Q4 2018 New Markets Investor

Q3 2016
Why Africa must look to diaspora inflows, PPPs as it
reels under debt
United Nations Conference on Trade and Development
has asked African leaders to shift attention to remittances
and public–private partnerships (PPPs) as tax
revenues fail to cover public projects.
The UN agency says tapping the potential of diaspora
inflows, PPPs and cutting illicit financial flows would
significantly reduce financing pressure that compel
them to accumulate huge public debts.
“Borrowing can be an important part of improving the
lives of African citizens but we must find a balance
between the present and the future, because debt is dangerous
when unsustainable,” Unctad Secretary-General
Mukhisa Kituyi said at the Nairobi forum.
The UN agency estimates that at least Sh60 trillion
($600 billion) will be needed each year to achieve the
Sustainable Development Goals in Africa, an amount
equivalent to roughly one third of the continent’s countries’
gross national income.
Although Kenya boasts a PPP legal framework and a
massive diaspora remittances which hit Sh156 billion
($1.54 billion) last year, it heavily relies on tax revenues,
official development aid and external debts to
finance public projects.
Kenya’s public debt has risen sharply in the last two
years, hitting Sh3.2 trillion at the start of the current
financial year.
Out of this, external debt increased to Sh1.667 trillion
by March from Sh1.646.56 trillion in February of 2016,
data prepared by the Central Bank of Kenya (CBK)
states. The country has borrowed lately to finance its
fiscal deficit and to build the Mombasa-Nairobi standard-gauge
railway (backed by Sh327 billion loan from
China) which covers the stretch from Nairobi towards
the Ugandan border.
It recently raised Sh280 billon through a Eurobond and
has indicated plans to issue a similar instrument with a
target of raising around Sh150 billion in the next two
fiscal years. The figures cement Kenya’s position as one
of the African countries groaning under the weight of
public debts.
Former head of the civil service Francis Muthaura however
says Kenya has taken every step to ensure that the
remaining flagship infrastructure projects are financed
via PPPs.
“We have been telling foreign investors that we have
a PPP framework and the best company law in the region,”
Mr Muthaura who chairs the board of LAPSSET
Corridor Development Authority, said on the sidelines
of the Unctad forum.
“The government only wants to play the role of a facilitator
to ensure that the private sector operates smoothly,”
he said, adding that he expects the private sector
to build the remaining components of the transnational
corridor once the government completes building the
first three berths of Lamu port in four years.
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New Markets Investor
Unctad says a decade or so of strong growth has provided
many other countries on the continent with the
opportunity to access international financial markets.
Between 2006 and 2009, for instance, the average African
country saw its external debt stock grow 7.8 per
cent per year, a figure that rose to 10 per cent per year
in 2011–2013 to reach Sh44.3 trillion or 22 per cent of
gross national income by 2013.
The report features Ghana, Kenya, Nigeria, Tanzania
and Zambia among African states struggling with heavy
debts. The report notes that in some countries, domestic
debt rose from an average 11 per cent of gross domestic
product in 1995, to around 19 per cent at the end of
2013, almost doubling in two decades.
“Many African countries have begun the move away
from a dependence on official development aid, looking
to achieve the Sustainable Development Goals with
new and innovative sources of finance,” Dr Kituyi said.
Just like Dr Kituyi, The Economic Development in Africa
Report on which he based his presentation argues
that African countries should look for complementary
sources of revenue, including remittances, which have
been growing rapidly, reaching Sh6.38 trillion to Africa
in 2014.
The report discusses how remittances and diaspora savings
can contribute to public and development finance.
“Together with the global community, Africa must also
tackle illicit financial flows, which can be as high as
$50 billion per year,” the report states.
According to the report, Africa lost an estimated Sh85.4
trillion in illicit financial flows between 1970 and 2008,
roughly equal to all official development assistance
received by the continent during the period.
The report urges the continent to be vigilant on borrowing
risks even as it notes that public–private partnerships
have also started to play a more prominent role in
financing development.
“In Africa, PPPs are being used especially to finance
infrastructure,” the report states , adding that of the
52 countries considered during the period 1990–2014,
Nigeria tops the list with Sh3.79 trillion of investment,
followed by Morocco and South Africa.
Fast growth lies in trading online, UN forum tells
emerging nations
Encourage the shift to e-commerce
Kenya’s growing shift to e-commerce is set to receive
a fresh impetus as United Nations Conference on Trade
and Development (Unctad) begins to rally developing
countries to exploit the potential of online trading.
Under its initiative ‘eTrade for all’ launched at the forum
in Nairobi, Unctad hopes to promote use of online
platforms as part of efforts to boost participation of