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A Recipe for Africa: Tolerance, Trade and Youth Opportunity

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Africa has a recipe for sustainable growth, following this year’s agreement on a ground-breaking trade deal that promises to soften borders across the continent, the Co-Chairs of the World Economic Forum on Africa told participants.

While big challenges remain to translate the promise of the Africa Continental Free Trade Area (AfCFTA) into jobs and economic growth on the ground, there is a palpable sense of hope that the components for success are now in place.

“I like to think of this CFTA as the most delicious African dish that can be produced,” said Arancha Gonzalez Laya, Executive Director of the International Trade Centre. “The ingredients have been assembled, the cooks are in the kitchen. The guests are impatiently waiting for this dish to be served.”

The “dish” is vital for the 200 million young Africans aged 15-24 who need to see the continent move up a gear to a higher level of economic growth if they are to secure jobs and contribute to their countries’ prosperity as the workers of the future.

Sipho Pityana, Chairman of AngloGold Ashanti, said the free trade deal is a “catalyst”. However, it is now up to political and business leaders to implement the removal of trade barriers and ensure sufficient investment in infrastructure and logistics to truly accelerate cross-border trade flows.

“We need to soften our borders to enable easy movement,” Pityana said. “We need leadership that is capable and has the determination to act collaboratively.”

For investors, this is a critical moment – and also a testing time for the claim made by South African President Cyril Ramaphosa at the meeting that this will be “Africa’s century”.

“From a business point of view, I view Africa as a large-scale start-up, just as East Asia was in the early 1990s,” said Alex Liu, Managing Partner and Chairman of A.T. Kearney. He argued that the continent could leapfrog ahead in certain areas, just as it has already done in mobile payments.

Including the whole of society will be crucial to delivering sustainable success, given the rapid pace of change in the workplace and the disruptive effects of new technologies with the arrival of the Fourth Industrial Revolution. Africa’s left-behind youth and discriminated-against women have already made clear they are not prepared to tolerate the status quo.

“If we don’t bring society with us then we will end up with similar tensions that the first and the second and the third industrial revolutions had,” Farrar said.

That also requires long-term thinking and a multistakeholder approach from business. Ellen Agler, Chief Executive Officer of the END Fund, a philanthropic initiative tackling neglected tropical diseases, said it is clear that successful companies have to chase more than profit.

“It’s amazing how many times I engage with the pharma sector and they say: ‘We keep the best people because of our programmes on engaging in neglected diseases’ – but that’s one of the things that helps with retention, helps with talent acquisition.”

André Hoffmann, Vice-Chairman of Roche, said Africa’s extraordinary natural heritage also needs to be cherished and is an opportunity for development. “Nature is not something that stops you from developing but it is an opportunity. In fact it is a $1 trillion opportunity for investment,” he said.

Meeting outcomes

Reflecting on the challenges and opportunities of the region, the meeting produced numerous notable outcomes:

• An action plan was launched to tackle the crisis of gender-based violence. The plan is initiated by African Monitor working with multiple stakeholders and backed by the government of South Africa through the Minister of Women, Youth and Persons with Disabilities and UN WOMEN in South Africa. The plan has three core priorities:
o To work with the technology industry to deploy a free emergency response system for women under attack in nine provinces in South Africa
o Support for women entrepreneurs as a means of promoting economic empowerment
o Establishment of a fund to help support South Africa’s gender-based violence strategy and action plan

• The Africa Growth Platform was launched to help start-up businesses access finance, advice and better regulatory conditions. Founding partners are Alibaba Group, A.T. Kearney, Dalberg Group, Export Trading Group, US African Development Foundation and Zenith Bank.

• The African Risk Resilience Platform was initiated. It will combine private-sector resources with those of governments to help countries prepare for climate- and disease-related disasters.

• The World Economic Forum teamed with the International Trade Centre to kick off an E-Commerce Action Agenda. The initiative is aimed at promoting cross-border data services in Africa, an industry that could create 3 million jobs across the region by 2025.

• The African Union, in partnership with the World Economic Forum, launched a new foundation paving the way for the private sector to help build capacity and resources to strengthen health security across the continent.

• The World Bank and the Forum teamed up with African governments to launch an innovation challenge aimed at finding new ways of using drones across Africa. The competition, supported by the United Kingdom’s Department for International Development, is a precursor to the Africa Drone Forum, which will be held for the first time in 2020 in Rwanda.

• The Forum’s Global Plastic Action Partnership signed a national partnership with the country of Ghana. The partnership aims to combine public- and private-sector resources to tackle plastic pollution and unmanaged waste. The partnership is the first signed with an African country, following an initial partnership signed with Indonesia earlier this year.

