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Thursday, June 4, 2020
Paula Fray interviews TREVOR MANUEL, South African finance minister
PRETORIA, Apr 19 2009 (IPS) - African trade ministers who met in Addis Ababa at the African Union (AU) in March urged world leaders to “place African economic development at the centre of international efforts to build strategies towards the recovery of the global economy” ahead of the G20 summit in London.
At that summit, leaders pledged $1.1 trillion – including $100 billion that international development banks can lend to poorest countries – in measures to rescue the global economy.
The G20 agreed to increase the resources available to the International Monetary Fund (IMF) by $750 billion and committed $250 billion to help counteract the contraction of world trade and fight protectionism. And the summit agreed to new measures to regulate financial institutions, including sanctions against tax havens that do not disclose information.
South Africa is the only African member of the G20 and Paula Fray spoke to the country’s finance minister Trevor Manuel to assess the impact of the G20 on Africa.
This is an edited version of the interview.
Because we are participants, we can’t go from the outside with expectation of other people delivering. Let me also say that African finance ministers and central bank governors met with the IMF in Dar es Salaam in March.
The one very strong message that came out of that meeting that, even as this very delegation comprising NEPAD, African Development Bank and African Union (AU) prepared to participate in G20 for the first time, was that the mandate we must give them is that Africans don’t go to the G20 as supplicants – it very important that we are equal and co-responsible in respect of the global economy. The issue of expectations needs that backdrop to it.
In respect of what we hoped for, there were short-term and long term objectives in at least two strands – the global economy and financial regulation.
In terms of financial regulation, the idea that there would be derivatives quite outside any supervision has always been abhorrent. The idea that we would get regulation dealing with the various issues is now a very important victory; the idea that all kinds of financial institutions – where-ever they are – will now be regulated, is a victory.
In respect of the global economy, one issue that is very necessary but also almost impossible to deal with in the short term is the global imbalances, that you will have these very active exporting countries with high trading called China and there would be wealthy consumer countries like the UK is unsustainable – it must be dealt with; there must be shifts in trade. But having said that, there are certain changes that must be made and one of those changes relates to attempts to mutual accountability.
IPS: What, in your view, is the most critical issue for Africa that emerged from this meeting? TM: In terms of financial regulations, the equity issue, we don’t have large financial markets in most countries in Africa but the equity issues are still important. Perhaps for Africa there are changes that we need to understand – a retooled IMF with greater political oversight, this is a great victory for Africa; ditto a larger pool of money and commitments made to the IMF… these are the $250 billion for trade and that number can be enlarged; thirdly, recapitalisation of the regional development banks and while the African Development Bank has not been mentioned in detail – simply because they have not yet looked at how much capital will be required – it would be that the African Development Bank will be recapitalised.
Then its also important to recognize that there have been other commitments to trade including an announcement to coincide with the meeting between the Standard Bank and the International Finance Corporation (IFC) of the World Bank of $400 million in support of trade finance – that’s a big number – over and above the $250 billion for the IMF.
IPS: The G20 was a major meeting and at the end there was a sense that things were moving. $1.1 trillion is a big headline but what difference did this meeting make for people in Africa? TM: It’s a meeting; it’s not a light switch and you can’t flick the switch at a meeting. I’m saying that the more we go to meetings expecting a cataclysmic change at the meeting, the more we set ourselves up for failure. What these meetings are about are process issues…
The global economy is stuck, the banks aren’t lending; the banks aren’t lending and people aren’t buying; people aren’t buying and we can’t sell; jobs are being lost and all the big gains that are being made from a development perspective are then at risk.
Part of the decisions impact on the way that the markets behave and if the banks can loosen up and thaw out of this freeze and start doing what banks should do, then I think you’re on a promise to something different. But this meeting of leaders of state and government is not in a position to compel banks across the world to start to start behaving as banks should, so there is a signaling effect from a meeting like this which is extremely important.
I think the changes to the IMF are significant. They are significant for countries that have no access to capital markets like large countries. But you need to change rules … so the one thing that we are doing is making sure that the IMF has more money available.
The second thing, and there was an announcement days before the G20 meeting that the IMF will have a new instrument that will be far more flexible; the responses will be quicker and it will have no conditionalities. The measure was agreed to by the board … so it preceded the G20 and is part of the impetus around the G20. Those are big progress issues.
Similarly when we ask governments to meet their aid commitments, it might not be a terribly new point, but if we don’t allow governments to walk away from their Gleneagles commitments … holding them to account is always going to be good for Africa.
IPS: The communiqué isn’t very specific about the deadline for the Doha Round of talks or even the next ministerial meeting around that. Do you feel that this might have been a missed opportunity? TM: There’s a journalist who interviewed me just before the G20 finance ministers meeting who said ‘if the last line of your communiqué says “the ministers express their wishes for the speedy conclusion of the Doha Round”, I will know that you actually have nothing to say’. He’s dead right.
What does a speedy conclusion of the Doha Round mean for Africa? I don’t know. I don’t know what market access means. What would you be exporting?
IPS: There are lots of hopes that the conclusion of the Doha Round might actually… TM: Whose hopes?
IPS: Certainly civil society’s hopes… TM: What would they want out of it? It’s a cool thing to say: “yeah, we love Doha” but what does it actually bring, what are the changes?
If I was Brazil, and I am chasing agricultural markets, then the Doha Round makes a lot of sense. If I was China and chasing non-agricultural market access now, then I know it will bring it; if I was India and I was chasing hard trade and services; I know what its going to bring.
But if we’re Africa, it doesn’t quite have the same ring. I mean it will be wonderful to conclude the Round but I am not quite sure what it is going to bring; what food it puts on the table, what jobs it creates.
IPS: Certainly there is a perception, or maybe it is a false hope, that concluding the Doha Round with its original commitments would help redress trade imbalances. TM: How would it do that? What would we trade? If I were to pull up now the basket by value or volume of Africa’s exports, its commodities. And even some commodities like agriculture are quite low on the list … which is why we were so heavily impacted on by the food price changes – we aren’t big food producers.
IPS: So where should Africa’s focus be then? TM: Africa’s focus must be on intra-Africa trade. The opportunity that the current global economic situation presents to Africa, if we’re smart about it, we can deal with it quite differently … but we don’t trade with our neighbours. All of the infrastructure on the African continent is still shaped by colonial patterns. Mine, port, railway line; mine, onto train, out… that’s it.
IPS: Where to from here? What happens after this huge meeting? TM: We have this problem … people say what are you going to ask the G20. What is this G20 thing? Would you ask the G20 net of South Africa, India and Brazil? I think its very important because media have this responsibility that you can hype it and pretend that we can walk in there and walk out with a big bag of money.
But what we’re actually looking for is not that kind of engagement between the master and the petitioner; you’re looking for a sense of joint responsibility about decisions that will change the way in which the global economy functions. If that’s what you want … then the way in which you engage in this process is actually quite different.
*Not for publication in Italy
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