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AfricaJune 1 2001

The future of Africa

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What does the future hold for Africa in the next few years? The Banker asks financial institutions active in the region about developments in the economy, banking, technology and politics.

Economic outlook

1 Which three African countries will grow fastest over the next few years and why?

2 Do you expect ordinary citizens to feel the benefits of this growth? If not, what kinds of policies are needed to improve distribution without slowing growth?

3 Which three African countries do you expect to perform the worst over the next few years and why?

4 How much would a substantial privatisation programme improve growth prospects in Africa? Do you expect privatisation to develop quickly in Africa?

5 How positively or otherwise do you regard the role of the non-governmental organisations in Africa?

Panellists

Francis Beddington, senior sovereign strategist, JP Morgan

Patrick Smith, editor, Africa Confidential

Gregory Kronsten, economics researcher, WestLB

Omar Kabbaj, president, African Development Bank

Banking

1 What are the key elements of a winning strategy for an African bank?

2 What are the greatest challenges faced by African banks?

3 What are the major initiatives governments could take to improve the banking environment?

4 Are the new Basel II proposals appropriate to African banks? If not, why?

5 How important is microlending to African development and how attractive is it as a banking product?

Panellists

Ayo Salami, bank analyst, Nomura

William Pamford Bray, chief executive, Ghana Commercial Bank

Jacko Maree, chief executive, Stanbic

Nallie Bosman, chief executive, Absa Group

Investment banking

1 Are African capital markets answering the financial needs of African companies? How could things be improved?

2 Are African banks answering the financial needs of African companies? How could things be improved?

3 What role do you expect international capital markets to play in financing African development?

4 Which African countries and companies would you expect to see issue Eurobonds over the next couple of years? What steps do these countries and companies still need to take to access the international markets?

5 Is there a need for investor education about how the majority of western investors approach Africa? What needs to be done now?

Panellists

Yofi Grant, executive director, Databank Brokerage

Dele Babade, vice-president corporate finance, Citibank/Schroder Salomon Smith Barney

Konrad Reuss, managing director, sovereign ratings, Standard & Poor's

Jose de Nobrega, global head of project finance, Investec Bank

Technology

1 Do you expect Africa to take a technological leap forward in the next couple of years?

2 What role will the internet play in Africa?

3 How can African banks make best use of new technology?

4 Is the mobile phone the answer to telecoms problems in Africa?

5 How could the application of new technology improve the operation of African stockmarkets?

Panellists

Arnold Ekpe, chief executive, Ecobank

Colin Wheater, general manager, marketing and communications for technology and operations division, Nedcor Bank

Dominic Bruynseels, managing director, Barclays Africa

Future of Africa

1 What do you regard as the most positive developments taking place in Africa?

2 Should Africa follow the standard economic reform model - open markets, privatisation, development of capital markets - that has been tried in other emerging markets, or should it go its own way?

3 Would Africa benefit from more pluralistic political systems?

4 How fair or otherwise is the media's treatment of African issues?

5 How much will Aids impinge on African growth prospects? Should drugs companies make Aids treatment available at affordable prices?

6 How can the problem of corruption best be tackled?

Panellist

Emmanuel Tumusiime-Mutebile, governor, Bank of Uganda

Economic outlook

Francis Beddington, senior sovereign strategist, JP Morgan, London

1 If we exclude those countries whose economies are rebounding after the impact of civil war I would cite Africa's top three likely economic performers as Mozambique, Botswana and Tunisia. The reasons for strong growth are obviously different in each country but a few key themes that I would cite are a strong and stable economic policy environment and an outward-looking orientation towards economic policy.

2 Generally I believe that faster growth will benefit the broader community, but growth can be made generally more beneficial if the focus is on the provision of government services in areas such as education, health and the provision of rural infrastructure.

3 Again, if we exclude the unfortunately large number of countries that are mired in civil war, which will obviously undermine economic performance, I would cite Zimbabwe and Zambia as the countries likely to underperform in the next few years. The main reasons for this are government preoccupation with politics rather than economics, excessive state involvement in the economy, loose fiscal policy and a weak legal framework.

