Regional integration and digital transformation

07 Jun Regional integration and digital transformation

Dr. Ibrahim Mayaki, CEO, African Union Development Agency- New Partnership for Africa’s Development (AUPA-NEPAD), shares insights on Africa’s future

AUDA-NEPAD turned 20 this year. Could you tell us how it has evolved over the period since its inception to where it stands today?

I’ll start by focusing on three points. NEPAD, as an idea and as a program, was defined in 2000 through strong political leadership and strong political will by critical leaders like Obasanjo, Mbeki and Wade. The main objective of the program was to focus on two issues: regional integration, which you could also call economic integration, quality of governance systems. These two pillars were to drive the transformation of a continent, reducing extreme poverty and trying to put Africa on the global scene, with a much more relevant role than it had before. Behind this was the idea of getting away from aid, given the fact that no country has ever developed through official development assistance.

NEPAD as a program was created before the Organization of African Unity (OAU) became the African Union (AU). The idea was to bring this program to the OAU as a development program, so that it could start with a framework regarding the design of development policies. It played that role for a number of years, because the main shift from the OAU to the AU was a shift whereby the focus was on developmental issues and no longer on political liberation issues, like apartheid and the fight for decolonization, which pertained to previous times.

The African Union Commission (AUC), which is the AU’s Secretariat, organized itself in order to tackle these developmental issues. And there was this program, NEPAD, which could help in doing so. That’s the second aspect of transformation. The Secretariat of NEPAD worked closely with the AUC in order to deliver on developmental issues. That’s how we started developing strategies related to agriculture, industrialization, environmental issues, education, and so on. The first step, which is where we are now, was the transformation of that Secretariat, which was called NEPAD Planning and Coordinating Agency, into a continental development agency.

This means that, in terms of functional differentiation, we have a Commission which is the Secretariat of the AU, focused on policy design, and we have a development agency which is AUDA-NEPAD, focused on implementation on the ground. There is a complementarity between the two functions. As we implement what we need in transport, energy, education, and climate change adaptation, we report to the Commission, so that the frameworks that they design continentally are fed with better data, better analysis and feedback.

Covid-19 has posed a variety of challenges to governments and businesses alike throughout the world. How did your organization navigate this challenge in terms of debt relief, the mobilization of private resources and educating the public? What major challenges arose from this crisis and how did you address them?

My first response would be related to the contextualization of the AU’s response. From the moment of the first case in February 2020, which occurred in Egypt, the AU gathered all the health ministers of the continent, with the support of the African Centers for Disease Control and Prevention (CDCs). They decided to design a roadmap which focused on two issues: how to de-multiply CDCs in all African countries (so that the central CDC in Addis could support them), and to draft a specific and individual roadmap for each of the countries, so that they could track adequately the propagation of the virus, because data was extremely important. At that time there was no vaccine, so fundamentally it was about adopting the right behaviors. This required pushing in terms of communication from public officials, from governments, and so on. That’s how the reaction was, and that was the context.

As we moved towards a greater number of Covid-19 cases, the fundamental aim was to track this exponential curve and see if, from the first wave, we were going to a second wave, as well as how to optimize regionally, how to decentralize capacities to intervene, how to make sure that hospitals had the necessary capacity in terms of intensive care units, and so on. But luckily, given certain specificities which are not yet well-understood—but may be related to the youth of the population, or to a lack of density in certain regions—the numbers were not as high as expected by the World Health Organization and the United Nations. Nonetheless, the reaction was very strong because Africa was used to Ebola and many other previous epidemics, so in terms of behavior, the fear of propagation was very present in people’s minds. That sustained communication and helped contain dissemination, because people were wary of shaking hands with anyone, because they were remembering Ebola. These two factors—the reaction of the AU, and the memory of what had happened with other epidemics—did help to lower the dissemination.

