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Making Finance Work for Africa

Written by: World Economic Forum

Article Overview: South Africa’s success in getting the financial sector to extend services to poorer communities could be adapted for other African countries, said Trevor Manuel, Minister of Finance of South Africa. He told participants that this is exactly what has been achieved by South Africa’s Financial Sector Charter. The charter was developed some four years ago by the financial sector, including banks and insurers, after the government urged it to transform its practices and policies

Making Finance Work for Africa

South Africa’s success in getting the financial sector to extend services to poorer communities could be adapted for other African countries, said Trevor Manuel, Minister of Finance of South Africa. He told participants that this is exactly what has been achieved by South Africa’s Financial Sector Charter. The charter was developed some four years ago by the financial sector, including banks and insurers, after the government urged it to transform its practices and policies.

The outcome has been targets that are being reached in areas such as access to financial services, lending to poorer sections of the population, enterprise development, procurement of services from small business, and the promotion of black management and direct ownership of banks.

"Banks in this country did not want low-income account holders. Now there are more than 3 million low income account holders, with the banks all participating voluntarily," he said. Other results of this drive for change include 16% black ownership of banks and 36% procurement of services from small business. "If we want people to feel part of growth, then the financial sector presents opportunities for a sense of sharing."

Li Ruogu, Chairman and President, Export-Import Bank of China, People's Republic of China, a Co-Chair of the World Economic Forum on Africa, said China’s investments in Africa are driven not by commercial considerations but by a desire to help Africa and produce a sustainable increase in local production. "Globalization without the active participation or involvement of Africa is not complete or fair."

He said capital is crucial to resolving Africa’s issues and urged developing countries to encourage debt relief and direct investment in Africa. Responding to a question from a Mozambican participant, Li said China would decide in the near future about investing in a hydroelectric scheme in that country.

Marilou Jane Uy, Sector Director, Africa Finance and Private Sector Development Department, World Bank, Washington DC, said Africa’s financial systems look much better than five years ago. The financial services landscape is changing, with the entry of new owners including foreign investors and regional banking groups such as those based in Nigeria and South Africa. Wireless and mobile phone technology is opening up access to financial services, with estimates that more than 200 million Africans will be mobile phone users by 2013.

Stefano Manservisi, Director-General, DG Development, European Commission, Brussels, said the 80 billion euros pledged by the G8 group of countries is not enough to meet Africa’s massive needs, but is nevertheless a lot of money. He said the European Commission seeks to promote good governance, increased long-term lending in local currencies and getting the public and private sectors to work in coordination. It also encourages regional regulation of and access to financial services.

From the floor, A. Michael Spence, Professor Emeritus, Stanford University, USA, said high levels of sustainable growth require high levels of savings and investment, reaching about 30% of gross domestic product.

Session moderator Lumkile Mondi, Executive Vice-President, Professional Services, and Chief Economist, Industrial Development Corporation (IDC), South Africa, asked for comments on corruption and poor practices at state-owned banks. This prompted Manuel to remark, to much laughter, that he might have to request an investigation of practices at the IDC, a state-owned financial institution.

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Article Tags: africa finance, african countries, bank of china, co chair, commercial considerations, debt relief, developing countries, enterprise development, export import bank, export import bank of china, financial sector, globalization, hydroelectric scheme, minister of finance, private sector development, procurement, republic of china, trevor manuel, uy, world economic forum



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