Monday, 13 June 2011

After staying out of the IMF battle, Africa should run for the World Bank Presidency

Lisbon, 13 June

Much of the chatter at the annual meeting of the African Development Bank in Lisbon last week focussed on the African role in another financial institution: the troubled International Monetary Fund. Specifically, whether there would be an African candidate in the race for the IMF managing director's position after the resignation of France's Dominique Strauss Kahn who faces trial for sexual assault in New York.

There is no shortage of eminently qualified African candidates – central bankers, investment bankers or academic economists – but none were prepared to throw their hats in the ring. I asked AfDB President Donald Kaberuka in Lisbon whether he would consider running for the IMF job and he laughed off the idea, insisting he was far too busy at the African Bank to contemplate a change at this point.

No whispers of interest from other possible candidates such as Nigeria's reforming central bank governor Lamido Sanusi or Côte d'Ivoire's Tidiane Thiam, who is currently chief executive of Prudential, one of Europe's biggest insurance companies.

The most credible claims about an African candidacy for the fund came from further South, from Tshwane, aka Pretoria, where there was a buzz about former Finance Minister Trevor Manuel launching a campaign on 11 June. South Africa's incumbent Finance Minister, Pravin Gordhan, gave an elliptical response to questions about Manuel's candidacy on the previous day.

Then, excitement grew with reports of South Africa's President Jacob Zuma lobbying several developing country governments to back a Manuel candidacy. But as the deadline of midnight on 11 June loomed, Manuel took to the stage himself and told journalists in South Africa that he would not be a candidate for the IMF: 'My adrenaline is flowing about South Africa right now. It's where my focus is.'

End of story? Not quite, as Manuel's statement circulated among African officials and bankers in Lisbon, the AfDB's Kaberuka was welcoming France's leading contender for the IMF job, Christine Lagarde, to the conference. Fresh from a lobbying tour of Brazil, India and China, Lagarde had touched down in Lisbon on Friday to state her case to the African shareholders of the IMF.

It was a good day's work for Lagarde for she emerged with strong African support after addressing a special luncheon meeting. Chairman of the African caucus at the IMF and Congo-Kinshasa's Finance Minister Matata Ponyo Mapon told reporters there was 'massive' African support for Lagarde. Then, Lagarde rushed to the airport where she took a flight to London en route to Egypt and Saudi Arabia.

Despite – or perhaps because of – her training as a lawyer rather than as an economist or a banker, Lagarde has held the finance portfolio in France longer any of her predecessors. And she is streets ahead of her nearest rival for the IMF job, Mexico's central bank governor Agustin Carstens.

And few believe that the late candidacy of former top IMF official and current central bank governor of Israel, Stanley Fischer, will upset Lagarde's campaign. Given his birth and early upbringing in Zambia, Fischer might have been able to win over some African support were he to have joined the race earlier.

Now, the final hurdle Lagarde faces is a French row over a €285 million compensation payment to the colourful ex-chairman of Olympique de Marseille, Bernard Tapie, after a boardroom row over the sale of shares in the sports equipment company Adidas.

Largarde endorsed the French courts' award to Tapie, arguing that most of it would be returned to the French taxpayers. However, Tapie diverted the award to an offshore fund and has paid less then €30 mn. in taxes. The court which is reviewing Lagarde's role in the affair will not, however, reach its conclusions until after the IMF board has decided on whom to appoint as its next managing director.

Just as Lagarde was addressing African finance ministers in Lisbon, more speculation started – about whether her friend and United States Secretary of State Hillary Clinton might run for the Presidency of the World Bank. The tenure of the incumbent, Robert Zoellick, who had previously served in President George Bush's Republican administration, expires next year. It seems likely that President Barack Obama will be looking for a new candidate for the post: appointing Clinton to the World Bank would allow Obama to move her out of the State Department without causing undue offence.

It would send the message that Washington is determined to maintain the unwritten deal between Europe and the USA: that Europe takes the top job at the IMF, and the USA takes the presidency of the World Bank. An African banker in Lisbon suggested that appointing women to both jobs could be a blow against gender discrimination as well as a way of allowing the West to keep hold of both positions.

He joked it might look as though western men were no longer suitable candidates to run international financial institutions. But many in Lisbon argued that Africa should target the World Bank presidency next year – and try to break the Europe-USA stranglehold on the top positions.

The case is straightforward: more than half the projects funded by the Bank's soft-loan affiliate, the International Development Association, are in Africa, the majority of the world's 15 fastest growing economies are in Africa, and most of them are using World Bank resources. Former African finance ministers – such as Manuel and Kaberuka – have presided over impressive economic recoveries.

More than most, they know the practical effects of the Bank's policies and how they could be changed for the better. For the first time, the Bank could be led by someone who has steered a developing economy through treacherous waters. If Africa is going to have a chance for the Bank presidency next year, now is the time to start the campaign. It could make sense for Africa to make its support for Lagarde contingent on a guarantee of a fair and open contest for the World Bank presidency next year based purely on merit,and the final abandonment of the Europe-USA deal.

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