AFRICAN countries should strive to achieve favourable sovereign credit ratings for them to access affordable capital and avoid the high cost of borrowing, President Hakainde Hichilema has advised.
President Hichilema said favourable sovereign credit ratings were essential to access affordable capital and only 32 countries had been assigned sovereign credit ratings from international rating agencies.
He said this yesterday when he opened the Fifth Ordinary Session of the Specialised Technical Committee of the African Union on Finance, Monetary Affairs, Economic Planning and Integration.
He said in a speech read on his behalf by Finance Minister Situmbeko Musokotwane that generally, as African countries, ratings had been poor leading to high cost of borrowing as they were regarded as risky borrowers.
“If the African continent is to attract low cost capital, there is need to be transformative in the way we handle economic affairs by putting in place a predictable, competitive and stable economic policy environment. “This will significantly increase the level of investments, harness opportunities for value addition, job and wealth creation and policy predictability will guarantee and safeguard private sector investments, whether local or foreign,” he said.
President Hichilema said efforts to attract private capital to exploit and add value to resources continued to be hampered by unpredictable policies, legal, political and unfriendly business environments.
For the private sector to thrive, Governments needed to meet the critical infrastructural deficits estimated to cost between US$130 billion and $170 billion per year which had resulted in most countries borrowing to finance infrastructure projects in transportation, communication, energy, health, and education sectors.
He said Africa’s Gross Domestic Product (GDP) estimated at $2.7 trillion was almost the same size as the economy of France despite having abundant natural resource endowments.
“Africa is home to an estimated 30 per cent of the world’s mineral reserves and a combined 20 per cent of the world’s oil and natural gas reserves. Africa also boasts of a large population of over 1.3 billion, majority of which are in the productive age group,” he said.
He said Africa’s resources had been exported with very little value addition, thereby limiting its contribution to economies and wealth creation while support to local private sector and other foreign companies in value addition was essential in changing the economic landscape.
President Hichilema said despite the resource endowments, incomes for African countries had remained low in addition to inequality and poverty levels being among the highest in the world.
He said this was partly because the continent was characterised by huge infrastructure deficits, low levels of human development and low levels of private investment.
He said the meeting was an opportunity for Finance ministers and Central Bank governors to put across ideas and policies that would assist Africa take full responsibility for financing her development by looking at alternatives.
He added that the meeting’s theme “Improving Africa’s access to Capital: Debt Management and the rising influence of credit rating agencies” was timely and relevant as it resonated with the challenges Africa was facing that needed to be overcome to attain aspirations of the African Union Agenda 2063.
