.    In addition, I would like to extend my profound gratitude to the AfDB President, Dr. Adesina and his team for organising the 2019 Annual Meetings under the theme “Regional Integration for Africa’s Economic Prosperity”.

Zimbabwe Situation

4.    The new economic dispensation, led by His Excellency, President Emmerson Dambudzo Mnangagwa is committed to promoting integration, through the provision of an enabling environment, as well as being a member to a number of regional and continental bodies such as the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the African Union (AU).

5.    Zimbabwe, through its short term economic blue print the Transitional Stabilisation Programme (TSP), is developing strategies to promote it’s integration with regional and continental bodies by undertaking the following steps:

•    Establishment of the “one stop shop”  Zimbabwe Investment Development Agency (ZIDA);
•    Accelerate the ease and cost of doing business reforms;
•    Promotion of Joint Ventures in infrastructure projects;
•    Implementation of Special Economic Zones;
•    Streamlining regulations and policies affecting export processes and manufacturing in general; and
•    Supporting the activities of SMEs by promoting linkages with the rest of the business world, and in particular Africa.

6.    Zimbabwe has also prioritised implementation of the SADC, COMESA and African Union integration strategies that promotes the development of shared infrastructure among other initiatives.

7.    The Government of Zimbabwe is prioritising re-engagement with the international community to attract Foreign Direct Investment (FDI) under the dictum – “Zimbabwe is Now Open for Business”.

8.    The reforms being implemented by Government under the Transitional Stabilisation Programme (TSP – October 2018 – 2020), are beginning to show positive developments, as the twin deficit challenge of the fiscal and the current account are coming under control.

9.    Government has started realising a budget surplus. This is being achieved through containing expenditures by reducing the wage bill and plugging revenue leakages through improving the Zimbabwe Revenue Authority (ZIMRA) ‘s Tax Management Revenue System, and revenue enhancement measures such as a 2% intermediate money transfer tax, among others.

10.    Furthermore, the 2019 Budget primarily targets macro – economic and fiscal stabilisation and implementation of quick win flagship and high impact projects and programmes, which will lay a solid foundation for private sector led growth.

11.    On the other hand, with regards to prices, fiscal consolidation measures, reinforced with a tight monetary stance together with liberalisation of the exchange rate are containing inflationary pressures which are expected to slow down in the third quarter.

12.    However, the 2019 GDP growth rate is expected to be weighed down due to unfavourable El-Nino induced drought, the devastating Cyclone Idai, foreign currency shortages and constrained spending being imposed by fiscal reforms.

13.    In addition, challenges in fuel and electricity availability are also a factor weighing down economic performance.
Cyclone Idai

14.    The 2019 Annual meetings come at a time when Southern Africa, as you might be aware, is in the aftermath of the devastating Tropical Cyclone Idai that hit three countries namely Malawi, Mozambique and Zimbabwe.

15.    Cyclone Idai left a trail of destruction in its wake in the three countries where lives and livelihoods were lost and infrastructure was damaged, among others.

16.     In Zimbabwe, Cyclone Idai hit the four provinces of Manicaland, Masvingo, Midlands and Mashonaland East, with the most affected areas being Chimanimani and Chipinge districts where approximately 344 people lost their lives.

17.    On behalf of the Government of Zimbabwe, His Excellency the President of the Republic of Zimbabwe and on my own behalf, I would like to acknowledge the support from the international community and also in particular the heartfelt condolences from the Bank Group extended by President, Dr. Adesina, on his behalf and that of the Bank Group towards the victims of the devastating Cyclone.

18.    The support from various Development Partners, including the Bank’s swift response towards the disaster, is highly commendable and appreciated.