4 Privatisation in Africa has a patchy record. African countries would benefit from increased investment and improved services if state enterprises were sold to the private sector in a transparent manner. The risk is that vested interests may try to hijack the privatisation process and extract economic rents from privatised enterprises. Recently, I was impressed with the auction of the global systems for mobiles licences in Nigeria, which was conducted in an open and transparent manner, raising significant revenue for the government.

5 I am in strong support of the growth of indigenous NGOs as they demonstrate a broadening and deepening of civil society, which can only be positive for African countries. My attitude to international NGOs is more ambiguous. Some international NGOs, particularly those involved in emergency assistance and/or post-emergency rehabilitation, such as the anti-landmine groups, do excellent work. I have more concerns about the longer-term development NGOs. Many of their projects, while excellent in principle, are difficult to scale up and rarely reach a wider target population. In addition, many international NGOs hire their local staff from government departments, which undermines the institutional capacity of the government to deliver services.

Patrick Smith, editor, Africa Confidential

1 Mozambique - because its government is committed to a development strategy, it is making maximum use of the country's natural resources, it benefits from its proximity to the South African market and it is maintaining a post-war boost in economic growth. Angola - because its oil and gas resources have attracted multi-billion dollar investment from the international oil majors despite the continuing war with Unita rebels and high levels of government corruption. Equatorial Guinea will post among the highest per capita growth rates in Africa because it has been a poverty stricken dictatorship but is now receiving a massive inflow of investment to develop its oil resources.

2 Many Mozambicans will receive the benefits of the growth because the economy is becoming more diversified and the government is committed to boosting spending on education and health (the same holds for other faster-growing African economies such as Ghana, Tanzania and Uganda). This is not likely to happen in the highly centralised, monocultural economies of Angola and Equatorial Guinea.

3 Liberia, because the government's sponsorship of rebels in Sierra Leone and Guinea has branded it an international pariah and it is off limits for development aid and investors. The Sudan, because the government is diverting the bulk of earnings from its oil production into prosecuting its war against northern and southern opposition groups while the economy festers and hundreds of thousands starve. Zimbabwe, because the government has not invested in its land resettlement programme, and the political violence has frightened off investment.

4 A well-designed privatisation of state assets, which emphasises skills development and linkages with local resources, should improve growth prospects. Privatisation will develop quickly in Africa because most governments do not have the resources to finance the budgets of state companies and because of policy pressure from the IMF and the World Bank.

5 Africa-based NGOs have been a positive force in developing civil society, demanding higher standards of corporate responsibility and providing services in areas where governments fail. But there are legitimate concerns about the representivity and mandate of NGOs: they should not try to take over from the state.

Gregory Kronsten, economics research, WestLB

1 Botswana, for sound economic management, influence in the world diamond market and diversification of the economy. Mozambique, for liberal economic policies, openness to investment and favoured status in the donor community. Tunisia, for its ability to attract FDI, an educated workforce and Association Agreement with the EU. Among microstates, Equatorial Guinea.

2 Real GDP growth above 5% annually, an investment ratio of more than 25% and reasonable governance will usually create the trickle-down effect. Foreign exchange earning businesses, such as tourism and mines, have a good record for job creation. Alternatively, at the grassroots level, savings groups and co-operatives can boost income levels in a stagnant economy.

3 Two countries, Cote d'Ivoire and Zimbabwe, where a domestic political agenda prevails over economic policy, scares off investors and inhibits domestic production. Angola, where the agenda is complicated by external factors but where the well-established "Dutch disease" leaves little hope for economic reconstruction. Among microstates, Djibouti.

4 Yes, if the assets attract global interest and are tendered transparently. In South Africa's case, privatisation this fiscal year will attract FDI and support the currency. If investor interest is modest and the divestiture process opaque, as with the mooted sale of Kenya's telecoms operator, the growth impetus can be marginal.

