T20 Africa Conference Communiqué: Africa and the G20 – Building alliances for sustainable development
For the first time since the establishment of the Think20 (T20) process, Think Tanks from across Africa have met with T20 Think Tanks on African soil to discuss the G20 agenda and potential opportunities for Africa – G20 cooperation. The T20 Africa conference provided a forum to discuss how Africa and the G20 could build alliances to promote sustainable development both on the continent as well as globally.
The T20 Africa conference was organized by the South African Institute of International Affairs (SAIIA), the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE) and the Kiel Institute for the World Economy (IfW) with support from the DIE’s Managing Global Governance (MGG) network and the Global Economic Governance (GEG) – Africa program. The conference was addressed by Germany’s Parliamentary State Secretary of the Ministry for Economic Cooperation and Development, Thomas Silberhorn, and the Deputy Governor of the South African Reserve Bank, Daniel Mminele. It was attended by 240 high-ranking delegates from African and G20 Think Tanks, African regional organizations (African Union, NEPAD, UNECA, African Development Bank), the South African and German governments, the European Union and the OECD, as well as other G20 engagement groups such as the Business20 (B20). The conference was part of the official T20 process, one of seven G20 engagement processes.
This communiqué is presented by the three co-hosts of the conference: SAIIA, DIE and IfW Kiel. The co-hosts will communicate the findings of the conference to their respective governments, the G20 Sherpas as well as African regional organizations and governments. The results will feed into future T20 events in particular the Think20 Summit: “Global Solutions” on 29-31 May 2017 in Berlin. The co-hosts will continue to reach out to G20 members, G20 engagement groups, and African and international institutions to sustain African participation in the T20 and G20 processes and to facilitate sharing of experiences, mutual learning and joint initiatives.
G20 and Africa
The African Union’s (AU) Agenda 2063 “The Africa We Want” has defined a vision and action plan for the continent’s sustainable socio-economic transformation. Its first 10-year implementation strategy was adopted by the AU Summit in 2015. Africa also has a strong commitment to the implementation of the 2030 Agenda for Sustainable Development that heads of state and government decided upon at the UN Summit in September 2015. The Agenda 2063 as well as the 2030 Agenda for Sustainable Development should define the engagement between the G20 and Africa. At the G20 Hangzhou Summit in September 2016, G20-leaders adopted the G20 Action Plan on the 2030 Agenda reaffirming their commitment to align their work with the 2030 Agenda and to enhance policy coherence for sustainable development. Building on the achievements of the Chinese presidency, the German G20 presidency intends to foster G20 cooperation and partnership with Africa.
The T20 and African Think Tanks welcome the emphasis of the German G20 Presidency on strengthening G20-Africa cooperation. The policies of the G20 countries directly impact upon sustainable development in Africa. At the same time, developments in Africa will influence prosperity and stability worldwide. Key examples for strong interdependencies between Africa and the G20 include climate change, the consequences of the financial and economic crisis, pandemics, terrorism as well as migration and refugees. Given these inter-dependencies, G20 and Africa should make more efforts to build alliances for sustainable development. There was a strong call by African participants that Africa takes the intellectual lead on the global discourse about Africa. Moreover, discussions during the conference indicated that joint challenges for Africa and the G20 can only be addressed through investments in an effective, inclusive, and open education system.
A shift of paradigm in engagement between Africa and the G20 is needed. Participants at the T20 Africa conference underlined the importance of developing an overarching narrative that globalisation should benefit everyone and leave no one behind. An open world economy that achieves this goal is therefore essential. In particular, fostering sustainability with a focus on climate and the implementation of the 2030 Agenda for Sustainable Development are of great relevance for global development. The G20 and African countries should be equal partners in tackling the current global crisis. The limits of the current globalisation model have become visible in various global crises such as the economic and financial crisis, rising inequalities, increasing economic protectionism, and rising nationalism. On that basis, T20 members see an urgent need to identify shared interests and problems of G20 members and African countries with a view to supporting more effective international cooperation on these.