19.    To this end, the Bank instituted a three party multi – pronged disaster mitigation relief and reconstruction effort to assist Zimbabwe, Mozambique and Malawi through:-

•    Establishment of a special Relief Fund amounting to US$400 000 for Zimbabwe, specifically set aside for aid efforts in some worst affected areas, which will be administered by the United Nations Children Fund (UNICEF);
•    Setting up of an Economic Recovery Funding by the Bank’s Transitional Support Facility (TSF) to help disburse US$100 million this quarter to assist the three countries; and
•    Leading global efforts for the Beira Regional Corridor Reconstruction Plan, given the vital importance of this critically needed economic route for Zimbabwe and its neighbours.

20.    Mention should also be made of the Bank’s participation at the Cyclone Idai Response Round Table co-hosted by the United Kingdom and Portugal, on the side-lines of the IMF/WB Spring Meetings in April 2019, which is well appreciated.

Regional Integration for Africa’s Economic Prosperity

21.    This year’s theme, “Regional Integration for Africa’s Economic Prosperity” resonates well with the thrust of the African Union to make Africa a borderless continent.

22.    Let’s not forget that African regional integration was a dream of the Continent’s leaders which gave impetus to the creation of the Organisation of African Unity in 1963, the forerunner to the current African Union.

23.     The theme is also in tandem with the Bank’s High 5 priorities, of which one of them is “Integrate Africa”.

24.    To date, many regional groupings are characterised by uncoordinated initiatives, political conflicts and low levels of intra-regional trade. Research by the African Development Bank shows that intra- African trade is the lowest of all global regions at approximately 15% as compared to 54% in the North America Free Trade Area, 70% within the European Union and 60% in Asia.

25.    Integration is essential for Africa’s development as it brings with it a lot of benefits to individual countries and the continent as a whole, in that it strengthens competitiveness and trading capacity, market expansion and upgrading of value chains, as integration particularly: –

•    Creates an appropriate enabling environment for private sector development (lower transaction costs, lower investment risks, markets);
•    Develops infrastructure programmes in support of economic growth, development and regional integration;
•    Provides a framework for coordinating policies and regulations;
•    Develops strong public sector institutions and good governance;
•    Reduces social exclusion and develops an inclusive civil society;
•    Promotes regional peace and security and political engagement among members;
•    Builds environmental programmes at the regional level;
•    Strengthens the region’s interaction with other regions of the world;
•    Improves intra – state connectivity; and
•    Enhances and solidifies domestic reforms;

26.    Africa therefore must unite not simply to enhance the continent’s weight in global affairs, but to meet the very basic needs of its population, for if we build for ourselves, then others will come.

27.    Thus, it is pertinent to note that, in grappling with challenges facing regional integration efforts in Africa, proponents for greater unity identified the following as pre-requisites for success in integrating Africa: –

•    Involving business groups, professionals and other sectors of society more actively in all integration issues;
•    Achieving an appropriate balance between public and private economic initiatives;
•    Reconciling the sometimes conflicting interests of countries with diverse sizes, natural resources and economic performances;
•    Pursuing a pace of integration that is simultaneously ambitious and realistic; and
•    Rationalising Africa’s many different regional institutions, in order to reduce overlap and inefficiency.
•    Leveraging on such comparative advantage by promoting region building and regional integration which is a pre- requisite for sustainable development.
•    Exploiting Africa’s huge infrastructure gap necessitating African policy makers in their pursuit of greater integration, to advance their efforts towards promoting peace, security and socio-economic development.
•    Strengthening the capacities of institutional frameworks for intra African trade, including improved coordination between the African Union and sub-regional bodies.
•    Putting in place effective domestic mechanisms for monitoring the consistency of national policies with regional frameworks need to be put in place.
•    Inclusive development, where no one is left behind especially the private sector and the informal trading networks is the way to go.

Zimfund

28.    As you might be aware, the current four-year mandate for the Zimbabwe Multi-Donor Trust Fund (ZimFund) will expire in October 2019. Government notes that the implementation of certain approved activities is expected to go beyond the mandate of the current ZimFund programme.