5 Disaster relief has to be a positive. Perhaps the best use of other international NGOs is as the channel for multilateral and bilateral resources to reach targeted communities in society. Domestic NGOs are better placed to withstand the official accusation of interference, and can act as effective lobbying groups to keep governments in check.

Omar Kabbaj, president, African Development Bank

1 Six countries, including Botswana, Mozambique and Uganda, have achieved growth rates double the continental average of 3.2% between 1996 and 2000. These and other countries can be expected to continue to realise such rates as they maintain a stable macroeconomic environment, improve their governance structures and continue to receive donor support.

2 Ordinary citizens are beginning to benefit from economic growth as African countries take steps to improve the access of the poor to productive assets and invest in health and education services. Such policies would need to be sustained and complemented by increased assistance from donor countries and further opening up of their markets to African exports.

3 Economic growth in conflict-affected countries is two-and-a-half times below that of the continental average. As steps are taken to resolve these conflicts, the prospects for growth could improve. I wish to stress, however, that as long as conflicts and poor systems of governance continue, it would be difficult to achieve high growth rates.

4 Privatisation enhances the magnitude and productivity of investment, reduces public deficits, and helps expand local capital markets, improving growth prospects considerably. This is recognised in many African countries, where improved governance and better frameworks will help sustain a quicker pace in the future.

5 NGOs and broadly civil society play a vital role in any country's development. Based on a mutually shared vision of poverty reduction and sustainable economic development in Africa, the synergy between the efforts of the bank and NGOs is being realised through ongoing collaboration at different levels.

Banking

Ayo Salami, bank analyst, Nomura

1 To improve depth and quality of management talent. To reduce the overhead cost base through the use of technology. To diversify income sources to reduce reliance on net interest spreads and retail lending-related fees as the principal contributors to profits. To enhance quality of customer service. And to implement a responsible credit culture and practice that can withstand political interference and dominant executives.

2 The greatest challenges are the inability to deploy deposits due to the scarcity of creditworthy borrowers; coping with arbitrary changes in government regulations; sourcing foreign exchange and accessing lines of credit from counterparties in the developed economies; the lack of adequately skilled human resources; and extending banking services profitably to the mass market.

3 The most important initiative governments can take to improve both the banking environment and the general macroeconomy would be to reduce the large fiscal deficits that tend to be financed through inflationary monetary growth. Additionally, governments can deregulate the banking sector, privatise domestic banks and create a transparent independent supervision and regulatory regime.

4 No. The proposals are too complicated even for institutions in the developed economies and would be very difficult for regulators to supervise effectively. The corporate governance structures in Africa are not strong enough to allow the successful implementation of Basel II.

5 Access to credit is important in any economy, hence microlending would undoubtedly stimulate development, particularly in the rural regions of Africa. Yet operational efficiency requires that banks adopt standardised procedures for most transactions, irrespective of size. The high cost of operating a microlending account could result in exorbitant charges if banks are to make a profit.

William Pamford Bray, general manager, Ghana Commercial Bank

1 The winning strategy will be to develop the bank as a financial services supermarket. This will involve developing a more effective distribution channel strategy to improve customer service and internal efficiencies by realigning IT, processes and human resources. A marketing focus will be needed to develop products and improve customer services.

2 Challenges include how the banks can bring the unbanked and underbanked into the banking sector, reduce cash holdings outside the banking sector and strengthen their balance sheets. These are expected to be accomplished in environments that have high levels of inflation, high risk-fee rates and low levels of income, and in which the banks operate in high regulatory environments coupled with stagnant economies.

3 Governments can improve the macro environment by lowering inflation, reducing internal debt by cutting down on deficit financing and also reducing political interference. They can also develop new banking laws and establish independent central banks.

4 The proposals are not appropriate because now the banks cannot borrow as they used to. The risk weights that are attached result in non-OECD countries' banks being given short-term credit and paying high interest rates on credit that is offered to them.

5 Microlending is very important but it is not attractive as a banking product. This is because the high risk inherent in this type of lending is not commensurate with the interest to cover the risks as much as they want to, so they often shy away from this product.

