Financial professionals in the public sector have an essential role to play in ensuring social stability and economic growth across Africa. They are well placed to provide the transparent and reliable data governments need: to communicate effectively with stakeholders, to manage their debt better, to attract investment, and plan and fund impactful sustainability initiatives. These were some of the main takeaways from ACCA’s recent Africa Virtual Public Sector Conference.
A key focus of the two-day event was the impact of public debt across the continent. In Sub-Saharan Africa, the volume of nominal public debt has more than tripled since 2010, to around US$1.14 trillion by the end of 2022, according to the World Bank. This has the potential to reverse decades of development gains.
‘Ask yourself what is the impact of every single penny that is spent’
Several African countries are also still recovering from Covid-19, which depleted the financial buffers they had previously built up and raised debt levels even higher. In addition, Russia’s invasion of Ukraine, which disrupted supply chains and pushed global inflation higher, coupled with the depreciation of African currencies, have made it harder to service debt.
Avoiding a crisis
Speaking in a panel discussion on Africa’s debt and inflation crisis, Leonard Minega Rugwabiza, chief economic adviser in Rwanda’s Ministry of Finance and Economic Planning, said that the debt situation needs to be addressed in such a way that it does not precipitate a development crisis. He highlighted the need not just for more prudent debt management but also better fiscal management. ‘Ask yourself what is the impact of every single penny that is spent,’ he said.
‘These countries can’t stop investing in development,’ he continued. ‘If you say “I am going to do fiscal consolidation, I am going to stop investing in development, I will stop recurrent spending,” and halt or reduce everything that was going to education and health, for example, for how long can you do that? At the end of the day, you will have an implosion. Your population will demonstrate, and the civil unrest will be even worse than the debt crisis.’
Alongside mobilising domestic resources, Rugwabiza also highlighted the importance of concessional finance from the international community. Tope Fasua, the Nigerian president’s special adviser on economic affairs, made the point that African countries can’t expect foreign countries to invest in their future if they don’t buy into it themselves. Stressing the need for economic growth and structural reforms to improve conditions, he said: ‘We need to do everything we can in Africa to localise debt, and show that our people buy into the future of their country.’
‘When the projections are wrong, then you have supplementary budget after supplementary budget’
Dr Magalie Masamba, post-doctoral fellow at the Centre for Human Rights, University of Pretoria, South Africa, pointed out that regional and international development banks, whose role is to provide long-term financing, technical assistance and policy support, can help countries attract private sector finance by using existing instruments to share risk and provide credit guarantees.
A question of skills
A key problem across the continent is a skills gap in the public sector. Evelyn Isioye, ACCA’s lead for policy and insights, India and Africa, said that among the major factors that impact public financial management (PFM) were technical capacity gaps and a lack of forecasting skills, which affect debt management and the preparation of budgets.
About the conference
ACCA’s Africa Virtual Public Sector Conference, on the theme of ‘Risk, Resilience, Results’, brought together experts from several African countries including Nigeria, Ghana, Uganda, Zambia and Botswana. Sessions included public financial management performance and reform, the debt and inflation crisis and sustainability reporting.
Isioye was presenting ACCA’s new report, PFM Performance in Africa, which examines the systemic and operational factors that are impeding PFM systems and reforms on the continent. Improving the capacity of people in the public sector will result in improvements in service delivery, she said. Data integrity is also key, she continued: ‘When the forecasting or projections are wrong, then you have supplementary budget after supplementary budget and then overspending,’ she said, adding that gaps in communication skills had an impact on how information was conveyed to stakeholders.
Sustainability reach
In a discussion on sustainability reporting, panellists highlighted the importance of reporting systems and processes to identify priorities and progress. Building capacity in this regard should be tackled in a step-by-step process.
Sunil Ramdeen FCCA, accountant general in Mauritius, said that once a country understands where they are positioned from a sustainability perspective this will help them build insights into future strategies.
‘Once the politicians buy into the idea of sustainability reporting they are willing to allocate budgets’
Dr Neema Kiure, EY partner and a member of the International Public Sector Accounting Standards Board, described how linking sustainability reporting to sustainable development goals (SDGs) can ensure that relevant data is reported, enabling countries to assess progress and invest resources where required.
Accountants can help governments to achieve their goals by, for example, explaining through reporting how specific SDGs are being addressed – for example, highlighting where books are not being delivered to schools or identifying areas with no or poor water supply. ‘Once the politicians buy into the idea of sustainability reporting they are willing to allocate budgets,’ she said. ‘It is then our responsibility to show them what will be the benefits to their constituents if we comply with sustainability reporting.’
As an example, Kiure described how Tanzania’s government has allocated funds to sustainability targets, with the accountant general collaborating with the National Bureau of Statistics and other stakeholders to ensure that effective reporting is carried out.
Investment benefit
In demonstrating the benefits of sustainability reporting, Alex Metcalfe, ACCA’s head of public sector, highlighted a case study from Toronto, Canada, which showed how the practice reduced the cost of borrowing when going to the market with green bonds.
In a discussion, a panellist noted the connection between sustainability disclosures and financial reports, and how transparent and reliable data lowers the perception of risk and therefore the pricing of that risk.
Ultimately, the challenge for financial professionals in the public sector is that they are increasingly required to interact with a wide range of experts within more complex spheres of activity. In order to support their governments’ engagement with a broad range of stakeholders with reliable transparent data they need to deploy technology and develop skills to convey the relevance and impact of their work.
