MIL-OSI Banking: AEC 2021: Nobel laureate shares his views on the missing piece in Africa’s development discourse

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Source: African Development Bank Group

Nobel prize-winning economist Roger Myerson has shared his views on how African governments can spur competition and development.

Myerson was speaking on Thursday at the 2021 African Economic Conference (AEC) in Cabo Verde during a session on the role institutional and political frameworks play in Africa’s capacity to finance its development. He was joined by Ahunna Eziakonwa, the UN Development Programme’s Assistant Administrator and Regional Director for Africa.

Myerson used the opportunity to detail the findings of his research, published in April 2021, which concluded that decentralisation could be a driving force for development, democracy and better government. Successful countries devolve between 20% and 30% of their national budgets to local councils.

“A lack of decentralisation is worse than a lack of democracy, a lack of decentralised systems can be most detrimental to development,’’ Myerson said during the session. “If you are not giving 20% of the national budget to sub-nationals, you are not serious about decentralisation.’’

Furthermore, the University of Chicago professor said the trade disruptions caused by the Covid-19 pandemic provide an opportunity for African countries to grow local industries. The pandemic has been central to discussions at the AEC, which began on Thursday, 2 December, with a call from the development community for vaccine equity.

The event is organised by the African Development Bank, the United Nations Development Programme, and the Economic Commission for Africa. It brings together a wide range of stakeholders, including policymakers, development institutions, the private sector, and researchers, to discuss ways to sustainably grow the continent’s development funding sources.

At least two finance ministers urged African governments to expand their tax base by tackling illicit financial flows and reducing mounting debt, in order to gain fiscal space to overcome the challenges of the pandemic. “We are defining new financial mechanisms. We need to use non-conventional models and to think outside of the box, or even without the box,” said Nicolas Kazadi, Finance Minister of the Democratic Republic of the Congo.

Kevin Urama, Acting Chief Economist and Vice-President at the African Development Bank said in 2020 the African Development Bank Group disbursed US$7.3 billion, a 40% increase from the US$5.2 billion disbursed in 2019. Volumes were boosted by a rapid increase in disbursements from the Covid-19 Response Facility.

The new of the pandemic wave is expected to put further pressure on the debt situation of many countries. This has heightened the need for transformative domestic reforms. “Challenges to Africa’s financing development must be tackled collectively,” Urama said.

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