For our part, AUDA-NEPAD refocused all our programs on the health dimension. This involved three things. First of all, we worked closely with the CDCs in terms of smart safety surveillance, in terms of looking at the ecosystem, which allowed manufacturing of protective equipment. Secondly, we looked at the socio-economic consequences of Covid-19. This was fundamentally about the impact it had on micro-, small and medium-sized enterprises (MSMEs). Some 80-90 percent of jobs on this continent are in the informal sector, and in this sector is comprised by MSMEs. The question was how to make sure that these could survive. It meant using digital tools, linking them to commercial banks, creating partnerships and trying as much as we could. That’s why we created the program which is called 100,000 MSMEs. This is a very small number if you compare it to the huge numbers of MSMEs, but our aim was to design an approach which could be replicated. That approach went very well. We established a partnership with Ecobank, a continental bank. We worked on the methodology with McKinsey, and we established an MSME Academy—a financial digital platform—so that we could accompany the MSMEs that were selected, protecting them from of the consequences of the pandemic and establishing a practice which could be replicated.

As an organization, you face the twin challenges of, on the one hand, facilitating regional economic integration, and on the other, the relatively new paradigm of public-private partnerships (PPPs). How does your organization coordinate cross-border development schemes from public and private funding, and what are the biggest challenges in facilitating these projects?

It will be better to answer this by way of very concrete examples, which help understand a theory better. The main aim of the AU is to boost regional integration. The question is, why do we want to boost regional integration? Because we are a continent fragmented into 54 countries, and when you have 54 countries and you elaborate 54 energy policies, 54 industrial policies, 54 agriculture policies… inevitably, you will fail, because the scale is not there.

Regional integration means adopting regional solutions for infrastructure, education and health, which can help address national problems. That’s the reasoning. On the basis of that reasoning, evidently, we need to work on regional solutions, but adapt them nationally. A concrete example is the Program for Infrastructure Development in Africa (PIDA). We are not working on national projects because it doesn’t make sense for us. Governments are used to implementing national projects, be they bridges, roads, railways or energy projects. And most of the time, they try to implement these projects through PPPs, or through their own public funds, or through debt. We work on regional projects which are trans-boundary, like the development corridors, such as Lagos-Abidjan, or the central corridor from Burundi to Dar Es Salaam. We work on corridors because these trans-boundary spaces have a high economic density, and if you create infrastructure within these corridors, they multiply the conditions of economic development.

African countries were not used to the management of trans-boundary projects; we were used to the management of national projects. Moving to trans-boundary projects meant different management systems, it meant expanded and better-managed coordination between countries, it meant harmonization of regulatory frameworks, and it meant looking at PPPs in a different manner. Because an investor who is interested in a trans-boundary project will look at the risks. If the project is not sufficiently harmonized—if the minister of country X is telling him one thing and the minister of country Y is telling him something else—he will find it a mess and won’t put his money into it.

For a PPP to succeed, you need strong coordination and strong harmonization. That’s the role we play. In the second phase of PIDA, the corridors—we call them “smart”, but the idea is to have a development corridor with a certain number of criteria—can have rail, can have optic fiber, can have a polytechnic institute where students help maintain the facilities that are in the corridors. We provide the methodology and we facilitate the coordination and organization. That’s our role. It is not easy at all. Just to put a one-stop border post between two countries in order to reduce the length of the lines of trucks which are waiting to pass—sometimes for six days—and put the customs officers in the same place, the health officers in the same place… this is a huge task. But we know it is the right track, so we don’t have any choice but to follow it. It means convincing political leadership, it means having the right methodologies, it means having a mindset about learning, so that you can correct what is going wrong. It means constant feedback on what is right and what is wrong, and it means strong coordination and strong harmonization of regulatory framework. This is what we do.

With regional economic integration being consolidated throughout the continent, do you see a bigger appetite for risks on behalf of investors? Further to this, are you experiencing any sort of resistance from national governments?