29.    To this end, Government is of the view that there is need to extend the mandate of ZimFund by a year to enable completion of the project activities

30.    Therefore, Government wants to acknowledge the AfDB for managing the ZimFund. The ZimFund has seen tremendous improvement in power and water & sanitation projects, with state of the art equipment being installed.

31.    This impact was witnessed by outgoing Executive Director Dr. Heinrich Gaomab II who visited during the first quarter of 2019.

Bank support

32.    Government would like to re – assure the Bank of its commitment to project implementation as evidenced by the improved progress across all projects being supported under the African Development Fund (ADF).

33.    We pledge our support to continue instituting measures that will improve delivery on Development Partners’ Funded programmes such as the following: –
•    Government has engaged Development Partners and took measures to clarify issues pertaining to the separation of accounts and introduction of a floating exchange rate through the 2019 Monetary Policy Statement. This has enhanced access to foreign currency by our Partners and enabled store of value on their funds; and
•    Government is in the process of implementing the following initiatives: –
i)    Development Cooperation Policy and the Procedures Manual to guide engagement with Development Partners as well as use of external support; and
ii)    Procurement and installation of an Aid Information Management System (AIMS) to better manage and account for external resources has since been initiated.

34.    To this end, we welcome valuable comments provided by the Bank on our Development Cooperation Policy.

35.    These interventions are reflective of the level of Government commitment to improve performance of Development Partner – funded projects in order to maximise value for money.

36.    In addition, we have been working closely with Project Implementing Entities to ensure that: –
•    Project Steering and Technical Committee meetings are held regularly as stated in the Protocols of Agreement;
•    Regular portfolio review meetings are held;
•    Reported challenges are acted upon timeously;
•    Government continues to review internal processes that delay movement of communication, with the intention of eliminating bureaucracy; and
•    Quarterly, annual and audit reports are being timeously submitted.

37.    Meanwhile Government is awaiting for approval under ADF14 of the following projects: –

•    Zimbabwe – Zambia – Botswana – Namibia Interconnector Project (US$27.30 million) regional power project;
•    Zimbabwe Revenue Authority (ZIMRA) covering the acquisition of the Tax Management System (US$2 million); and
•    Contribution to Feasibility study for the Batoka Gorge Hydro-Electric Scheme (US$1.4 million).

38.    To this end, Government is urging the Bank to expedite approval of the above pipeline projects which are due to be tabled before the Board in 2019.

Arrears Clearance and Debt Restructuring

39.     Government is committed and continues to engage various creditors for arrears clearance, an initiative expected to open access to new development financing. It should be noted that the country’s capacity to clear old arrears and meet obligations arising from new financing hinges on the strength of the economy, which in turn requires implementation of deep reforms under the TSP.
40.    To this end, Government and the International Monetary Fund (IMF) reached an informal and flexible instrument agreement (Staff Monitored Programme) in April 2019 on macroeconomic policies and structural reforms that will underpin dialogue on the country’s economic policies.

41.    The SMP will be monitored on a quarterly basis with the intention to implement a coherent set of policies that can facilitate a return to macroeconomic stability.

42.    Successful implementation of the SMP will assist in building a track record and facilitate Zimbabwe’s re-engagement with the international community.

43.     The policy agenda to be monitored under the SMP is anchored on the TSP and emphasises fiscal consolidation, the elimination of Central Bank financing of the fiscal deficit, and adoption of reforms that allow market forces to drive the effective functioning of foreign exchange and other financial markets.

44.    Furthermore, Government has started paying token payments to the Bank, as well as to the World Bank and the European Investment Bank, indicating our commitment towards the debt arrears clearance process.
Conclusion

45.    Let me conclude by applauding the call for integrating our Continent. It is through this initiative that we will be able to transform our economies and address challenges of unemployment, poverty, trade deficits and value addition of our exports.

46.    We need to religiously pursue our Integration Strategy for the betterment of our economies and people.

I thank you

Source – Mthuli Ncube