An Africa-G20 partnership should address the diversity of challenges the continent faces and find appropriate solutions at country, regional and pan-African as well as global levels. A number of specific policy recommendations were formulated during the conference. They concern the governance mechanisms to sustain G20-Africa cooperation as well as African Think Tanks’ participation in the T20 process. In addition, thematic working groups developed and presented specific policy recommendations on how the G20 and Africa should strengthen cooperation in the fields of (1) infrastructure, (2) e-commerce and the digital economy, (3) agriculture, food security and climate action, (4) trade and investment, (5) international cooperation on tax matters, as well as the (6) political and social environment of sustainable development. These sectoral recommendations can be found in the Annex of the present Communiqué.
ANNEX: Recommendations of Sectoral Working Groups
The working groups focused on areas where G20 engagement with Africa is key to promote global sustainable development. In line with our reasoning above, we propose that the G20 activities are as closely embedded in existing African initiatives and institutions as possible.
I. Infrastructure investments
The scale of infrastructure investment needs in Africa is much larger than for other regions. Investment needs cut across countries, regions, and sectors. The international community should respond by supporting high quality infrastructure (poor quality infrastructure leads to high costs in the medium- to long-term). The G20 can play a critical role. Non-involvement is not an option.
The G20 and Africa should not limit their cooperation to large-scale projects but include smaller projects as well that can be scaled up. A focus should be on cities, where infrastructure investment can improve education, health and sanitation, respond to the urbanization trend in Africa, and facilitate regional integration. The private sector needs to be pulled in more strongly to finance infrastructure. There should be a focus on local currency lending and bond markets to avoid LDCs borrowing in hard currency and not being able to repay these loans if their currencies are devaluated given international shocks.
Africa and the G20 should work together to expand existing international initiatives to include African perspectives more strongly: The G20 has been active in the infrastructure space since 2012 through the Global Partnership for Infrastructure. Through this partnership the deficits and bottlenecks for infrastructure development in G20 countries were approached in a systematic way in order to clear back logs and ensure adequate progress. This partnership should be extended to Africa. The Global Partnership for Infrastructure should contribute by focusing on quality data collection, developing toolkits and benchmarks for infrastructure development across Africa. African initiatives here exist: the G20 should aim to support these initiatives.
Africa and the G20 should emphasise the sustainability of infrastructure investment: New infra-structure should be of high quality, have a low carbon footprint and should align with continental plans, like Agenda 2063, and key international agreements such as the 2030 Agenda and the Paris Agreement. Financing models of infrastructure investment will have to be innovative if the current deficit of US$ 100 billion per annum is to be addressed. Public contribution remains important, but it is estimated that up to 7% of Africa’s GDP needs to be invested at a time when the fiscal space is constrained, given recent rising debt levels. Thus private capital has to be leveraged through public funds.
The G20 should support the African Development Bank (AfDB), as a key agent for change on the African continent, in finding innovative solutions to financing, including blended financing that attracts private capital. The G20 should recognise that Multilateral Development Banks, especially the AfDB, have a critical role to play in improving the environment for infrastructure investment. The G20 should support the AfDB in its efforts to develop skills, focus on quality, targeted research as well as attracting private financing.
II. E-commerce and the digital economy
African countries are confronted by a potential digital divide. Access to the internet and related digital services is low and in most countries, the supporting regulatory framework and necessary data and logistics infrastructure are not in place. On the other hand, there are multiple examples of e-commerce success stories across Africa; and the wide use of mobile phone technology has created many new opportunities for African entrepreneurs and consumers alike. It has also enabled the provision of key government services to more distant communities.
To cross this divide and take full advantage of the benefits that can be derived from participation in the digital economy, will require substantive action in three main areas: regulation, education and infra-structure. Specifically, to support the growth of digital trade and investment in Africa, the G20 should support African initiatives to:
Develop and where appropriate harmonize laws and regulations in e-commerce (including, for example, support to the negotiation of regional trade agreements that incorporate aspects of the digital economy). Specific attention will need to be given to developing policies and laws that serve to pro-mote inclusion and access to the digital economy for African consumers and producers, without undermining legitimate domestic security and local development interests. The impact of taxation, on trade in digital products, is of particular concern, as is the manner in which e-commerce can be harnessed to contribute to ongoing sustainable development initiatives.
Strengthen supporting infrastructure, including sufficient and competitive access to data through undersea cables, but also through the improvement of warehousing, postal and communication facilities. This may require consideration of a specialist financing facility; or could be linked to wider discussions on infrastructure finance in Africa.