The wisest answer for any economist is always to start by saying: it depends. It depends on the region. Take East Africa. There is a high level of complementarity in terms of planning systems, and there is incremental progress in terms of harmonization. On a scale of 0 to 5 in terms of regional and economic integration, you could rate East Africa at 3.5. If you take Central Africa, you could rate it at 0.5, leaning towards 0. I can’t give you an answer for the whole continent. If you take Southern Africa, let’s say it’s around 2.5. West Africa is around 3. It really depends on the region. There are regions where regional integration has been embedded in national systems and there are regions where the national systems are frightened by regional solutions

Evidently, when an investor comes to a region or a country, the first thing he looks at is how well the domestic enterprises are doing. Do we have a good ecosystem, is the “doing business” environment good, are we constrained by the government, is corruption low, do we have capacity to train, can we hire without difficult labor laws? In two to three days, you have your answers, because you talk with the entrepreneurs and they tell you. If you are in a region or a country where the entrepreneurs tell you: look, I could move from Kenya to Rwanda and in two days all my papers would be done done—you say, that’s impressive. But if you are in another region and they tell you bureaucracy is high and you have to pay baksheesh at every step, you don’t invest there. So you have the intrinsic risk, which is linked to the quality of a project itself, and you have the ecosystem, which you take into account. And sometimes, as an investor, you can look at the intrinsic risk in a more favorable manner if the ecosystem is up to standard. Because if the “doing business” environment is complicated, if corruption is high, if you sign a contract today and you are not sure that it will be respected tomorrow, then you keep your distance.

What we tell countries is: first of all, be strong at project preparation, because the rate of returns needs to be satisfactory. Africa today, compared to other regions of the world, can have well-prepared projects with good returns. This is fine, but be careful and make sure that your ecosystem for investors is attractive, because if the ecosystem is not attractive, you can have the best project, but they won’t come.

Last year you released the AUDA-NEPAD strategic plan 2022-23. What are your main priorities for this period? What would you say is your strategic vision moving forward and what do you most hope to achieve in the short to medium term?

The difference between AUDA-NEPAD and a private enterprise is that we are an AU public agency, so we need to align on the strategic frameworks defined by the AUC. If the AUC says: on vaccine manufacturing, this is the approach we have, we need to align to it. If the AU says: on issues regarding adaptation in agriculture, this is what we recognize, we have to align to it. Our perimeter of intervention is within AU frameworks because we are a development agency. The Department for International Development would do the same with regards to the development cooperation strategy of the U.K. GIZ (Deutsche Gesellschaft für Internationale Zusammenarbeit) would do the same with regards to the development cooperation of Germany. So we have to align with the strategies which are defined by the AU.

In that domain, we have clear strategies which are linked to human capital and skills, sustainability issues, industrialization, health (which is extremely important, evidently), and science and technology. And we are very lucky to be in South Africa, which is, by the way the home country of Elon Musk. In Western Cape, in the Stellenbosch area, there is a small Silicon Valley, with hundreds of start-ups inventing products and processes. We are partnering with them, so that we can leapfrog and disseminate them to African countries that are willing to accept these products and these processes.

Do you have a final message for the readers of Newsweek magazine?  

I would flag three main points. The first one is that we have launched the African Continental Free Trade Agreement. It is about integrating markets, but it will work only if we have an industrialization process. Industrialization and manufacturing are extremely important. We want to trade industrialized products.

The second point, which is linked to it, is job creation. In Africa, every year, around 20 million young people come onto the labor market, which means that in the next 20 years we need to create 400 million jobs. How do we do it? Should we do it like the Chinese did, with sweatshops, or do we do it in a smarter manner, by really jumping into innovative approaches with strong digital transformation? It’s a question that we need to answer very quickly, because these youngsters have already been born.

The third point is the issue of the nexus between climate, water and energy. This nexus is very important because it will help us avoid conflictual issues which are happening in many parts of other countries. Water, energy and climate are a very important dimension that we should be considering closely.