An emergency meeting of the central bank’s monetary policy committee on Wednesday increased policy rate by 300 basis points to 22% -- the third ... time since January -- as the country struggles with rising inflation and the downward spiral of the cedi.
But behind the scenes, he has vigorously applied President Emmanuel Macron’s policies in support of African economies hit hard by the effects of Covid-19.
At the G7 and G20 summits, he advocated that the debt of these countries be suspended in the short term and reduced in the medium term. As this would not be enough, he and Emmanuel Macron persuaded the other G20 members to authorise the IMF to create $650bn in Special Drawing Rights (SDRs) in a few months’ time, much of which will replenish the reserves of African states.
It was also he who pushed to strengthen the autonomy of the CFA franc, and he was pleased that: “everything that brought independence and freedom was achieved” and that “everything that ensured security was preserved.”
In this interview, Bruno Le Maire delves into the details in what role France can play to make sure Africa bounces back from Covid.
The Africa Report: How can France help Africa rebound from the Covid-19 crisis?
Bruno Le Maire: I have great faith in the vitality of African economies and entrepreneurs. Like all continents, Africa has been hit hard.
The impact of this crisis on value chains, such as trade and tourism, has been significant. But let us remain positive: the IMF estimates that in 2021 its average growth rate will be around 3.5% – a good sign. We have a collective responsibility to give Africans the means to accelerate their development.
Their investment needs are estimated at $350bn over three years. President Macron has been personally involved in convincing the G7, G20 and IMF member states to provide unprecedented financial support to the continent.
What are the solutions on the table?
There are three: direct financing, the fight against excessive debt and support for SMEs. First, more direct financial aid can be provided through the IMF; France fought to increase the fund’s special drawing rights (SDRs). We are therefore pleased that the G20 members have agreed to a general allocation of SDRs, amounting to $650bn. With this historic amount, Africa will receive about $34bn in SDRs, including $24bn for Sub-Saharan Africa alone. We need to reallocate these SDRs to the poorest countries, to help them cope with the crisis and invest in health, education and the environment.
Second, to fight against excessive debt we have suspended the short-term debt of thirty African countries until the end of 2021, in order to lighten the burden and give them cash.
This will allow these states to support their health systems and invest to boost their economies. We also need to transition to the implementation of the ‘Common Framework.’ This framework, which aims to structurally address the debt problems of countries with struggling economies, brings together the Paris Club creditors and – for the first time ever – emerging creditors (China, India, Saudi Arabia). We have already received requests from Ethiopia, Chad and Zambia.
Third, support for African SMEs is essential and shows the greatest promise. With the Agence Française de Développement [French development agency], we launched a project in 2019 for 16,000 SMEs, for which we have made available $3bn. Despite the Covid-19 pandemic, in 2020 we made the decision to increase this fund by a further €1bn.
There is often a discussion about what form aid should take: donations or loans? Shouldn’t loans be reserved for those who can pay them back?
This is precisely why we have made it possible for the countries most in need to receive grants. Loans are given to those who are able to pay them back.
Shouldn’t we, therefore, rebalance the actions of the French Development Agency (FDA) which, out of its €15bn budget for programmes per year, only gives a few hundred million?
Let us take a step back.
At the request of the President of the Republic, France has increased its development aid to 0.52% of its gross national income, at a time when we are facing the most serious economic crisis since the one in 1929. This is a significant gesture of solidarity.
It is normal for France to have special bonds with the Francophone African countries
Furthermore, with the FDA we are allocating more and more aid, including grants, to real projects. Here again, the objective is to give priority to anything that contributes to the development of SMEs.
You were Minister of Agriculture. What role does this sector play in France’s aid policy?
Achieving self-sufficiency in agriculture is an integral part of economic development. We must continue to support agricultural development projects throughout Africa. Supporting SMEs in this sector increases local value creation. Being a major cocoa producer is great; processing cocoa and keeping the added value for your people is even better.
This is the direction in which we need to work: the development of value chains allows African states to benefit from a better return on investment. After all, the price of raw materials may fall or their usefulness may drop.
France mainly helps French-speaking countries. Will this bias continue?
No one should be left out. On the other hand, it is normal for France to have special, historical, cultural and friendly ties with Francophone countries.
It is just as normal that it has established close relations with countries that are part of the same monetary zone, which has also been thoroughly modernised thanks to the efforts of Emmanuel Macron.
Which African countries will emerge most successfully from this crisis?
I will refrain from making any predictions. I would say the same thing if it were Europe. It is not the job of a Minister of the Economy to give out brownie points.
My view is clear: the resources and qualities of African economies and entrepreneurs are exceptional. As for the difficulties, they are well identified. The first is the debt overhang, which we are trying to resolve with our partners. The second is the insufficient diversification of economies: this is in the process of being resolved thanks to support for SMEs. The third is good governance.
What is ‘good governance’?
It is a whole. In the economic and financial sphere, it means good tax revenues, which are the result of a positive circle. When the economy is functioning and SMEs are making money, companies must pay taxes so that the state can use this tax revenue to invest in public services and, as a priority, in education and health.
If wealth does not circulate and fund public services, sustainable development is impossible. Taxes must be paid by all those who can afford them. Without it, there is no common good.
Emmanuel Macron has proposed reforms of the CFA Franc. This is a historic development.
In Africa, a certain hostility is being expressed against France, for example with regard to the CFA franc. How do you explain this issue?
The CFA franc is a major issue. The President of the Republic has listened to the criticism and has proposed reforms, which the African states concerned have taken up.
In particular, we decided to put an end to the obligation for the CFA zone states in West Africa to centralise their foreign exchange reserves in the French Treasury.
We also withdrew French representatives from the governance bodies of the zone, while retaining two elements of stability: the fixed parity with the Euro and the guarantee of unlimited convertibility.
Everything that brought independence and freedom has been implemented; everything that provided security has been preserved. This is a historic development.
Corruption, spiralling population growth, a growing public sector… Which of these ills is Africa’s first priority?
For me, Africa is neither uniform nor homogeneous. Each state has its own specificities, culture, strengths and difficulties. Security is an indispensable prerequisite. Without it, there can be no economic development. The Malian authorities, with whom we had many discussions, told us how much the fight against terrorism represented a high cost for their national budget.
The commitment of African states to security is therefore essential. France and other European countries are making a decisive contribution.
Free trade as the only global trade rule is an outdated concept.
On the other hand, too large a public sector does not guarantee efficiency. Hence our commitment to SMEs, entrepreneurs and start-ups. Finally, as I said, long-term development requires a sound, transparent and efficient tax system.
Europe has imposed free trade on Africa. Shouldn’t Africa be able to protect its fragile production before facing competition?
This issue goes beyond Africa. The health crisis confirmed the industrial vulnerability of certain states, particularly in Europe, and we are therefore seeing a movement towards relocation.
However, we must be aware that it is also trade that creates value. States must find a balance between, on the one hand, the protection of their technologies, their know-how or their fledgling companies and, on the other hand, the confrontation with the international market, which also creates value and makes it possible to guarantee the prosperity of the populations.
Free trade as the only trade rule and the only future for the planet is an outdated concept. Protectionism does not offer any more prospects. A balance must be found between these two extremes.
Which African countries are you planning to visit in the near future?
After Côte d’Ivoire [which he visited on 29 and 30 April, after this interview was conducted], I would like to go to Senegal and Egypt.
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