Archived - Notes for Remarks by the Honourable Ralph Goodale, Minister of Finance, at the Unleashing Finance and Infrastructure for Africa Conference

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Toronto, Ontario
April 25, 2005


Introduction

Mr. Daignault, Mr. Bradet, ambassadors and distinguished guests.

I would like to start by thanking the Canadian Council on Africa for bringing together such a wide range of experts to discuss the important issues of financing and infrastructure for Africa.

I'm glad we have this opportunity to boost awareness about Africa, and especially the Canada Investment Fund for Africa. This is one way the Government of Canada is encouraging partnerships between the private sector and developing countries in Africa.

Canada was founded upon certain values and beliefs, a sense of fairness and justice, a spirit of generosity, compassion, tolerance and inclusion. In turn, those values have shaped our character as a nation and helped define our role in the world.

It was in this spirit that I accepted the invitation to join the Commission for Africa (CFA), established 12 months ago by UK Prime Minister Tony Blair.

I'm pleased to see African development once again in the international spotlight and I look forward to Africa being high on the agenda at the G-8 Summit this summer in Gleneagles, Scotland.

This will not be the first time that Africa is front and centre at a G-8 summit. At the 2002 summit in Kananaskis, Alberta, it was Canada's leadership that provided the impetus for the creation of a formal partnership between the G-8 and the African leaders of the New Partnership for Africa's Development.

Seventeen men and women, more than half of them Africans, were invited to join this UK Commission just over one year ago. We served in our private capacities, not representing the organizations, or political offices, we came from.

Our objective was to generate concrete advice to achieve tangible socio-economic progress in Africa. That meant being honest about issues such as poverty and corruption in Africa as well as our own propensity for indifference or inaction here in the developed world.

As you may know, the Commission for Africa released its final report on March 11th, 2005. The report sets the bar rather high. It points us, I think, in the right direction. But what was so strategically important in writing the report was to ensure that, beyond the 17 of us who participated directly, the report had entry ramps that would allow more and more players to join in as time went by.

In many ways, Africa is a continent in crisis. It faces enormous economic and human development challenges, the scope and scale of which defy comprehension. For example, more than 260,000 people die in Africa of AIDS and malaria-the equivalent of the recent Asian tsunami-every single month.

But there are also important signs of progress. Incidents of conflict are down. Governance is improving. Africa is a seedbed of entrepreneurial potential, and governments on the continent are changing past ways-working towards creating the kind of enabling environment that will allow Africans themselves to become the true economic engines of the future. You saw some of the best in the film tonight.

I saw many of those signs first-hand when I had the opportunity, as part of my personal consultations, to spend some time in Africa last year, to learn first-hand from Africans themselves about what works, what doesn't work and what they believe needs to get done.

I had the privilege of meeting the people from all walks of life-presidents, prime ministers, ministers and officials, business people, academics, non-governmental organizations (NGOs), the voices of civil society, private citizens-in four separate nations: Tanzania, South Africa, Mali and Nigeria.

I was riveted by Trevor Manuel's compelling stories about the final days of apartheid, about the very day that Nelson Mandela was freed from prison and how things have evolved in South Africa, now some 10 years later. I met Canadian business entrepreneurs working in tandem with South African bankers and developers on information technology in small and medium-sized enterprises.

I remember walking through the Tandale market in Tanzania, where shop owners spoke passionately about the need for improved infrastructure and better access to capital. From our North American perspective, those sound like difficult things to get passionate about. In Tanzania and the Tandale market, their practical daily importance is huge. That's why the presence there of the Desjardins group from Canada is so vital.

I listened to cotton farmers and mill workers in Mali who wanted more value-added processing of cotton products and more open and less distorted access to other markets around the world. They acknowledged how useful it was to have a functioning railway to tidewater-with Canadian help and expertise from CANAC.

And I remember the Nigerian legislators who said, "we cannot even breathe because of the debt we carry." And again they said, "we know our Nigerian reputation for corruption and we must convince the world with hard evidence that we are fighting it and making progress." And remember please that there is now a new generation of younger Nigerian leaders who really want to make that change.

