Keynote address by Daniel Mminele,
Deputy Governor of the South African Reserve Bank,
at the T-20 Africa Conference
Crowne Plaza Hotel, Johannesburg
1 February 2017
Africa and the G-20: some implications for the work of the T-20
1. Introduction
Good evening, distinguished guests, ladies and gentlemen.
I would like to thank the South African Institute of International Affairs (SAIIA) and
the Germany co-chairs of the T-201, namely the German Development Institute
and the Kiel Institute for the World Economy (IFW Kiel), for the kind invitation to
address you this evening.
The Think Tank 20 was initiated during the Mexican presidency of the G-202 in
2012 as a collaborative network of premier think tanks from the G-20 economies
and other high-level experts. The aim of the T-20 is to provide analytical depth to
G-20 discussions so as to assist in developing concrete and sustainable
research based policy measures.
Think tanks and academics from the G-20 countries have indeed made important
contributions in the past to the G-20 dialogue via the T-20 forum. Events such as
this conference serve to reinforce this view and showcase the work being
undertaken by the T-20. Dennis Snower, President of the IFW Kiel, summarised
this year aptly when he said: "In
the work of the T-20 for 2017, the T-20 aims to
support the German G-20 presidency in rising to the diverse but interconnected
global challenges that the G-20 faces."
Judging by the impressive conference programme, you must have had a fruitful
day. It is especially encouraging to see the involvement of experts from the African
continent as well as from other emerging economies in this conference.
In my remarks this evening, I would like to first make a few general observations
about Africa and the G-20 before making some specific comments on two of the
issues that feature on the conference programme and which are topical in central
banking circles at the moment.
2. Africa and the G-20
As a group, the G-20 consists of only 19 countries, which means that it is made up of
world's
only 10 per cent of nations. However, these 19 countries account for about 80
per cent of global trade and approximately 90 per cent of global GDP3. The G-20 is
therefore representative, more so since it includes both major advanced economies
and systemically important emerging market economies.
has an impact on policies relevant to Africa's economic development,
The G-20 with
the agenda focusing on issues ranging from financial inclusion through infrastructure
investment to illicit financial flows. Africa too is important to the G-20, as the
of the world's GDP, makes up 17 per
continent, while accounting for only 5 per cent
cent of the world's
population.
As the only African member country of the G-20, South Africa seeks to advance both
regional and continental interests when participating in G-20 deliberations, albeit
without a formal mandate to do so. South Africa consults with a number of
stakeholders and, regionally, the Committee of Ten African Countries4 (C-10) was
formed in 2009 in order to help solicit views from countries across the continent on
how the G-20 could address their concerns. The C-10 seeks to provide support and
input to enable South Africa, or any other African country involved in deliberations
related to international finance, to act more effectively in the interest of the continent
as a whole. It has to be admitted, however, that the consultation process could be
more effective, and that more needs to be done to strengthen these initiatives and to
ensure that they work as intended. These efforts are also complemented by the chair
of the African Union (AU) and a representative of the New Partnership for Africa's
Development (NEPAD) being invited to attend G-20 meetings as observers.
Unfortunately, due to the fact that the AU and NEPAD representatives are often
rotated, there is insufficient continuity which, at times, adversely affects effectiveness
and impact. Furthermore, the AU has only an observer status, in contrast to the
European Commission, which is a fully fledged G-20 member.
The role of both the AU and NEPAD could be strengthened to allow them to play a
more meaningful part in coordinating the preparation of African positions. As SAIIA
has noted in one of its policy briefs, what is required is a concrete, sustainable
mechanism through which Africa's participation can be coordinated.5
It has been
suggested that this could include a designated secretariat or a coordinating unit
within the AU Commission that would conduct outreach, consult with a range of
stakeholders, and put forward African positions at the G-20.6 SAIIA has provided
some recommendations on how the capacity constraints on the continent could be
addressed, which would entail, among others, the following:
 collecting information about relevant issues on the G-20 agenda and
preparing clear African positions in line with the continent's overall
development objectives, possibly also coordinating African delegations
participating in G-20 events, as was done at the time of the Cannes Summit
in 2011;

supporting African representatives during the negotiating processes of the G-
20 in order to promote their greater involvement in agenda-setting and
therefore greater influence on the final outcomes in areas of priority interest;
and

continuously monitoring the implementation of key G-20 commitments
directly relevant to Africa in order to ensure that their impact is assessed and
to maintain pressure to achieve tangible results.
However, while these recommendations are laudable, they require dedicated
resources, which may be difficult to mobilise.
