The sole representative of Africa makes a case for IMF reform
On June 23, 2010, South Africa President Zuma landed in Toronto, Canada to participate in this year’s G20. Established in the wake of the 1997 Asian Financial Crisis, the purpose of the G20 is to give an equal platform for advanced and emerging economies to create a global financial market. The G20 holds annual meetings to discuss measures to promote this goal and achieve a sustainable economic growth and development and is committed to implementing macroeconomic policies. The International organization that follows these policies is the International Monetary Fund (IMF). The IMF was founded to stabilize international exchange rates and essentially fuel development of emerging countries through loans, restructuring or aid. High on President Zuma’s agenda was to encourage the group’s leaders to take initiative to reform the IMF so that it will better serve Africa’s emerging economy.

The President was greeted with enthusiastic applause when he entered the downtown Toronto conference centre for the G20 affiliate event: Partnering with Africa’s Dynamic Markets. In his speech, the President spoke in very optimistic terms about the potential of South Africa and the continent, citing “the average growth last year for the advanced economies was about minus two-and–a-half per cent, while that of Africa was two per cent.” Zuma credited “accountability and political freedom” for the continent’s improvement since the end of the Cold War, notably in peace and security.

Zuma’s message was direct and reiterated during his time at the summit: “Our markets are open for trade and investments.” The President also came with a message that reforms of the IMF will further help Africa emerge as a vital part of the global economic engine. Zuma said it was time for the group’s leaders to take the initiative with regard to the reform of the International Monetary Fund (IMF). “Our reform of the World Bank shows that the slow movement on IMF reform is not necessary.”

IMF reform

Traditionally, developing countries must navigate through global financial institutions which are dominated by developed economies; a pattern to which South Africa is no exception. Emerging policies of the IMF have been aimed at cutting off social spending, which presents obstacles to development objectives in SA, a country where social spending is vital.
In the wake of the Global Economic Crisis, policymakers around the world are looking for ways to improve upon the international financial system and how to structure it so that it benefits countries with the greatest need. There are many players on the field: national governments, international financial organizations, and groups of countries, such as the Group of 20 leading economies and the European Union are all banning together in this common effort.

Zuma’s message was that these policies, though created to make a fair playing-ground, might be inherently bias to the larger economies. Zuma capitalised on the occasion to state “The developing world has an equal right to direct the work of these institutions.”

“When we raise these issues, we should not create the impression that we have come cap-in-hand to ask for favours,” said Zuma. “We also support the move to a more open, transparent and merit-based approach to choose the heads of the World Bank and the IMF. Our movement forward will be greatly enhanced by the speeding up of economic reforms to enable more inclusive and faster growth.

The issue is imperative for the future of South Africa and the continent. “Our strongly held view is that quotas must shift to developing economies as their need for the IMF resources is higher. The shift must essentially be from developed countries to developing countries. We must ensure that no emerging and low-income countries lose quotas as a result of these reforms,” he said.

The basis of Zuma’s request is that International Monetary Fund and the World Bank emphasize changes in both the voting structure and leadership of these institutions, factors crucial in ensuring a more stable and equitable financial infrastructure.

Africa’s recent economic success is “proving Afro-pessimists wrong,” Zuma said. “The index of political freedom prepared by the think-tank Freedom House, shows that while less than a third of African countries were classified as free or partly free in 1990, today about two thirds of African countries are considered free or partly free. The Kennedy School Index of Good Governance shows that governance in 38 African countries has improved since 2000.”

Of course, there is much more to do in terms of economic reform and the development of infrastructure and social services in Africa, said Zuma, adding, “I doubt that many will disagree, though, that we know better and agree more than before on what we still have to do in Africa.” At the crux of his message, Zuma wants to see the hard-fought improvements of his country to be better reflected in the architecture of major institutions.

At the end of his address, the Zuma once again restated his overriding message to the crowd. “We reiterate that Africa is open for business. It is open for trade and investment.” The President was then presented with a gift of a Canadian hockey jersey, with his name and the number one imprinted on the back, which he received graciously. Hopefully, President Zuma’s initiative will be received as well.

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