njuguna ndung ’ u : implications of capital flight for macroeconomic management and growth in sub - saharan africa keynote address by prof njuguna ndung ’ u, governor of the central bank of kenya, at the senior policy seminar on implications of capital flight and macroeconomic management and growth in sub - saharan africa, south african reserve bank, pretoria, 30 october 2007. * * * honorable governors and colleagues, honorable ministers, honorable ambassadors and excellencies, representatives of external partners and institutions, ladies and gentlemen, i would first like to thank the south african reserve bank, and particularly, my colleague honorable tito mboweni, for hosting this important and timely event on the “ implications of capital flight for macroeconomic management and growth in sub - saharan africa ”. i would also like to thank all my colleagues, and senior officials who have responded positively and are here to participate in the deliberations and contribute to the success of this important event, which has tremendous potential for investment, economic growth and more generally for the development of our continent. africa is often labeled as the capital - scarce region of the world ; one that has been marginalized in the landscape of global capital flows. the latest statistics published by the world bank flagship report “ global development finance ” suggest that the region received less than 4 percent of net foreign direct investment ( fdi ) flows to developing countries in 2006. interestingly the totality of these fdi inflows went to 5 countries ( angola, equatorial guinea, nigeria, south africa, and sudan ), all of which are oil and mineral - rich. so these fdis went to extraction sectors. the region is also lagging on the remittances, receiving just 4 percent of total remittances to developing countries – by far the smallest share. the average in other regions is in excess of 25 percent. as a result of chronic shortage of capital, investment prospects have been delayed, leaving the majority of countries in the region undiversified, commodity - dependent, and highly vulnerable to terms of trade and exogenous shocks. over the years, most of these countries have been confronted with chronic balance of payments crises, and relied on external debt to bridge their ever growing financing gap. however, the accumulation of external liabilities over time took africa ’ s external debt to unsustainable levels, when it reached the critical threshold of us $ 230 billion, about 45 % of gdp in the 1990s. and as external debt

in the midst of all this, countries in asia and latin america have succeeded in escaping the infinite loop. remember the east asian tigers, and emerging market economies in latin america, chile and argentina. i believe there is a way out of this loop for african countries and hope that the deliberations coming out of this seminar will identify concrete policy options and proposals to support ongoing efforts to stem capital flight and enhance repatriation in support of investment and economic growth across sub - saharan africa ; so that africa in 3007 is not the mirror image of africa in 2007 ; the one which has rightly or wrongly been associated with corruption, capital flight, hipc and poverty. in wishing successful deliberations to all the delegates, i hereby declare this seminar open. thank you all.