How to help African companies in a context of international crisis? How to foster investment and trade on the continent despite the disorganization of value chains?

Makhtar Diop (IFC): “Developing regional value chains in Africa”

Makhtar Diop, when he was vice-president of the World Bank for Africa, on April 22, 2017 in Washington.

Text by: Olivier Rogez Follow |

Charlotte Cosset Follow

8 mins

How to help African companies in a context of international crisis?

How to promote investment and trade on the continent despite the disorganization of value chains on the continent?

These are some of the missions of the International Finance Corporation (IFC), the leading development institution focused on the private sector in emerging countries.

Its managing director, Makhtar Diop, gave an interview to RFI to detail his actions and strategy.

Advertising

RFI: Makhtar Diop, your start in office was marked by a severe economic crisis and a resumption of global inflation.

Food prices are soaring, and even more so since the Ukrainian crisis.

How can companies be helped to mitigate this global inflationary shock

Makhtar Diop:

Today we have inflation resulting from a massive imbalance between demand, which is significant and which has been encouraged by the strong monetary and budgetary stimulus measures in the countries, and supply which is disrupted by logistical bottlenecks.

And this particularly affects developing countries.

For example, in North Africa, we see that 46% of the grain supply comes from Russia and Ukraine.

What can be done for this?

Work on the offer, that is to say remove all the bottlenecks and precisely allow companies to be able to increase the efficiency of the value chains.

One of the axes that we have at the level of the IFC as far as Africa is concerned, is to use this opportunity of the free trade zone to be able to increase inter-African trade.

It is worth noting that inter-African trade has increased significantly over the past few years.

But we believe much more needs to be done.

We must integrate the economic sectors of the countries more, have more specializations in the countries in order to be able to integrate the value chains effectively.

►Also read: Africa economy - Burkina Faso: the African Development Bank supports shea producers

The Covid-19 pandemic has led to an African awareness of the need to first facilitate the importation of medical products and vaccines on the continent, and to develop production there.

Now, several manufacturers have announced that they want to set up vaccine factories in Africa.

In these cases, how do you intervene

?
Do you lend them money
?

It was one of my most important projects during this year.

A year ago, when we were talking about producing vaccines in Africa, people looked at us wondering if we were really realistic.

This is a challenge that the IFC has taken up.

And we have managed, I think, to contribute significantly.

Today, we are working with the Institut Pasteur in Dakar, with the authorities of Rwanda, with South Africa, with Ghana,

for the production of vaccines

We believe these are activities that should be funded by the private sector.

We are very advanced in the case of Senegal and Rwanda to set up commercial structures that can produce vaccines.

Kenya has also signed an agreement with a vaccine producer.

We are also going to work with the Kenyans and this company to be able to help with the production of vaccines.

This pandemic has revealed the importance of the return of the State to its role of both regulation and protection.

When you discuss with companies, do you take into account this protective role that the State is increasingly called upon to play, especially in the troubled times that we live in

In all economies, the state has a role to play, be it in the United States, be it in Singapore, be it Senegal, be it Kenya, be it Morocco.

The role of the state is to regulate sectors because there are sectors that need to be regulated.

We need to have terms of competition that are transparent, we need to protect the consumer where he needs to be protected.

It is a vision of the economy where the private sector is at the center of development.

As far as Africa is concerned, it is clear that the investment needs are enormous, that there is room for the private sector and for the public sector.

The public sector will be more constrained because it faces significant expenditure in the field of health, in the field of social protection, and to help reduce the shocks at the level of the poorest populations.

The state has a role to protect the poor through subsidies, and all of this takes a lot of state resources.

So in the infrastructure sectors and in other sectors, it is increasingly difficult for countries to invest and the private sector has a key role to play in this.

You plead for the development of public-private partnership.

How do you intervene?

Do you lend privately?

To the public ?

The IFC lends to the private sector.

The World Bank lends to the public, to put it simply.

And Miga [the Multilateral Investment Guarantee Agency], which is our guarantee institution, guarantees political risk.

These three instruments allow us to attract foreign direct investment in the countries.

It is also a question of mobilizing local savings in order to be able to invest in the productive sectors.

This is something I would like to accelerate during my tenure at IFC.

A reproach which is often made to you, in particular by NGOs, is that you do not sufficiently take into account the environmental impact during your investments.

When you decide to invest the money of the IFC in such or such energy production company or in such real estate project, do you take the environmental question sufficiently into account

It's essential.

85% of our portfolio in 2023 will be what we call “

Paris aligned

”.

This means that the investment will be aligned with the criteria of COP 21 in Paris.

By 2025, 100% of our projects will be aligned with the principles that were developed at COP 21. That being said, we were the first institution to issue green vouchers over a decade ago.

And you see today the impact that has had on the market.

It was the IFC that started this and created a movement for people to start financing green economies.

We have reviewed all of our environmental and social protection procedures.

This was done in collaboration with NGOs

We launched two other products at COP 26: what is called the Planet Emerging Green One (EGO) and Best Bound which also aim to finance the green economy.

We are embarking on investments that help reduce marine plastic pollution.

We did this with one of our Indorama companies.

We innovate a lot and our innovations are widely taken up by the market.

We have reviewed all of our environmental and social protection procedures.

This was done in collaboration with NGOs.

They have been widely consulted.

Their comments and suggestions have been incorporated into our new environmental and social protection policies.

And I think what we have today is certainly the best there is in this area, in terms of private sector development.

Let's go back to an example cited by several NGOs, that of the Tata Mundra Power Plant in India.

A project which is supported by the IFC and which has generated groundwater pollution.

Shouldn't the IFC work to put in place a compensation mechanism for the populations who would be victims of collateral pollution in the projects that you support

We are discussing the issue.

This is called “

remedies

”.

At present, when a company does not respect environmental and social standards, it must compensate the populations.

It's not up to us to do that.

Because it would still be necessary to be very clear on the responsibilities.

We are not the ones setting up the project.

We lend to a business.

The company is

ultimately

responsible for the implementation of the social and environmental standards to which it adheres and which it agreed to implement when it took our resources.

We had several cases.

And this case (Tata Mundra Power Plant) is one.

We were very involved in the discussions to ensure that the populations were compensated fairly.

Makhtar Diop (IFC): “Developing regional value chains in Africa”

Makhtar Diop (IFC): “Developing regional value chains in Africa”

You may like

Trends 24h

Latest