And I think often of Nigerian President Obasanjo telling me, frankly, perhaps skeptically, that moving forward on even one or two of the good ideas he expected to come from this Commission's final report would greatly surpass expectations of most Africans about "just another official report."

Following this visit, I also met with private sector groups and NGOs in Canada. I recognize a few faces in the room from those consultations, and I'm pleased that some of the businesses at the consultations have sent representatives to this conference as well. Some of you also participated in the web-based discussions launched by my department-in the end we received multiple written submissions from organizations and individuals covering a wide range of topics and proposing solutions to a very broad range of problems.

The consultations with private sector groups were in fact quite unique. Too often, businesses are wrongfully excluded from discussions on development, despite their ability to stimulate economic growth in even the poorest nations. That is why the Commission made every effort to engage in dialogue with private sector groups, and I am proud of the collaboration and cooperation both sides displayed during the realization of our final report.

These consultations have also shaped the way I think about Africa and its many challenges. Paramount among these-and a key theme in our report-is that, if Africa is to become a success story, it must be able to take the leadon its own economic development.

True and sustainable progress, especially in the critical areas of governance and security, cannot be bootstrapped by a foreign nation-it must come from within.

But for Africa to reach its Millennium Development Goals by its target date of 2015, it will take more than simply acknowledging the importance of African leadership. It requires finding a way to support that leadership in developing the tools to make sustainable economic progress.

Gone are the days when "development" and "business" were antithetical. There is now global consensus that mobilizing the private sector-and its contributions to economic growth, job creation and the incomes of the poor-must be an integral part of sustained and sustainable poverty reduction.

A successful private sector also leads to a growing middle class, which drives consumer demand and economic growth-while also fostering democratic development.

It is easy to make the mistake of assuming that Africa does not even have a significant private sector. This is not the case; in Africa, there are millions of poor men and women who make their living by providing goods and services to others-in informal markets and on anonymous street corners.

The problem is that these entrepreneurs face huge barriers that are hindering their formal advancement, and hindering both foreign and domestic investment.

They face obstacles like limited access to financing and business capital; weak policy, legal, fiscal and regulatory environments; poor governance; and inadequate public infrastructure in the areas of transportation, communications, energy and water-to name a few.

These barriers have resulted in Africa having the highest level of "capital flight" in the world; 40 per cent from Africa, compared with only 4 per cent in Asia.

These are just some of the obstacles identified in the 2004 UN report called Unleashing Entrepreneurship, which was co-authored by Prime Minister Paul Martin and former Mexican President Ernesto Zedillo.

The report makes the point that a strong enabling environment for investment-one that is firmly rooted in the rule of law and directed at increasing the saving and investment capabilities of poor households-is essential to achieving both domestic and foreign investment, and thus economic growth and development.

With our tactical help and tangible support, African governments must make a strong and unambiguous policy commitment to sustainable private sector development. They must invest in public infrastructure, eliminate inefficiencies, address legal and security issues, and improve access to finance.

They must commit to improving trade capacity by reducing supply-side constraints and increasing export readiness, including access to capital and skills.

They must eliminate the barriers to intra-African trade: In North America, intra-regional trade through the North American Free Trade Agreement has led to impressive economic growth for Canada, the U.S. and Mexico. Lending our experiences on this matter could help the development of a vibrant free trade zone in Africa. From hard experience, we can also explain the pain and failure that flows from knee-jerk protectionism.

Most importantly, they must engage their indigenous private sector in the policy-making process. The formation of a real partnership between governments and small and medium-sized enterprises is essential to beginning a real dialogue on economic growth and through this, poverty reduction.

But Africans, and their governments, cannot reasonably be expected to make this progress entirely on their own. While I firmly believe they must be the catalysts for change-if the change is to be real and lasting, there is a big role for wealthy countries and donor organizations in poverty reduction.

Helping reverse Africa's economic decline will first require improved international "rules of the game." We must do more to enable Africa to compete globally. While the rest of the developing world has seen its share of world trade rise or at least remain constant, Africa's share has dropped from 6 to 2 per cent over the last 20 years.

Market access is key to helping developing countries achieve the economic growth required to meet the Millennium Development Goals.

And not only on trade between Africa and developed countries-much real potential for economic growth exists in Africa gaining access to the markets of other developing countries.