Jacko Maree, chief executive, Stanbic

1 The ability to identify profitable customer segments and products across national and regional boundaries; to be able to attract and retain the appropriate talent; and to make best use of technology.

2 Income disparities, Afro-pessimism and political and economic instability, and lack of development.

3 They could initiate vigorous efforts to end regional conflicts, and form regional blocs to promote stability, good governance and economic co-operation.

4 The proposals tend to favour very large banks with investment-grade asset portfolios. Smaller banks in higher risk countries will find it more difficult to attract funding in the interbank market.

5 Microlending is an essential product in African countries. Microlenders tend to be specialist institutions that migrate to the formal banking sector only as the regulatory environment and competition mature.

Nallie Bosman, chief executive officer, Absa Group, South Africa

Note: South Africa's banking sector is more sophisticated and technologically advanced than the industry in most other parts of Africa. The conditions under which banks operate are also quite different. As such, the Absa Group applies unique strategies to its banking investments elsewhere in Africa.

1 The quality of management is key and when it comes to ventures outside of South Africa, operational control is vital. Your products and service delivery channels must also be appropriate for the market. In South Africa, for instance, electronic banking channels are widely used, while in cash-based economies elsewhere, physical infrastructure is a priority.

2 On a broad scale, the greatest challenge is to build wealth. In terms of individual problems, Africa is battling with skills crises, and it is difficult to find appropriate middle management. Many African countries are also still a step behind technologically and the poor infrastructure can limit efforts to upgrade and expand a bank's services and networks.

3 The number one issue: independent supervision of the banking sector. Governments must separate monetary policy from politics. Furthermore, governments need to get out of commercial banking themselves. There is a trend towards the privatisation of banking assets in Africa and that is often where the opportunities for private investment lie.

4 The proposal that banks be allowed to regulate the capital they hold against their advances will suit South African banks because it will allow them to maximise returns on their capital. But in the rest of Africa, the cost of internal monitoring might be prohibitively expensive and difficult to manage.

5 Microlending is absolutely critical if you are going to alleviate poverty and build wealth. From a banking point of view though, the risk/reward is not there unless you use punitive interest rates or you can get multilateral or government support to underwrite the risk. Yet there are creative solutions available.

Investment banking

Yofi Grant, executive director, Databank Brokerage Limited

1 Not entirely. There are four reasons for the limitations: the comparatively small, unstable economies in varying degrees of disrepair, resulting in a high cost of capital, rising inflation and depreciating currencies; weak and ineffective private sectors due to poor corporate governance, statism and government policies at variance with private sector development; structural and mechanical issues in capital markets. A lack of depth and sophistication required for effective intermediation; a business culture of indigenous African businesses - a small, informal, lack of sophistication in technical financial know-how. The way forward is to enable and accelerate private sector development; form and develop regional economic blocs, such as Comesa (Southern and Eastern Africa) and Ecowas (West Africa) to stimulate activity in a bigger context; and increase education. Macroeconomic stability, often precipitated by good governance, is key.

2 Not entirely. Domestic credit provided by the banking sector is low. As a percentage of GDP, it is typically less than 30%. The high credit risk of small and medium-sized enterprises virtually precludes them from formal banking services. Banks are also under-capitalised and incapable of providing long-term capital. Financing is limited to high-cost, short-term credit. Governments also compete aggressively for bank credit. The way forward is stronger intermediation through specialist microfinance institutions and stronger domestic participation in capital markets to meet long-term financing requirements.

3 Africa needs long-term sustainable capital for growth. International capital markets will be important and necessary to fill this gap. This will be crucial in unravelling the dependence and reliance on aid and grants, and will also reposition the continent's drive towards being a credible business destination.

4 Countries that show promise in terms of economic growth and stability are likely candidates. Potential candidates are South Africa, Botswana, Mauritius, Namibia and Nigeria. Opportunities will be in infrastructure, such as pipelines, roads, telecommunications, oil and gas and privatisations. Some of the large European and US multinationals and franchises in Africa could also issue Eurobonds. Rating will be important in facilitating access to the international markets.