Africa under Germany's
I would now like to turn to the opportunities for presidency of
Germany's focus on Africa,
the G-20. Let me first note that we welcome which builds
on efforts by the Chinese presidency last year. We believe that this is a step in the
right direction in both highlighting and confronting the challenges that the continent
faces. As you know, the German Federal Ministry for Economic Cooperation and
Development released a document titled The Marshall plan for Africa two weeks ago,
which proposes a partnership between Europe and Africa to find solutions to the
challenges the continent confronts. The Marshall plan for Africa acknowledges that 'in
the long term and as neighbours, we can either prosper together or suffer together'. I
The Marshall plan for Africa
will not say too much about at this stage given that it still
requires consultation. Indeed, it has been met with great optimism in some quarters
but also with scepticism in others.
Let me rather take this opportunity to focus on one of the components of The
Marshall plan for Africa, namely the G-20 Compact with Africa, an initiative in which
South Africa, through the G-20, is more closely involved. The idea of a Compact with
Africa should be welcomed based on what it could achieve given its focus on
encouraging private-sector investment, including in infrastructure. By so doing, it is
hoped that employment will increase and that sustainable, inclusive growth and
development on the continent can be fostered. As we know, the investment financing
gap in Africa is huge, and closing this gap is a top priority in order to put the continent
on a path of higher and more sustainable growth and development. Under this
initiative, African countries are being encouraged to discuss and agree on individual
compacts, and to match commitments from G-20 countries with commitments of their
own in respect of concrete actions to enhance investment opportunities, such as
further enhancing governance standards and creating investor-friendly environments.
The G-20 is taking the initiative very seriously and we should expect it to gain
momentum in the coming months and beyond. However, we also have to stress that
the Compact should take cognisance of existing initiatives by Pan-African
organisations such as the AU and NEPAD, as much of the groundwork has already
been laid and there is a need to ensure economies of scale by bringing all these
initiatives together, fill the existing gaps, and drive implementation in such a way that
there is concrete action and tangible results. It is therefore encouraging that both The
Marshall plan for Africa and the Compact acknowledge that the starting point will be
the AU's Agenda 2063
and its key pillars around industrialisation, infrastructure
development, intra-African trade and combatting illicit flows.
Given that the Compact is still in its infancy, that it will take some time for it to
become entrenched and for there to be visible outcomes, it will be important that the
Compact does not end with the German presidency. We hope that the Compact will
be carried forward into Argentina's
presidency in 2018 and beyond, into future G-20
presidencies. We will therefore need to develop mechanisms for hold each other
accountable for the commitments we make.
3. Some observations on the T-20 topics under discussion
Allow me to now make some comments on two issues that are in the domain of
central banking but relate quite closely to some of the topics that you are discussing
at this conference. I would like to focus on the issue of de-risking as it relates to
correspondent banking and, secondly, on some developments in the digital economy.
Much of the work in the G-20 has focussed on improving the resilience of the
financial system. The global financial system is stronger and safer now than before
the Global Financial Crisis, and regulatory reforms to future-proof the financial
system are well under way. However, we have to admit that some of the reforms
have had unintended consequences and have led to a number of global systemically
important financial institutions reassessing the sustainability of their business models
following the Global Financial Crisis; de-risking has consequently taken the form of
reducing or withdrawing entirely from certain activities in some emerging market and
developing economies.
A case in point is the decline in correspondent banking services on the African
continent. Research conducted by the BIS7 Committee on Payments and Market
Infrastructures (CPMI) Working Group on Correspondent Banking in 2016 highlighted
the pronounced declines in correspondent banking relationships in Northern Africa
and partly in Southern Africa.8 The International Monetary Fund has similarly pointed
out a decline in correspondent banking relationships in banks' operations in countries
such as Angola, Guinea and Liberia where some international banks have either
restricted or exited correspondent banking relations.9 Continued efforts by regulators,
national authorities and institutions such as the T-20 are crucial in identifying
solutions and encouraging concrete and swift actions to mitigate financial exclusion in
affected countries while still prioritising efforts to ensure compliance with anti-money
laundering and combating the financing of terrorism regulations.
Markets in all jurisdictions must have access to a well-functioning global financial
system in order to develop and prosper. De-risking and deglobalisation contribute to
global financial market fragmentation and uncertainty, and could fatally compromise
the open and integrated structure we are all striving for. On the other hand, this trend
poses an opportunity for Pan-African banks to fill the gap in services left by European
and US10 banks subject to having appropriate access to reserve currencies.
The second issue I would like to touch on has to do with innovations in the digital
economy. Africa in particular shows enormous potential in this area as the broader
population gains increasingly more access to the Internet. Developments such as
mobile money and e-wallets, P2P lending, alternative credit scoring, cross-border
remittances as well as payment technologies leveraging digital platforms support real
economic activity and contribute towards the common goal of financial inclusion.
