South Africa leads G20 initiative to address capital costs hindering Africa’s growth

Following the recent G20 finance and central bank deputies meetings last week, the National Treasury on Friday underscored that revisiting the cost of capital for African nations and developing economies was vital to unlocking sustainable growth.

South Africa’s intention from the outset has been to place African priorities at the forefront of discussions, seamlessly integrating them into every Finance Track Working Group.

“With our longstanding expertise on issues influencing the cost of capital, the Finance Track will take the lead in this review,” Treasury said.

To this end, the agenda focuses on creating concrete recommendations reflective of the discussions held in various Working Group Meetings.

Key issues on the table include the pressing need for reforms within Multilateral Development Banks (MDBs), the establishment of country-led platforms, and mechanisms to mobilise private capital.

This would involve enhancing funding designs and derisking strategies aimed at attracting private investments.

Treasury has also called for increased concessional resources, advocating for the reshuffling of Special Drawing Rights (SDRs) to further support MDBs.

Furthermore, South Africa is on a mission to galvanise support for an ambitious replenishment of the African Development Fund in 2025. The Finance Track intends to accelerate the growth of local currency bond markets, which are essential for fostering resilient regional economies.

“We strongly advocate for an ambitious African Development Fund 17th replenishment in 2025. In our work, we will emphasise steps needed to accelerate the development of local currency bond markets,” said Treasury.

This year’s agenda will also spotlight non-bank financial institutions and their roles in understanding the vulnerabilities that influence capital volatility. This attention aims not only to monitor capital flow dynamics but also to promote sustainable, resilient financial practices.

Throughout the year, it will also be focusing strongly on debt, debt sustainability, and support for countries with liquidity challenges in Africa and other developing countries.

The Minister of Finance will appoint a G20 African Expert Panel to advise him on matters of policy, financing, and outcomes to be achieved during the G20 Presidency.

The Panel will be chaired by former finance minister, Trevor Manuel, and composed of leading African economic, development, and finance experts from the public sector, think tanks, academia, and international financial institutions.

South African Reserve Bank Governor, Lesetja Kganyago, also reiterated in the meeting on Thursday that South Africa was guided by the need to represent the African continent and the emerging market and developing economies, in setting its priorities for G20 Presidency.

Kganyago said South Africa believed that it was time to focus on implementation, take stock of where the G20 is vis-à-vis its objectives and agree on how it accelerates progress towards the 2030 Sustainable Development Goals.

“It won’t be easy, particularly in a global environment of geoeconomic fragmentation, escalating conflicts and intensifying climate change. The spillovers from these risks are expected to further hamper progress and have a disproportionate impact on those countries that can least afford it,” Kganyago said.

“Within this context, the primary objective for our presidency, through our theme of solidarity, equality and sustainability, is to reinvigorate the spirit of multilateralism within the G20 finance track.”

He further emphasised the need for a renewed spirit of multilateralism throughout the G20 finance track, saying there was a clear necessity to refine the global financial architecture to make it more effective and inclusive as the world commemorate eight decades since the founding of the Bretton Woods institutions.

Kganyago also called attention to ongoing challenges concerning cross-border payments and the significance of efficient payment systems for promoting financial inclusion, which ultimately supports sustainable economic development across the continent.

“Notwithstanding this remarkable success, we cannot be complacent. There are concerns that the G20 has, over the past few years, faced challenges with the implementation of the recommendations from the FSB and other standard-setting bodies.

“Finally, we have been grappling with the problems of cross-border payments and fast payment systems,” he said.

“Given their importance to the continent and to many others around the table, we have raised this as one of our flagship priorities. We know the importance of payments for achieving greater financial inclusion and ultimately supporting sustainable economic development.”