We must work toward a fairer international trade system and ensure that the Doha round, which provides the mandate for various trade and development reforms, delivers on its commitment to greater opportunity for trade-ending all export subsidies, slashing domestic supports that have trade-distorting effects, and opening new market access.

We can also help Africa improve its trade capacity. Trade-related technical assistance from donor countries can speed this process. Canada has already provided technical assistance-about $316 million through both bilateral and multilateral initiatives, and we should do more.

We also need to help harness the potential of foreign direct investment. Global foreign direct investment has consistently been larger than aid flows from donor countries. In 2002, net private capital flows to developing countries were more than three times the net official development assistance-or about US$150 billion in FDI compared to US$50 billion in aid.

That is why donor countries like Canada must find ways to encourage Canadian firms to do more business in Africa.

The Canada Investment Fund for Africa (CIFA) is an important tool for that purpose. Developed under the Canada Fund for Africa, housed at the Canadian International Development Agency, the CIFA is designed to provide risk capital for private investments in Africa that generate economic growth. It is in line with recommendations in the Martin-Zedillo report.

CIFA aims to stimulate intra-African and foreign investment to contribute to sustainable development by channelling at least $100 million in private investment into Africa, matched by an additional $100 million in public funds.

The success of the fund, however, depends mostly on strong leadership and entrepreneurial innovation from individuals like you. There is tremendous potential for Canadian businesses not only to expand their own operations in new and dynamic markets, but also to contribute in a socially responsible way to Africa's growth.

Many Canadian businesses have already developed fully functioning models that reflect the "human face of business"-that is, corporate social responsibility that reaps benefits on all sides by taking into consideration the local community and the lives of the workers in these foreign markets without compromising their own economic growth.

These businesses invest in local communities because in doing so, they are bolstering the livelihood of their workers, thereby improving productivity and fostering the local economy-all of which translates into sustainable poverty reduction for the community itself-and also more security, less violence and better governance.

Going into developing markets poses more risks than perhaps elsewhere, but there is also greater payoff for those businesses that can make the leap. And with the added help of the Government of Canada, I firmly believe that in working together, we can develop even better models, more innovative methodologies, and ultimately contribute to poverty alleviation for the world's poorest in a meaningful way.

All it takes is the willingness to explore the options. The Government of Canada stands ready to work with private sector firms on new initiatives that will benefit the people of Africa. I encourage you to work with us towards that end.

Let me close by mentioning two other barriers to African well-being which should be of primary Canadian interest and action-those of debt and disease.

From Canada's perspective, too many resources in Africa are being used up to pay for the debts of the past when they should be invested in a better social and economic future.

In a continent where young people now make up half of the entire population, the importance of such future-oriented investments simply cannot be overstated.

That is why Canada has championed debt relief for the world's poorest countries-both multilaterally and through our own bilateral debt relief initiative. And we have backed our rhetoric with cash!

This helps African nations to use more of their own money to invest in their own priorities.

The second major barrier to progress is the scourge of disease. The impact of diseases like HIV/AIDS, tuberculosis, malaria and polio is so devastating that it is no longer simply a social issue-it has enormous implications for the future of market economies in Africa.

It is not unusual to find businesses in Africa that cannot stay at full capacity because of the effects of illness on their staff. And while I am personally troubled by the humanitarian implications of this pandemic, as a CFA Commissioner and a G-7 Finance Minister, I am also greatly disturbed by the consequences of disease on Africa's ability to create and maintain a thriving economy.

Without that, Africa will never be able to take control of its destiny. It therefore falls to us to help Africa to combat disease in order to provide the kind of environment where greater health and economic growth are possible. I was proud to include several key measures in this regard in my February budget.

Moving Forward

Everyone here tonight has a role to play in changing Africa's economic reality.

As a CFA Commissioner, I believe we need to change the way we do things by improving not just the quantity, but also the quality of our support, and by developing and deepening the partnerships between Africa and its donor countries.

I believe Canadians want to take a greater interest in how to help developing countries, particularly African countries, build their private sectors, make local markets work for the poor and compete globally.

To me this is not just economic theory or good business; it is the right human thing to do.