Address the intersect between education and development, and specifically, the need for early expo-sure to the digital economy. This may involve the establishment of new cooperation mechanisms between regional and international institutions or workgroups in order to advocate for in-creased education around digitization, and additional investment in the up-skilling and re-skilling of entrepreneurs and workers in Africa.
At this stage, the continent does not have a common position on e-commerce, or a platform at which these issues are widely discussed; and the experience and views of countries and Think Tanks is likely to differ widely. There are also concerns that African countries are not engaging in discussions on e-commerce issues even at a multilateral level. The G20 should support engagement by African countries on e-commerce issues to encourage their greater engagement within larger fora, such as at the WTO. However, prior to taking these discussions forward at the G20, it may be important to first develop an informed framework for engagement, which accurately reflects the regulatory, infrastructure and education priorities and interventions of African countries. Further dialogue with African countries will likely be required in order to populate this framework.
IV. International Trade and Investment
African governments should strengthen their lead in promoting an enabling investment and trade climate that is conducive to sustainable development. G20 should provide political leadership by promoting inclusive, fair and sustainable trade and investment with and in African countries and beyond Afri-ca. While there are many ways in which African countries can foster trade and investment (e.g. governance reform, improving business climates, deepening regional economic integration), the G20 can also support this endeavor.
Strengthen the multilateral trading system and combat protectionism: The G20 should renew their commitment to strengthen the multilateral World Trade Organization (WTO) as the most inclusive trade forum and the commitment not to introduce new protectionism.
Foster synergies with the 2030 Agenda: In light of the G20’s Action Plan on the 2030 Agenda, G20 members should support a more proactive positioning of trade and investment in helping countries achieve their SDGs. Reference to the 2030 Agenda can also help to change the narrative around trade, for example by underlining that losers from global trade policies should be supported.
Expand and improve trade preferences for African economies: G20 members’ preferential regimes should be reformed with the aim of focusing the benefits on the countries that need trade preferences the most. G20 members that currently do not offer trade preferences should consider establishing preferential regimes as well. All preference schemes should include rules of origin that allow for the widest cumulation possible to encourage cross-border value chains with and across African countries.
Foster value addition in African economies: African governments should more systematically enact trade and investment policies that exploit the opportunities at hand already today. G20 members should support African supply-side capacities and the integration of Small and Medium Enterprises (SMEs) into cross-border value chains, for example by helping them to comply with public and private standards.
Promote trade facilitation: The WTO Trade Facilitation Agreement, which will soon enter into force, offers substantial potential for African economies. The G20 and Africa should therefore support the implementation of the Trade Facilitation Agreement, for example by strengthening the Global Alliance for Trade Facilitation.
V. International cooperation on tax matters
Despite great advances in the global cooperation on tax matters, governments still lose revenue needed to finance sustainable development because of corporate tax avoidance and illicit financial flows (including its commercial tax evasion component). New policy tools have been introduced to address aspects of base erosion and profit shifting (BEPS), such as abusive transfer pricing and aggressive tax planning. However, implementation of the new mechanisms has not always been as swift as hoped for. Developing countries, particularly in Africa, are often faced with capacity problems when trying to keep up with the pace and complexity of the current reform agenda.
Therefore, the G20 should work towards extending the framework of international tax governance such that global standards are developed on a truly multilateral basis, and can be implemented as such. In addition, the G20 should promote increased international cooperation with regard to data collection and data accessibility in key aspects of taxation, such as customs data on international trade (including e-commerce) or beneficial ownership of assets. This is a key element of evidence-based tax policy. The digital economy and digital (crypto) currencies are increasingly being used to facilitate trade and payments in the global village. The G20 should ensure that the multilateral tax (and customs) frameworks should be relevant and appropriate for this digital world.
To foster tax certainty, pre-dispute mechanisms, such as Enhanced Engagement Programs can strengthen mutual trust and certainty, and should be supported by regional and international organizations. Tax uncertainty has two dimensions: multinational corporations face uncertainty in their investment decisions, and governments face uncertainty about their tax incomes. In cooperation with regional organizations from Africa and other parts of the world, the G20 should promote model legislations and the development of common standards that are easy to implement.
International cooperation should also be enhanced with regard to countries’ tax expenditures, through aligning reporting standards and evaluation methods to improve the efficiency of the tool of tax exemptions for all countries. In addition, G20 members should stop requesting tax exemptions for their development cooperation spending in recipient countries.