5 Certainly. Investors need to be educated on the proclivities of doing business in Africa due to differences in business culture, economics and politics. Some of the myths that Africa is all war, civil strife and disaster must be dispelled. There are a lot of good investment opportunities of which the western world is unaware. Many African capital markets are cheap and have the potential of rewarding returns but many foreign portfolio investors will not even look because of prejudices that may not be applicable in all situations.

Dele Babade, vice president corporate finance, Citibank

1 Improvements will come from the benefits of regional bourses; increased levels of national savings; the return of flight capital (about 37% of African private wealth is held outside Africa); stability in socio-political systems and sustained macroeconomic stability; and privatisation, which will contribute to the deepening of financial institutions and securities markets by increasing the stock of securities available for investors to buy.

2 African banks are increasingly answering the needs of African companies but the industry faces some limitations. Financial market liberalisation often outpaced the necessary reform or closure of weak financial institutions. Central banks often lacked the powers and resources to regulate a growing number of financial institutions in increasingly volatile markets. Banks are hampered by the absence of credit ratings and a shallow medium-term deposit base.

3 The support required from the international capital markets is financing to accompany and support the foreign direct investment (FDI) coming into Africa. Significant value will come from the FDI investor leveraging its relationships with international financial institutions to improve their participation in African financings. Foreign investment is essential in linking Africa to the global economy.

4 Eurobonds are most likely to be issued by African companies and countries that have already accessed the international bank market and have a track record. Further, the pre-requisite of credit ratings means that sovereign Eurobonds are only likely to be issued by the small group of seven African countries that have obtained international ratings, that is: Egypt, Morocco, Tunisia, Mauritius, South Africa and, more recently, Senegal and Botswana. Of the smaller countries, the issue is whether their financing needs would justify the costs and work required for issuance of a Eurobond. The prospects for "structured" corporate or project related Eurobonds are higher, particularly in the mining, and oil and gas sectors which have experienced the international bank markets and could be seeking to diversify and lengthen funding sources.

5 Absolutely. "Africa's tragedy", "Africa's burden" or "Africa, the lost continent" are phrases the media repeatedly uses to depict Africa. Yet only six out of 54 countries of the continent are at war. Many African economies have been reformed, with economic activities being conducted freely and transparently. The African economy in the past five years averaged a growth rate of about 4% (1995-2000), in some years exceeding global economic growth. More than 50% of African economies are experiencing single-digit inflation levels. Fiscal deficits have averaged less than 3% during 1995-2000.

Konrad Reuss, managing director, sovereign ratings, Standard & Poor's

1 South Africa's capital markets are well ahead of all other regional financial centres because its market infrastructure, banking system and technical know-how is far advanced compared with the rest. However, even in South Africa a corporate bond market is emerging only slowly. Economic reforms that strengthen the business environment of African corporates, and financial market reforms that enhance regulation, supervision and disclosure are critical.

2 In the absence of deep and liquid capital markets, African companies have long relied heavily on bank lending to satisfy their funding needs. Compared with other emerging markets, equity capital and debt securities have not played an important role. On the corporate side, strengthening corporate balance sheets and improving disclosure would be a plus; on the banking side, improved credit controls and lending policies would be a plus.

3 Bilateral loans, IFI funding and foreign aid will continue to play a key role. International private capital will only be available to the most attractive markets and companies which have demonstrated a positive track record. At present, only investment-grade rated South Africa and Tunisia are regular borrowers in international capital markets.

4 Botswana received a single-A-minus long-term foreign currency rating in March this year, which puts it in a good position to tap international markets. At present, however, no immediate funding needs exist. There are rumours that Egypt, rated -BBB, and BB-rated Morocco will issue their first Eurobonds soon. For many African governments, however, tapping international capital markets remains a distant prospect.

5 Investor sentiment regarding the most attractive African markets still seems to be affected quickly by events elsewhere on the African continent. Investor education may help to curtail such contagion. Ultimately, however, African countries need to establish a better track record of good governance, transparency and economic reforms.