• Five private sector partners announced $23 million in new pledges for the Global Fund’s Sixth Replenishment. Donors include Goodbye Malaria, Project Last Mile, GBCHealth, Zenysis Technologies and Africa Health Business.

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WEF Releases Framework to Help Investors Address Six Global Risks

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The World Economic Forum has identified six systemic risks and established a governance framework to enable the investment community to address an investment gap of $6.27 trillion per year required to mitigate these risks. The risks include water security, climate change, population growth, geopolitical uncertainty, negative interest rates and technology disruption.

“Transformational Investment: Converting Global Systemic Risks into Sustainable Returns”, provides new insights to ensure that the long-term impact of non-traditional risks and opportunities can be better understood. It’s particularly important for investors to consider these ongoing risks now in order to have good responses to address the current economic crisis.

“The COVID-19 pandemic has altered the global economy in unprecedented ways,” says Maha Eltobgy, Head of Investing, World Economic Forum. “The pandemic has impacted capital markets, liquidity, the financial stability of entire industries and even challenged the fiscal solvency of governments. The Transformational Risk framework offers investors a new way to analyse systemic risks in the 21st century.”

The six systemic risks for asset holders, drawn from the Forum’s Global Risks Report 2020, will require over $6.27 trillion of investments per year to address. These include opportunities to invest in renewable energy, food production, infrastructure, education and more.

Governments, corporations and insurers are often the “funding entities” for long-term, diversified investment programmes. So, challenges to the financial standing of these funding entities can alter the liquidity budget, risk tolerance and investment time horizon of the world’s largest asset owners.

The framework recently developed for evaluating and incorporating global systemic risks into investment programmes can also act as a guide when addressing the risks created by the COVID-19 pandemic, or to help mitigate the risk of future pandemics.

Decision-making framework

In the study of these complicated global risks, the World Economic Forum and Mercer, who collaborated together for this white paper, propose a six-step framework to help investors navigate these challenges.

“Asset owners face an evolving set of long-term risks and challenges, accompanied by opportunities for transformational investment. The same six-step framework that asset owners have been applying to other long term systemic risks has turned out to work well when applied to the COVID-19 pandemic and its associated impact on the economy, society and financial markets,” said Rich Nuzum, President of Investments and Retirement at Mercer. “Disciplined, agile governance and implementation arrangements are being applied by the world’s leading investors to help mitigate systemic risks, while simultaneously enabling the pursuit of attractive expected returns.”

A roadmap and decision-making framework for governance

  • Understand – the overall impact on the funding entity, objectives and beneficiaries
  • Collaborate – with similarly situated organizations that are concerned about the same risks and opportunities
  • Design – governance, policies, delegation and accountabilities for material systemic risks
  • Invest – to manage the portfolio’s exposure to the global systemic risk
  • Transform – through driving investment strategy that delivers change
  • Monitor – and revisit; apply learnings to improve policies and processes

Case studies indicate that sovereign wealth funds and other long-term investors are already positioning themselves to respond to the impact of these global systemic risks on investment. However, greater innovation in practice and commonality of action are still required in most areas.

The World Economic Forum will continue to research ways that investors and other asset holders can pursue stakeholder capitalism.

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Investing in Girls and Women’s Empowerment in and Beyond the Sahel

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The World Bank Board of Directors today approved $376 million in additional International Development Association (IDA)* financing to build human capital and improve human development outcomes in Africa. This is the fourth additional financing to the Sahel Women Empowerment and Demographic Dividend project (SWEDD), a significant regional initiative developed in response to a call for action by the Presidents of Niger, Burkina Faso, Chad, Côte d’Ivoire, Mali and Mauritania in 2014. The newly approved expansion brings the total World Bank investment toward the SWEDD to $680 million, with an additional EUR 10 million invested in parallel financing by the Agence Française de Développement (AFD) in Mali.

SWEDD 2 will scale-up activities underway in Chad, Côte d’Ivoire, Mali and Mauritania and expand into two new countries, Cameroon (US$ 75 million) and Guinea ($60 million).

Cameroon’s vision for 2035 emphasizes how healthy and well-educated Cameroonians will achieve the country’s enormous potential for shared prosperity. However, challenges faced by girls and women today, including child marriage, early and frequent pregnancies as well as early school drop-out, put girls and their future children at heightened risk of poor health outcomes, tremendous loss of educational opportunity and future earnings prospects”, said Abdoulaye Seck, World Bank Country Director for Cameroon. “SWEDD 2 will serve as an instrument for empowering girls and building human capital, initially concentrating on three regions, namely the Far North, North and Adamaoua, where about 700,000 girls 10-19 years of age are vulnerable to these risks”.

