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South Africa, Africa and the G8 - Challenges and Opportunities

Address by Dame Nicola Brewer, British High Commissioner to South Africa to South African Institute of International Affairs (SAIIA) event on “South Africa, Africa and the G8 - Challenges and Opportunities”

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

British High Commissioner to South Africa Dame Nicola Brewer

It’s a subject that’s close to my head and my heart. In my 30 year career in the British public service I’ve been the “G7 desk officer”, that was in the FCO in the late 1980s; I negotiated – in French - on trade issues in the closing stages of the GATT Uruguay Round in the early 1990s; and I learned about the power of partnership and development when I was in DFID 10 years ago, and as the CEO of the EHRC just before I came to South Africa.

Back to the present day.

2013 is turning out to be another year of economic uncertainty. Much of the world is continuing to grapple with domestic challenges. But it’s also a time of opportunities for renewed global growth – through advancing trade, through laying the foundations for sustainable development, and through building on the huge advances in reducing poverty which the world has seen over the last decade. Many of those opportunities lie here in Africa, with South Africa still at the leading edge of this continent and part of the ‘Africa rising’ story.

From where I sit, 2013 is an important year for the UK. We hold the G8 Presidency for the first time since 2005. Our Prime Minister is a co-chair of the UN High Level Panel which last week released its ambitious report and recommendations on what should follow the Millennium Development Goals after 2015. It’s been my privilege to talk to Graca Machel, another member of the panel, about her input.

The UK believes this creates an opportunity to ‘turn the dial’ on how we can all work together in a changing world to secure sustainable global growth and to continue to drive poverty out of people’s lives.

I want to give you this afternoon a preview of the G8 summit later this month, and explain why I think its themes have global relevance. They build on the G8’s evolving agenda with African partners over the last decade, and on how the UK and other members of the G8 can continue to play our part in shaping a fair and open global economy.

The G8 and Africa The G8 has a longstanding partnership with African leaders and with African institutions. Over the last three decades, we have taken steps together to support global prosperity, create jobs, and generate growth.

In the 1990s, we made commitments to the Heavily Indebted Poor Countries (HIPC) initiative;

Then there was the launch of the Global Fund to fight AIDS, Tuberculosis and Malaria after the Genoa meeting in 2001;

Support to NEPAD, notably through the G8’s Africa Action Plan in 2002;

And most memorably for us, the successful Gleneagles summit in 2005, at which the G8 made unprecedented commitments on development. That included a pledge to double volumes of aid, after which flows increased by $11bn annually. And the agreement to cancel 100% of outstanding debts from the poorest countries, worth $35.5bn.

That debt cancellation enabled Tanzania to abolish primary school fees the following year, after which primary enrolment increased from 49% in 1999 to 98% by 2008.

But the world has changed a lot since 2005.

In Europe and among the countries of the G8, following the economic downturn, we’re now seeing slow growth and financial austerity.

At the same time, the exciting narrative of “Africa Rising” has taken hold. This describes a group of countries on this continent – though not all – that felt the impact of the global economic crisis less, that are developing fast, achieving human development gains, and attracting the attention of investors.

Across the continent, since 2005, child mortality has gone down by 18% and malaria mortality by 20%. 21 million more children are enrolled in primary school than in 2005. Average annual GDP growth has been an impressive 5%. And foreign direct investment has grown from $21bn in 2005 to $37bn in 2011.

The development narrative has changed too. A focus on aid or debt is not enough any more. Broader financial flows – export earnings, domestic taxes, remittances, foreign and direct investment – are outpacing aid levels in low and middle income countries.

And in a world where the majority of poor people don’t live in poor countries, we’ve realised increasingly that the positive impacts of non-aid policies, such as trade and tax, are just as important for development, if not more so. That’s another message that comes clearly across in last week’s High Level Panel report on the future of the MDGs.

So a G8 agenda about global growth and about development in 2013 needs to be very different to the one in 2005. I’ll talk a bit about what we think that difference might look like.

But first let me address a medium sized elephant in the room - is the G8 still relevant?

The G8 is an informal club of leaders: it is not an institution, nor an international organisation, and it has no permanent secretariat.

And it’s not the G20 – which, in bringing together the world’s biggest economies, remains the best forum to debate the world’s economic challenges.

But the G8 can be a powerful tool for making things happen. There are no limits to the topics it can discuss.

And perhaps most importantly, in our changing world, a G8 summit is an opportunity for some of the world’s leading economies to demonstrate that we are putting our own house in order.

That means supporting growth and prosperity around the world by helping open and fair societies to thrive. It means G8 nations adopting the rules which characterise a fair and open global economy. That’s an ambitious agenda which benefits everyone – in the developed and developing worlds.

The 2013 G8 agenda Prime Minister David Cameron has set out an agenda for this year’s G8 summit which is about pushing for fairer taxes, greater transparency and freer trade. These issues – the “three Ts” – are critical for global prosperity, for jobs, and for sustainable development. They are closely linked, and mutually reinforcing.

We need to work towards common international approaches on these issues, and the G8 can add momentum. These are issues where the G8 can best support growth and prosperity globally by putting its own house in order.