Jose de Nobrega, global head of project finance, Investec Bank

1 Capital markets barely exist in Africa, largely due to the absence of the regulatory and economic stability and local savings industries that such markets require. With a few exceptions, such as South Africa, local capital markets are not addressing the financial needs of African companies. Long-term developmental efforts should be directed towards the establishment and support of financial intermediaries. Where the markets already have critical mass, the focus should be on credit enhancement vehicles that improve access to these markets.

2 In some countries, local banks provide trade finance, transactional banking and short-term corporate facilities. Domestic banks in Africa provide very little long-term lending, corporate or project finance. The appropriate intervention is the strengthening of the financial and technical capacity of local private and public institutions.

3 While there are flagship projects that attract the attention of international capital markets, these are generally resource processing and export projects that generate hard-currency revenues. Even major infrastructure projects with solid economic fundamentals struggle to attract international finance due to currency risks. International capital markets should be at the forefront of bringing capital to bear on such projects, not least by addressing such risks.

4 Several African sovereigns have raised finance in the Euro market (bond and syndicated loan) - mainly South Africa, Nigeria and other countries with strong commodity export industries. The most likely candidate for corporate debt issuance would be South Africa due to well-developed corporates. Key steps are the requisite economic stability, regulatory certainty and sound fiscal and monetary policies.

5 Investors and countries need to understand their respective expectations and capabilities. Investors are sometimes paralysed by the apparently unstructured nature of project processes, and countries frequently fail to promote themselves. African countries must show initiative in demonstrating the viability of investment in their industries. There is scope for technical assistance in investment promotion, procurement and implementation.

Technology

Arnold Ekpe, chief executive, EcoBank

1 Perhaps not in the next couple of years but great progress is being made across the African continent, particularly in the area of telecommunications. As in the more developed countries, telecoms will serve as the backbone and the enabler to technology advancement in Africa.

2 As an open system, the internet has the potential to play a profound role in accelerating social, political and economic change in Africa. To play this role, internet use across the continent has to increase significantly. Use is limited to companies and the middle class, and will remain so until the infrastructure and access are significantly improved and access costs reduced.

3 Banks in Africa need to understand how to harness and exploit new technology to redefine their business models, reduce costs, grow revenues, manage risks and improve the speed and quality of service delivery and product offerings.

4 Mobile telephony is growing rapidly in Africa because it is cheaper and can be rolled out faster than terrestrial lines. It also has a more flexible billing system (for example, pre-paid cards), which is more appropriate to the low-income demographics of Africa. Wireless technology is clearly the future of African telecommunications.

5 Many stockmarkets in Africa are small and illiquid. New technology can help improve market reach and turnover, lower transaction costs and speed up clearing and settlements.

Colin Wheater, general manager, marketing and communications for technology and operations division, Nedcor Bank

1 In many countries there are no legacy systems and infrastructure. This allows new technology to be implemented without the expense of legacy write-offs and conversions. This is equally applicable in African governments. Technology leaps will happen in pockets - specifically, in those countries where technology use is a focus and government policy encourages such use.

2 The internet will reduce the cost and improve the reach of communications in Africa. Benefits will come from areas such as distance learning, improved access to medical research, access to trends and IT and faster business communication. Barriers to entry for small businesses will be lowered as access to shared applications and cheaper communications become a reality. Having cheap, secure communication will open many opportunities, including providing access to new markets.

3 The principle benefit will lie in the sharing of infrastructure. Hard currency-based technology has been unaffordable to many African businesses but, with improved communication infrastructures, these can be shared or outsourced economically for the benefit of both businesses and consumers. With the implementation of GSM networks and smart cards, banking in rural communities could become viable. Cheque clearing will be improved dramatically once the electronic transfer of funds replaces cheques as the primary mechanism for business banking.

4 Take-up rates of GSM technology in Africa are high. The networks' ability to sell air-time on a pre-paid basis removes the requirement of a billing address and to manage credit, allowing for faster take-up. Due to the lack of an extensive legacy infrastructure, the low density of population in rural areas and other geographical constraints, the GSM infrastructures will provide a more cost-effective solution than land lines. Next-generation mobile technology will have sufficient bandwidth to satisfy most data and voice needs in Africa.

