Managing Director of the International Monetary Fund (IMF), Christine Lagarde has said African governments can create a foundation for innovation by streamlining regulations "so that everyone plays by the same rules and entrepreneurs are rewarded for their ingenuity."
She was speaking at a special event hosted by the Economic Commission for Africa on the theme: Economic Challenges and Opportunities facing the African Continent; the role of technology in supporting the region achieve more inclusive growth.
Addressing a packed audience comprising representatives from the private sector, academia, university students, UN staff and the diplomatic corps, Ms Lagarde centred her remarks onthe topic: The Foundations of Technological Transformation in Africa, in which she offered numerous examples of innovation that is transforming lives across the continent, such as drone technology, financial integration, and mobile banking.
“When I travel in Africa, I never worry that the dreams of the next generation are not big enough. The only question is whether we can create an environment where those dreams will have the chance to be realized,” said Ms. Lagarde.
Noting that youth in Africa comprise 75 percent of the working age population, she said by 2030, over half of new workers entering the global labor force will come from Africa.
“With the right strategy, this incredible surge could translate into a virtuous cycle of economic growth and development,” she said.
She, however, cautioned, that hundreds of millions of people will need better health care, more educational opportunities, and jobs - many in career paths that have not yet been invented.
Expressing concerns over uneven growth and a slowdown in some countries due to lower commodity prices, Ms. Lagarde lamented that on a GDP per capita basis, 15 countries on the continent are expected to see a decline this year.
But, noted the IMF Chief, achieving growth that is stronger, lasting and more inclusive – one that leads to benefits and higher living standards - would require diversification, the right balance between investment and debt sustainability and harnessing technology to accelerate economic and social development.
“Technology does not hold all the answers. In fact, technology often raises new questions, including about the impact of automation. But there is no doubt technology is an important part of the story,” she said.
Ms. Lagarde also stressed that governments can do more than just encourage innovation, they can also help lead the way themselves. Doing both - creating the right environment for technological innovation and leveraging digital tools leads to more transparency, stronger accountability and “delivery of a better life for every citizen,” she added.
As an example, she indicated that updating payment systems from cash to digital could lead to savings ofaround one percent of GDP. “In some places in Africa the potential is even higher,” said Ms. Lagarde.
For her part, the Executive Secretary of the ECA, Ms. Vera Songwe noted that the fall in GDP per capita in many countries is alarming for inclusive growth and stressed that the biggest challenge facing Africa is how to increase the standard of living of its populations.
“With the huge demographic bulge Africa is facing can Africa dream of moving more countries into middle-income status or do we have to start working on a world where with the current population dynamics, Africa is caught up in a demographic trap where growth does not lead to increases in GDP per capita?" questioned Ms. Songwe.
To accelerate development, she called for more ambitious growth numbers, stating that double-digit growth rates are now needed to respond to these challenges.
“This is the only way to invest while maintaining appropriate macro balances such as the debt to GDP, said Ms. Songwe, adding that as interest rates rise in the west and threaten to reduce FDI flows to Africa we have to find ways of financing our development.”
She proposed the need to collect more taxes, broadening the base, making all savings more productive and investing resources efficiently and effectively.
During her visit to Ethiopia, Ms. Lagardemet with the ECA’s senior management to discuss mutual areas of collaboration. She also toured the Eastern industrial park, which she lauded as a “powerful reminder of the way technological innovation requires a strong foundation to flourish, not just in Ethiopia and the Horn of Africa, but across the entire continent.”
Ms. Lagarde's official visit to the ECA is the first of its kind by a leader of the IMF. Ms. Songwe described it as historical in many ways as it took place at a time the ECA and the IMF have the first female heads.