By Ashraf Patel
President Lula of Brazil is shaping the global development multilateral order in a big way. As host nation for the G20, he is quick off the mark and setting the scene for ‘a bold and broad Development agenda’. By attending the AU summit earlier in the year, Lula set the scene for his broad development agenda by announcing the Global Alliance Against Hunger.
At a time when the UN prepares for its historic Summit of the Future 2024, Brazil has anchored its G20 presidency on the UN Sustainable Development Goals SDG agenda.
As G20 Finance Ministers met in Rio this week again, the progressive development agenda of Lula deepened this commitment. Finance ministers from leading rich and developing nations agreed Friday to strive toward effectively taxing the super-rich, a joint ministerial declaration said.
For the first time, finance leaders from every G20 country have agreed to tax the world’s billionaires. Treasury ministers and central bankers from the group of 20 major economies agreed to reference fair taxation of “ultra-high-net-worth individuals” in joint statements after meetings in Brazil.
“With full respect to tax sovereignty, we will seek to engage cooperatively to ensure that ultra-high-net-worth individuals are effectively taxed,” the declaration said after the two-day meeting in Rio de Janeiro. Brazil has made a proposal to impose a 2% minimum tax on billionaires a top priority of its presidency of the Group of 20, ahead of the Nov. 18-19 summit in Rio. (G20 Brazil)
Brazil’s proposal to tax billionaires has largely been welcomed globally, and divided G20 nations. France, Spain and South Africa have expressed support – while the US and Germany is against it; thus, also signifying varying perspectives in regulating Global finance and its sources of development finance to meet the UN SDGs.
Other key dimensions of the G20 Finance meeting included:
- Support the development of an NBS financing toolbox, emphasising the integration of blended finance instruments, with the commitment to issue recommendations for addressing the challenges to scale up NbS financing (SFWG P4);
- Commitment to deliver better, bigger, and more effective MDBs to better address SDGs and support (i) the connection of MDBs with national and subnational development banks; (ii) the use of MDBs to mobilise private investments and create de-risking instruments; and (iii) the enhancement of the representation of developing countries in MDB decision-making;
- Recognition of the importance of climate-resilient and quality infrastructure and support for ongoing work on the linkages between infrastructure projects and poverty risks, mitigation of currency risks, and cross-border infrastructure financing;
According to Brazilian researcher Camila Santos, who covered the G20 Finance ministers meeting:
“One of the key takeaways was to consolidate and continue in the South-South momentum, and build from Brazil’s key priorities on the fight against hunger and poverty. And as South Africa begins to shape its priorities, its criteria should be guided by issues that resonate with ordinary people.
SA G21 Presidency, 2025 – Are we ready?
South Africa hosts the G21 in 2025 and President Ramaphosa has huge shoes to fill from Brazil’s G20 agenda. especially as most of Africa is saddled with the worst debt crisis in decades and myriads of conflicts and wars.
Some core priority challenges it can prioritise could include:
Challenge 1: Global Alliance Against Hunger and Poverty, Agri transformation
The G21 should bolster the Global Alliance against Hunger and Poverty proposed by Brazil, ensuring alignment with the Sustainable Development Goals (SDGs). This promotes multilateral cooperation, leveraging financial resources and knowledge, sustainable food systems, and social protection.
For the Global South, it offers opportunities for funding, technology transfer, and technical assistance, focusing on agroecology, land distribution, and local production, as well as reduce environmental damage and food insecurity.
South Africa itself is facing a hunger malnutrition pandemic.
An article by David Harrison cites a harrowing tale of malnutrition:
Approximately 17.5% of households report severe food insecurity – going to bed hungry or running out of food before the end of the month. However, the proportion of children who don’t even get enough energy to sustain their weight is much lower, with 7.7% of children under five years of age underweight and 5.3% wasted (low weight-for-height). On the other hand, 28.8% of children are stunted. Simply put, over a quarter of our children have a deep and chronic lack of protein, which undermines their potential and is a ball-and-chain around the ankles of economic productivity and long-term growth. (David Harrison, Daily Maverick, July 28, 2024)
South Africa by contrast has a large scale monopolistic Agri industry intensive model locked into value chains with large supermarket chains. Lack of land reforms in land reform ad Section 29 constitutional have stalled, access.
South Africa’s mega Agri industry’s market structure is an oligopolistic food chains with large supermarkets and export driven, commoditised. Hence, it unable to respond to the hunger crisis. Atop of this is the stalled land reform process for the past several years. Would Agriculture Minister Steenhuisen step up to the plate?