5 Lack of liquidity and the low volumes of small African exchanges are major issues for investors, putting pressure on country-based stock exchanges. Technology advances will allow the exchanges to merge into regional infrastructures, which would be economically viable. Technology will also enable data and systems sharing with the world's leading stock exchanges, increasing profitability and liquidity.

Dominic Bruynseels, managing director, Barclays Africa

1 There will be a sustained growth in certain technologies in Africa in the next few years. This is due largely to the lack of investment in infrastructure in the past. Businesses and individuals are embracing technology as a way to bypass this issue. This is shown by the recent growth and investment in ISP provision, internet cafes, PC ownership and mobile communications.

2 The internet will bring valuable education and knowledge into Africa. It provides a low cost entry mechanism, which may make doing business in Africa more viable than before. Barclays' view is that the internet provides opportunities to overcome infrastructure issues and reduce costs while improving the customer experience. We are exploring opportunities and investing in internet initiatives; for example, we recently opened three internet cafes in Nairobi in a joint venture with Africa Online.

3 New technologies will help Barclays in a number of ways. First, technology can improve speed and quality of service, accuracy and enable customers to manage their own finances better, removing the constraints of location and branch opening hours. Second, banks will be able to reduce costs through a number of initiatives, such as centralisation of support operations, better cash management and better risk profiling.

4 It presents some opportunities but is not the complete answer. The question is more whether the uptake of mobile phones and the revenue generated will impact positively or negatively on the shortfall in investment. We do not believe it is possible to bypass land-based communications, which is a problem because of the lack of investment in the land-based infrastructure. The popular uptake in the internet and the quality access that will be demanded, plus the fact that a lot of the mobile traffic eventually drops to land-based lines, will soon will force a resolution.

5 The situation differs in the various countries and, therefore, it would be misleading to give a response which is appropriate for the whole continent.

The future of Africa

Emmanuel Tumusiime-Mutebile, governor, Bank of Uganda

1 The increasing attention to the promotion of good governance and strengthening of institutions is a positive development. This is manifesting itself in greater attention to legal reforms, transparency and strengthening of parliamentary processes. Public sector institutional reform and the growing anti-corruption crusade are other welcome developments. The redirection of macroeconomic policy towards market-driven measures and the increasing emphasis on the participatory approach to rural poverty and natural resource management are all part of this positive agenda.

2 The issue is not whether Africa should follow or not follow the standard economic reform model. The problem has been that Africa has followed less of the good macroeconomic policies that spurred growth in a number of regions in the world. Africa needs to integrate policy packages, minimise perverse incentives, encourage initiative and facilitate participation. Open markets, privatisation and capital markets are some of the sure ways of eliminating perverse incentives and encouraging participation.

3 There appears to be a broad consensus that Africa stands to benefit from pluralistic political systems. The difference is in the approach: should the transition be a "big bang" or "gradualist"? We in Uganda have chosen a more gradualist approach, our past being the relevant information set. Political pluralism increases people's ability to participate in making decisions that affect them. This is a key ingredient in fighting poverty and improving living standards.

4 The media's treatment of African issues has had a negative skew, ignoring a number of positive developments. The challenge, however, lies in African people reversing this negative image. They must continue to reduce conflict, fight extreme poverty, increase access to education, make progress towards gender equality, reduce mortality rates, increase access to primary health care and ensure losses of environmental resources are reversed.

5 HIV/AIDS poses a threat to Africa's development because it affects the savings rates through higher dependency ratios. It kills many adults in the prime of their working lives and impoverishes families. Urgent action by African governments and their development partners will be critical to prevent further infections and to help those affected with affordable treatment. Drug companies should make AIDS treatment affordable because the costs of inaction are huge.

6 Improved governance in both public and private institutions can best tackle the problem of corruption in Africa. This will require provision of proper incentives to employees, adequate transparency and clear accountability for individual actions. It is important for Africa to design its policies so that there will be checks and balances to government and individual actions.

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