They are also central to the future of growth and development across Africa. As the recent Africa Progress Panel report made clear, it is unacceptable that foreign direct investment and aid flows into Africa combined ($62.2 billion) are worth less than the losses flowing out of Africa through illicit finance and the manipulation of international trade prices ($63.4 billion). We need to ask how we in the G8 can come together around fairer global rules which don’t disadvantage developing countries.

Let me give a bit more detail on each of the three Ts.

Transparency First, transparency. Shining a light on company ownership, land ownership, and where money flows from and to.

This is critical to developing countries. It’s at the heart of dealing with the causes of poverty: the conditions which enable open economies and open societies to thrive. The rule of law, the absence of conflict and corruption, the presence of property rights and strong institutions: these things are vital for countries to move from poverty to wealth.

Let me take the extractives sector as an example. Many of the world’s poorest countries have some of the greatest supplies of oil, gas and minerals, but are plagued by a lack of transparency, poor rules, corrupt practices or weak capacity.

Strong, transparent and accountable institutions which can regulate extractive industries while promoting open markets and societies are needed to attract responsible investment. That can transform the vast potential of natural resources into growth, jobs and development.

In Nigeria, a few years back a transparency initiative exposed a huge hole in the national finances. An eight hundred million dollar discrepancy between what companies were paying and what the government was receiving for oil. The discovery of this led to new regulation of Nigeria’s oil sector. Last year, Nigeria’s oil exports were worth almost a hundred billion dollars – more than the total net aid to the whole of sub Saharan Africa.

So we propose to get G8 endorsement of a new, tougher global standard around the Extractive Industries Transparency Initiative (EITI). That would help move us towards a future where all extractive companies report what they pay to governments, and governments in turn report those revenues.

That’s why David Cameron announced last month that the UK would commit for the first time to implementing EITI. Putting our own house in order.

Transparency of course is something on which South Africa plays a leading role on this continent and beyond. South Africa was a founding member of the Open Government Partnership, and is pioneering links between that partnership and the Africa Peer Review Mechanism initiative. This year South Africa is Chair of the Kimberley Process, improving the transparency of the diamond trade.

South Africa’s budget is already just about the most transparent in the world. As you in South Africa have recognised, open data puts raw information in the public domain: it drives innovation and economic growth, provides a basis for better policies and decisions, and increases the accountability of governments to citizens.

Tax The second T is tax. We want to use the G8 to drive a more serious debate on tax evasion and aggressive tax avoidance.

This is an issue on which the time has come to ‘wake up and smell the coffee’. There was a lot of media coverage of public condemnation in the UK of the coffee chain Starbucks, who paid only £8.6m in corporation tax on £3 billion in sales in Britain since 1998. But they did nothing illegal – they found a gap, which needs to be closed.

But it’s much wider than that. Some estimates of the amount of private financial wealth sitting in tax havens put the total at over $20 trillion, of which around $9 trillion is from developing countries.

Some industries are now dominated by tax havens: half the world’s shipping is registered in them.

The point is that no one country can, effectively tackle global tax issues. So we need to act together, including through the G8.

That means a new global standard for automatic information exchange between tax authorities. It means tackling tax avoidance by encouraging better global reporting to tax authorities in both the developed and developing world. And it means improving transparency so that tax collectors and law enforcement can find out who really owns and controls each company.

The G8 can play its part in supporting African tax authorities so they can benefit: the UK has worked with the Ethiopian authorities to help with tax collection, and in the last decade the amount of tax has increased by seven times.

South Africa’s own revenue service is one of the best in the world, and I’m delighted that my government is looking to expand our cooperation with SARS. That includes cooperation in international fora such as the G20, and helping to get new south-south cooperation initiatives up and running in other parts of the continent.

Trade The last of the Ts is trade. More than four years after the financial crisis started, trade has still not fully got back to where it was in 2008. Trade is a crucial driver of global growth, job creation and poverty reduction, and it has been at the heart of the G8 agenda since the very first summit.

We will use this month’s summit to underline the G8’s commitment to open markets, highlighting the importance of all countries resisting protectionism and reducing trade barriers. And to ambitious and comprehensive bilateral and regional trade agreements that increase trade.

At a global level, the G8 will send a strong message about its continued commitment to an open, rules-based multilateral trading system and securing a trade facilitation deal at the WTO’s Bali conference in December. Such a deal could add $70bn to the global economy and would provide particular benefit to Sub-Saharan Africa, where development is held back by the high costs of trading across borders.

The G8 will also convene government , business and civil society leaders to identify how they can help accelerate progress towards Africa’s economic integration – for example through unblocking trade corridors and border posts – something President Zuma is championing - tackling Non Tariff Barriers and supporting the development of cross-border value chains.

Looking ahead The 50th anniversary of the founding of the Organisation of African Unity is a good time to reflect on the fantastic progress Africa has made in the last half century - and on the challenges it faces in the next 50.

More than ever, we need to see these as shared challenges across continents. We have to work together as partners to create jobs, growth and stability around the world.

Let me give Kofi Annan the last word. He wrote in a ONE international report earlier this year, “if ambitious agreement can be reached on the trade, tax and transparency agenda, it could be transformative”.

It’s that vision which lies behind the G8 agenda this month. Thank you.

Published 5 June 2013