A fairer international tax system and subsidy reusing to ensure climate justice includes establishing common roadmaps for repurposing fossil fuel subsidies, implementing fairer taxation on high-pollution corporations, and redirecting the revenue to sustainable development and climate action. This can potentially provide the means for just transitions and address the funding gaps faced by Global South countries in climate adaptation.
But Ramaphosa is not Lula, and the ANC party in a GNU collation means policy would be more beholden to corporatist interest than a public good such as fighting hunger and poverty, or taxing multinational corporations or wealth tax
In two terms, 2004 to 2016, Lula’s and Brazil’s PT (Workers Party) managed unique broad social-programmes, solid social development and systems, which were the high points of the Lula administration – and ensured tens of millions were lifted out of poverty.
In addition, the PT worked closely with broad-based social movements such as the landless movement Via Campesina in mobilising landless and peasant farmers involved in agroecology, and food security at local level
Challenge 2: Africa’s mega Debt crises requires extraordinary effort by G21
The deadly #KenyaFinancial protests were sparked by intensive IMF austerity and tax increases on basic foods, as well as lack of tax revenues for the fiscus due to a number of tax breaks – because of Kenya’s myriad ‘free trade’ EPA agreements.
In a new report, Debt cancellation is not enough – Towards a new financial architecture, authors Mandua and Umubyeyi provide insights into Kenya’s financial crisis:
The protests have not been just about the Finance Bill; there is a lot more under the surface. There is widespread dissatisfaction with Kenya’s debt situation. People feel there was a lack of transparency about borrowed funds, causing uncertainty about how money is being spent
If Kenya is an economic power in East Africa, then landlocked Malawi, one of the poorest nations in the world, is dire:
“By 1999, Malawi owed $2.8 billion to lenders. Whether private or multilateral or bilateral, it was 2.8 billion when the debt cancellation was finally given. By 2008, when the debt was cancelled, we only remained with $400 million dollars, which was private debt. By today, we are way beyond $2.8 billion again. So, imagine: from independence in 1964 to 2000, we owed $2.8 billion (Kennedy Manduna, PhD and Liliane Umubyeyi, PhD)
Colonial debts left these countries as high-risk countries when it comes to gauging their credit worthiness. As a result, many of them access loans from multilateral institutions such as the IMF and the World Bank at a premium, as, according to these institutions, they are high-risk borrowers, thus making capital more expensive and more challenging to access trade and investment finance.
Opportunities in the BRICS plus bloc offers opportunities such as trade finance, infrastructure finance via the New Development Bank NDB, as well as the opportunity to trade in local currencies via BRICS emerging currency and a payment system that can buffer poor nations from the volatility and high interest payments in dollar
Challenge 3: Saving multilateral trade as WTO an AfCFTA fractures and rise of EPA
Another challenge is the ‘great global trade fracturing’ of trade agreements and inertia and dilution at the WTO. The mid July 2024 WTO meetings in Geneva has again seen the important Fisheries Treaty fail to reach agreement. The WTO Investment treaty also failed with South Africa, India, Turkey opposed the treaty due to significant issues with the new ‘sustainable trade’ agenda items, correctly viewed as new generation green trade barriers
The signature AfCFTA (African Continental Free Trade Area) agreement signed in 2021, is also under severe and global and regional trade fractures wars, inflation, and the rise of myriad of Economic Partnerships Agreements EPAs are self-diluting the impact of Intra Africa trade and the cohesion of the AfCFTA.
The AfCFTA first phase emphasises the trade of goods, committing to the removal of tariffs on 90% of product lines within five years. It also focuses on the reduction of non-tariff barriers to facilitate regional trade. In services, the AfCFTA seeks to liberalise areas such as business, communication, finance, tourism, and transport, putting brakes on the AU’s African industrialisation plans.
Generally, Africa’s trade patterns align with the Continent’s restricted participation in global value chains (GVCs), which is indicative of its fragmented trade policy environment characterised by multiple regional economic communities. Currently structural challenges include lack of transport-rail-roads networks at sub regional level, customs and border procedures, and access to trade finance and lack of skills for the 4th Industrial revolution data economy.
Furthermore, the AfCFTA faces insurmountable barriers:
- Low Intra-Africa Trade:
- Mushrooming of EPAs undermines AfCFTA:
Likewise, Nigeria’s economy is also in a meltdown, with fuel shortages and a deregulated electricity grid that causes chaos, run on the Naira currency plunging the once largest economy in Africa into freefall.
These are the major structural economic and social challenges Africa faces as it pins hope on South Africa to lead on the all-important Development Agenda in 2025.
Will President Ramaphosa follow Lula’s lead, or continue on its current ill-fated neo-liberal pathways?
* Ashraf Patel and Mika Kubayi are senior researchers at the IGD
** The views expressed in this article are those of the writers and do not necessarily reflect the views of The African