Quite rightly, the T-20 Summit in Beijing last year highlighted the importance of
innovation as a key driver of sustained economic growth. The G-20 has emphasised
G-20 high-
the potential role of digital finance in promoting financial inclusion in the
level principles for digital financial inclusion, released in September 2016. There is
widespread recognition that the Fourth Industrial Revolution is evolving at an
exponential pace, touching almost every fabric of society, with potentially significant
implications for almost every sector and industry. This Fourth Industrial Revolution
and developments in digital finance hold huge potential for job creation and the
promotion of small business development in emerging market and developing
Global Information Technology Report
economies. According to the 2016, the future
of countries, businesses and indeed individuals will depend more than ever on digital
technologies. This would apply equally to African countries and businesses, with the
added challenge that many of those who stand to gain the most are not yet
connected to the web. If we consider that Africa is expected to have a population of 2
billion by 2050, with a significant proportion being young people who will need
employment, it is important that we reap the economic and social benefits that the
digital economy can provide.11
Readiness Index, which assesses countries' preparedness to
The latest Networked
reap the benefits of emerging technologies and to capitalise thereon, reports that
seven countries stand out in terms of economic and digital innovation impact:
Finland, Israel, the Netherlands, Singapore, Sweden, Switzerland and the United
South Africa's digital economy has jumped
States. Compared to 2015, ten places to
65th out of 139 countries surveyed. This makes South Africa one of the ten most-
improved countries, alongside Italy and Slovakia. But South Africa is not the only
African country to improve in the last year; Ethiopia and the Ivory Coast also made
significant jumps in the rankings.
Africa offers enormous potential for e-commerce growth given that online shopping is
in its infancy on the continent. It was mentioned at the e-commerce Africa Confex
that, in 2016, e-commerce sales globally would reach almost US$2 trillion, of which
Africa's stake in the pie
would be just 2 per cent. However, despite infrastructure
challenges across the continent, e-commerce in Africa is expected to see 40 per cent
annual growth for the next ten years. Internet penetration jumped from very low levels
in 2009 to 16 per cent of individuals in 2013 and over 20 per cent in 2015. But the
-
proportion of people online is still far behind the global average of 50,1 per cent12
only 17,4 per cent of Africans have access to mobile broadband, while fixed
broadband connections remain very low.13
Nonetheless, the prospects for Africa look promising, with 50 per cent of the
continent expected to have access to the Internet by 2025 compared to the current
28,7 per cent14 while online shopping could account for as much as 10 per cent of
retail sales, or US$75 billion, according to a 2013 McKinsey report.15 With the
magnified impact of mobile phones in emerging economies and broader Internet
penetration, McKinsey project that the Internet could contribute as much as 10 per
cent of GDP to the African economy by 2025, from levels of around 1 per cent
currently. For these projections to be realised, there needs to be increased
investment in infrastructure, such as expanded access to mobile broadband, fibre-
optic cable connections to households, and power-supply expansion. Infrastructure
-
challenges are wider than just 'bricks and mortar' for example, the lack of a formal
delivery address complicates the logistics and is costly for online retailers.
Although digital opportunities are encouraging, especially in the financial sector,
numerous regulatory challenges need to be addressed, relating specifically to the
enabling policy environment for financial
development of an innovative and
technology while at the same time managing the risks to consumers and the financial
systems.
These regulatory challenges would include keeping pace with innovations
while crafting smart and appropriate regulations that meet the overarching objectives
of financial stability, prudential soundness, consumer protection and competition.
Furthermore, we need harmonised rules and consistency among regulators and
central banks, both domestically and internationally, and a level playing field between
existing regulated entities and new financial technology firms competing for the same
business. The emphasis placed by the G-20 and other international standard-setting
bodies on sharing cross-border experiences on the regulation of innovative financial
technologies is very much supported by South Africa.
4. Conclusion
Globalisation, innovation and for that matter increasing vulnerabilities force us to
appreciate our interconnectedness and the need for strengthening cooperative
relations. In this regard, the T-20 can make a meaningful contribution towards
addressing the key challenges on the G-20 agenda, of both the Sherpa and the
Finance tracks. I am convinced that, in the coming years, we will collectively make
further strides towards the accomplishment of the global objective of strong,
sustainable and balanced growth. In doing so, the T-20 can reach out on a
continuous basis to non-G-20 think tanks to ensure a more inclusive approach to the
initiatives we pursue.
Let me conclude by wishing you all the very best in your deliberations on developing
recommendations on how African voices could be better integrated into the G-20
agenda and, in so doing, how they could positively contribute towards the 'Africa
rising' narrative.
Allow me to close with a quote from our other T-20 co-chair, Dirk Messner from the
German Development Institute: "The world urgently needs a
G-20 solving global
problems and investing in a global culture of cooperation. 'Our first'
country
movements are threatening stability, wealth and peace in our interdependent world."
Thank you.