President Nana Addo Dankwa Akufo-Addo has advocated for African countries to invest 30 per cent of their foreign sovereign reserves in domestic financial institutions to boost their balance sheets and support the continent’s rapid development.
Currently, African countries invest 100 per cent of their foreign sovereign reserves in financial institutions outside Africa, even though those investments yield little to no profits.
That phenomenon, President Akufo-Addo intimated, has not and will not yield any benefits to the continent.
President Akufo-Addo made the call at the 37th Ordinary Session of the Assembly of Heads of State of the African Union (AU) last Saturday.
The President spoke on the theme: ‘Establishing African Union Financial Institutions in the Context of Africa’s Agenda for Global Financial Architecture Reform.’
President Akufo-Addo said it was time to strengthen the continent’s financial and multilateral establishments to increase their capacity to support the continent’s developmental agenda, adding: “It is time for the African people to look inward and to support themselves to develop.”
“We are all in agreement that the way the global financial architecture works is not in our [Africa’s] favour and there is the need to make some fundamental and systemic reforms. But making the reforms also requires that we [Africans] also take some steps that will assist us to have a greater impact in the way in which our economies are financed.
“As it stands, virtually all our countries hold our reserves in foreign banks, attracting largely negative rates of interest. The proposal that I am going to put to the plenary is that we should decide that a minimum of 30% of the reserves of each one of us, sovereign reserves, should be invested in the African multilateral institutions,” President Akufo-Addo proposed.
“I speak about the AfDB; I speak of Afreximbank. We should strengthen their balance sheets and strengthen their capacity to facilitate more and more resources for our development. If we find a way that we can increase the financial power of our institutions, we are in a better place to finance our development,” Akufo-Addo added.
On strategic economic matters, President Akufo-Addo called for the institutionalisation of an annual African economic summit that would focus mainly on finding strategic solutions to the many financial challenges affecting the African continent.
That, he said, would be prudent and make economic sense instead of African leaders travelling at the same time to several countries such as the United States of America, India, China, and Japan, among others, in the name of attending summits with these countries in search of economic solutions.
“We spend a lot of our time going from one country to another, having these summits. We have summits with China, India, Japan and America. We now have summits with Turkey, and recently with Italy and other countries are also going to have these summits. We [African Heads of State] all go to these summits because we do not want to endanger our relations with them.
“If we can find an institutional arrangement for ourselves whereby at least once a year, we can meet to talk about the strategic economic matters that affect our continent, I think we will obviate the need for these moving around from one country to the other and that is the idea of having every year, an economic summit,” President Akufo-Addo suggested.
The President of Kenya, William Ruto, in his remarks supported fully the two proposals made by President Akufo-Addo and indicated that the proposals are essential if Africa wants to leapfrog to its next level of development.
“I am very happy that President Akufo-Addo has made two fundamental proposals that I fully support. He has proposed that we must empower our own African financial and multilateral institutions. He has proposed that 30% of all our reserves that are in all manner of places earning sometimes, negative interest, we should make it available to our African multilateral institutions. I agree one hundred per cent. It is a step in the right direction.
“I also agree that instead of globetrotting and going to every other place, we need to organise our own development financing and economic summit where we invite those who want to do business with us to come and engage with us,” President William Ruto said.
“I think it is only fair that we have made good our part of the bargain. We have gone to many capitals. Surely, it is time for them to come to ours and I think we will not be asking for too much. I will take up the challenge if it is agreed that that be the case, I will offer to host the first summit,” the Kenyan leader further remarked.
Rex Mainoo Yeboah, ISD
