Second Conference of African and European Regional and Local Authorities on the theme of The Impact of the Economic and Financial Crisis on Decentralized Governance in Africa: the Response of Local Authorities to the New Development Challenges held in Florence Italy (6 7 November 2009) African Local Governments and the Global Economic and Financial Crisis by Dr. John Mary Kauzya Chief of Governance and Public Administration Branch Division for Public Administration and Development Management Department of Economic and Social Affairs United Nations Headquarters, New York DC Two, Room 1742, New York, NY 10017, USA Kauzya@un.org, www.unpan.org
1/ Introduction 2/ The Economic and Financial Crisis from a Global Perspective: A Situation that is Judged Problematic 3/ The Crisis in an African Perspective 4/ Public Administration and Local Governments as Economic Actors 5/ Measures for Mitigation, Coping and Risk Reduction in Africa 6/ Local Governments and MDGs 7/ Local Governments and the Economic and Financial Crisis
Introduction Local governments are part of public administration: the role of public administration in the economic and financial crisis in terms of causes, impact and remedies. The economic crisis has created a global problematic situation The suffering from the crisis is felt most at local government level Local government leadership: seek for strategic partners in the search of the remedy to the crisis. Public Administration as an actor in economic performance Professionals were wrong to just watch as advocates of the private sector and market based management approaches down graded the importance of public administration. For Africa: the State or Public Administration abandon the people The current economic crisis is a secondary problem to the development crisis The ultimate solution to the crisis lies in the hands of Africa s leadership in central government and local governments. Role of Local governments: mobilize development actors to devise strategies Re assert the role of public administration against the dangers of market
2/ The Economic and Financial Crisis from a Global Perspective: A Situation that is Judged Problematic The increased cost of external borrowing Developing countries are particularly adversely affected External financing for developing countries has dried up. Trade flows worldwide sharply declined from the end of 2008 Sharp declines in commodity prices are compounding the adverse impact Remittance flows to developing countries appear to be moderating. Remittance flows are also at risk because of rising immigration controls Aid flows may come under pressure in view of declining incomes Developing countries will experience severe balance of payment problems. One of the biggest risks is that of a prolonged labour market recession. Reduced investments in environmental protection, energy efficiency and renewable energy, water and land management, and forestation measures could slow efforts to make development more sustainable and to address climate change Prolonged recession and insufficient attention to social needs could cause problems of social unrest, rising criminality and weakening governance.
continued 200 million workers are at risk of joining the ranks of people living on less than $2 per day between 2007 and 2009. During the 2007 2009 period, between 210 million and 239 million persons would be unemployed, representing global unemployment rates of 6.5 and 7.4 per cent respectively, or increases of between 39 and 59 million unemployed people since 2007. the number of unemployed youth is expected to increase by between 11 and 17 million from 2008 2009, with the youth unemployment rate projected to increase from around 12 per cent in 2008 to up to 15 per cent in 2009. For Africa which is already lagging behind the achievement of the MDGs and other international Agreed Development Agenda, the Crisis has come at the wrong time, or just to put it differently, constitutes a fresh cut in a very bad wound!
3/ The Crisis in an African Perspective Initially it was thought that most Sub Saharan African countries were shielded That thinking was short lived. The most visible impact has been: Decline in prices of commodity exports. Decline in demand for services Decline in workers remittances. Decline in foreign direct investment. Possible decline in overseas development assistance For countries that are dependent on exports of primary commodities, remittances, overseas development assistance and foreign investment, these declines are leading to a very bleak economic picture which when put in the context of the achievement of the Millennium Development Goals (MDG), the immediate, medium and long term impact can be disastrous. What is seen in terms of financial and economic crisis in other countries is an accentuation of the socio economic crisis (abject poverty) African countries have been witnessing since independence.
4/ Public Administration and Local Governments as Economic Actors Many Central governments tend to regard local governments as expenditure centers. Local governments can stimulate employment, private investment & mitigate social discontent. The financial crisis provides an opportunity for local governments to re assess and re assert themselves as institutionalized structural arrangements through which government can reach the most needy especially in times of crisis A crisis is a powerful and effective incentive for positive change The government has been told that it has no business in business. But government has business in business. The right question should be, what business does government have in business? In fact Africa governments forced to abandon critical enterprises. In the discourse on public administration, most professionals of public administration literary stood by as the profession was attacked and ridiculed. Despite the years spent discrediting public administration s intervention in the economy now to counter the effects of the crisis governments are doing what a few months back was considered inappropriate. Why was it wrong for Africa in the 1980s and right for others today? Left to market forces unprotected, poor people, such as most populations in Africa, get harmed. The crisis in Africa did not begin in 2008. Africa has been in crisis all along! African leadership need to bear all this in mind as the deal with the crisis.
5/ Measures for Mitigation, Coping and Risk Reduction in Africa Monitoring the impact of the crisis in timely fashion Restoring confidence in banks and continuing to monitor and regulate banks Expanding trade (including through aid for trade programmes). Expanding trade finance African governments need to put emphasis on the following mitigation actions: Monitor the impact of the crisis Monitor and regulate their own banking systems and check for early signs of bank difficulty Maintain a positive stance towards trade liberalization and open markets Lobby for the satisfactory conclusion of the Doha (development) Round Work towards improving their respective supply capacities, Maintain competitive real exchange rates Further encourage regional integration and regional trade facilitation measures. Expanding domestic demand, through fiscal and monetary stimulus, Absorbing financial losses through foreign reserves, Targeting the vulnerable through appropriate social safety nets supported by aid Expanding self employment, through amongst others making the business environment easier and supporting public works programmes
6/ Local Governments and MDGs
7/ Local Governments and the Economic and Financial Crisis The Freeport declaration notes that improving local government is an important strategy in dealing with world economic downturn and emphasizes making sure that local governments have a sound financial base and calls up on local governments to develop strategies to respond to the impact of the economic downturn Most African societies suffer from multiple weaknesses. Their central and local governments are weak & their private and civil society sectors are also weak. Some local governments are putting infrastructure investments on hold and prioritizing social protection schemes. The best position though would be to maintain both infrastructure investments and social protection schemes. Address the long standing issues and challenges concerning the financing of local governments mandates. For examples; In all African countries that have decentralized, central governments monopolize the taxes that yield the highest revenues As a result, local governments depend on transfers from central governments Central governments transfers to local governments depend greatly on the vicissitudes of the central government treasury. The Euro Africa Partnerships for Decentralized Governments has been a good example Build partnerships for improving performance including in investments, trade and capacity building
8/ It Would Help If Africa Addressed the Development Crisis The crisis should be an eye opener for Africa to remember that the continent has been in crisis (food crisis, high mortality and morbidity rates, HIV/AIDS, high unemployment rates, conflict and insecurity, political instability, high levels of illiteracy, environmental degradation etc). Africa should think strategically on how to address the financial crisis while intensifying the struggle to overcome its underdevelopment. For example, if Africa does not achieve food self sufficiency, it will be further fueling the financial crisis by overburdening its import bill by importing food. Working towards food security for Africa should be one of the strategies for addressing the financial crisis. In this Local governments are critical