Overall, the SWEDD 2 will continue to  invest in activities that target adolescent girls and their surrounding communities to improve life skills and sexual and reproductive health knowledge among adolescents, keep girls in school, expand economic opportunity and create an enabling environment for girls’ social and economic empowerment through the nexus of statutory, religious and customary laws and norms, including through the prevention and improved response to gender based violence. Investments will also enhance last mile delivery of essential medicines, including access to contraceptives at community level and strengthen the capacity for midwives to deliver services in rural areas to women and adolescent girls.

One important aspect introduced by SWEDD 2 is the enhanced attention to strengthen legal frameworks that promote women’s rights to health and education. Activities supported by the project have been identified at both national and regional level through peer consultations between parliamentarians, judges and lawyers in and beyond SWEDD countries. These include reinforcing legislation, strengthening judicial capacity and promoting knowledge and application of existing legislation in communities where harmful practices are highly prevalent.

SWEDD 2 will also support the West Africa Health Organization (WAHO) – the health arm of the Economic Community of West African States (ECOWAS)— to facilitate a regional dialogue on improved opportunities in rural areas, and to conduct regional workshops to facilitate knowledge sharing. The United Nations Population Fund (UNFPA) remains an important partner in coordinating technical advice and implementation support, including through contracting with specialized partners and in the delivery of the regional social behavior change and communications campaign.   

The African Union (AU) joins the project as a new strategic partner. With membership of 55 States, the AU is the largest inter-governmental organization on the continent, providing a platform for social and economic transformation. This partnership will build AU’s capacity to serve as a platform for codifying policy/legal reform, facilitate peer exchange and communicate progress on areas related to the advancement of women empowerment across the continent.

The SWEDD project is well aligned with the African Union’s Agenda 2063, as well as with the national strategies of the respective beneficiary countries. It also contributes to the World Bank Group’s Regional Integration and Cooperation Assistance Strategy which puts an emphasis on human capital development, with a special focus on women’s economic empowerment. “The World Bank believes that there can be no sustainable economic growth without women’s empowerment and sees the full participation and inclusion of girls and women as fundamental to the continent’s progress,” said Deborah Wetzel, World Bank Director of Regional Integration for Africa.

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ADB Approves $300 Million Loan to Increase Indonesia’s Geothermal Electricity Generation

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The Asian Development Bank (ADB) has approved a $300 million loan to help PT Geo Dipa Energi (GDE), an Indonesian state-owned company, expand its geothermal power generation capacity by 110 megawatts in Java, the country’s largest electricity grid and a challenging market for the development of renewable energy. ADB will also manage a $35 million loan from the Clean Technology Fund for the project.

“ADB’s geothermal project will help Indonesia combat climate change and make its electricity system more sustainable, reliable, and efficient. It will also help businesses and consumers access affordable, reliable, and modern energy,” said ADB Country Director for Indonesia Winfried F. Wicklein. “Our support is aligned with Indonesia’s long-term goals for economic growth and energy, including maximizing the use of indigenous energy resources, diversifying the fuel mix, and ensuring environmental sustainability.”

Indonesia has the world’s largest geothermal potential, with an estimated 29 gigawatts (GW), and the world’s second-largest installed geothermal capacity of 2.1 GW. ADB, through its private sector finance operations, has had a long-standing interest in Indonesia’s geothermal sector, supporting projects at Muara Laboh, Rantau Dedap, and Sarulla. But the development of geothermal power remains slow, largely because the exploration phase is costly, lengthy, and high risk.

The Geothermal Power Generation Project will support the construction and commissioning of two geothermal plants at Dieng in Central Java and Patuha in West Java by GDE, a state-owned enterprise focused on geothermal exploration, development, and power generation. It will boost GDE’s capacity to plan and execute projects and undertake government-supported drilling, which aims to attract much-needed private sector investment to develop new geothermal areas. In addition, GDE will provide direct assistance to nearby communities, including women and other vulnerable groups, and help improve livelihoods.

“The project, recognized as a National Strategic Project by the government, will provide environmentally friendly base-load electricity to the Java–Bali electricity grid, reducing CO2 emissions by more than 700,000 tons per year,” said GDE President Director Riki Ibrahim. “The project will build critical geothermal experience in Indonesia and contribute to the government’s efforts to attract private-sector investment in the sector by reducing early-stage project development risk.”

The project, approved amid the novel coronavirus disease (COVID-19) pandemic, will help ensure that Indonesia’s economic recovery will be green, sustainable, and resilient.

“ADB’s intervention will help make clean energy transition a key part of the country’s recovery from the pandemic. The project will create jobs for those supplying goods and services for drilling and construction, and will create livelihood opportunities in the local area,” said ADB Senior Energy Specialist for Southeast Asia Shannon Cowlin.

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