- President Cyril Ramaphosa has added his voice to leaders calling for greater equality in the international economy.
- Ramaphosa and African leaders want a greater share of the IMF's reserve.
- During times of crisis, Special Drawing Rights have boosted the international economy.
In his latest weekly newsletter, President Cyril Ramaphosa writes about how struck he was by the image of a boy, floating on a buoy of plastic bottles, trying to escape hardship in Africa for a better life in Europe.
The boy was one of 8 000 migrants, who arrived in the Spanish enclave of Cueta in the past week. He'd arrived from Morocco in nothing but a soaking wet shorts and T-shirt, and reportedly told a Spanish soldier he'd rather die than go back.
For the South African president, it was a reminder of how much work still has to be done as the continent gears up to celebrate Africa Day on 25 May.
"While we celebrate the progress we have made towards building a peaceful and prosperous continent, events in faraway North Africa show that we still have a long way to go," the president wrote.
"Life is so difficult for millions of people on our continent and opportunities so few that they would risk their lives crossing the sea in pursuit of a better future."
The pandemic has set back the developmental gains Africa made in the last decade, Ramaphosa wrote, echoing the sentiments of development economists.
Fresh from a Paris summit on Africa's post-pandemic recovery, Ramaphosa joined the call for increasing Africa's share of the International Monetary Fund's (IMF) Special Drawing Rights (SDR) facility.
"It is important that we affirm our sovereignty as free and independent states, capable of determining the destiny of our continent."
What are Special Drawing Rights
The IMF created the SDR facility in 1969 as a special reserve that is based on a basket of five currencies: the US dollar, the euro, the pound sterling, Japanese yen and Chinese Renminbi.
The SDR also acts as its own unit of currency, used specifically by the IMF, and calculated according to the cumulative exchange of these currencies. Today, that amount sits at about SDR 1 to US$1.4.
Member states of the IMF can tap into the reserve to help their own liquidity during a crisis to boost their economies, and to ensure that the international economy stays afloat.
But, the allocation of that withdrawal is based on a quota system, based on the size and openness of an economy.
States have drawn on the SDR in 1970 to 1978 and 1979 to 1981, both periods marked my global financial distress.
That happened again in 2009, during the global recession, with the largest allocation yet of $161.2 billion.
Now, the Covid-19 pandemic has brought with it another burgeoning financial crisis.
Special Drawing Rights and the pandemic
Earlier this year, the IMF agreed to making the facility available again, to address the economic consequences of the pandemic. The IMF set aside the equivalent of $650 billion to help the global economy.
However, given how the current quota system is skewed toward rich countries, wealthy countries will get between 60% and 70% of this package. Africa will get just US$33 billion, exposing the system's inherent inequalities.
The IMF estimates that Africa will need US$285 billion to address the damage of the pandemic. This is why some economist are calling for a reform of the SDR system.
"The pandemic has revealed the true depths of structural inequalities between Global North and South, as the North hoards vaccines and enacts generous fiscal stimulus, while many countries in the South spend more public resources repaying private creditors than they do on domestic health and economic resuscitation," wrote Bhumika Muchhala, a senior policy researcher at the Third World Network.
Ramaphosa and other African leaders are calling for a bigger allocation of the SDR: 25% to share, which amounts to $162 billion.
Ramaphosa is championing the unity the continent has shown in addressing the pandemic, and is hoping it will turn into an economic cooperation that will boost African and, by extension, South African growth.
"As a country, we are part of Africa and Africa is part of us," Ramaphosa said.
"What happens in one part of our continent affects us all, and so we must work together to recover from this crisis, and to ensure that our continent grows and thrives."
The Africa Desk is supported by the Hanns Seidel Foundation. The stories produced through the Africa Desk and the opinions and statements that may be contained herein do not reflect those of Hanns Seidel Foundation.