Africa and its progress to improving PFM

17 Aug 18

Strong public financial management is the foundation for a sustainable growth. But are we doing enough? Asks the African Union’s Assietou Sylla Diouf. 

 

Over the past years, managing public finance has become more and more challenging due the combination of the factors such as:

- Lower resources from the main commodities

- Rising cost of public expenditure (investment in infrastructure, increasing costs of social benefits

- Sophisticated financial risks and mechanisms ( PPP, ...)

- Newly emerging trends such as new industry best practices, legislation, new technology and digitization to mention a few

- Increasing awareness and demand from the citizens to take into consideration sustainability in all major government’s decisions

- Development of various global or sectorial frameworks advocating for accountability, transparence and good governance as key pillars of public management

- The pressure to keep stakeholders (citizens, donors, ...) informed on the state of grants and public finance.

Studies have shown that there is a clear correlation between GDP level and PFM performance.

 

(Source: World Bank-Public Expenditure and Financial accountability (PEFA) 117 countries for which PEFA data was available).

 

This situation has prompted many leaders to initiate PFM reforms, structured around 7 pillars:

 

https://pefa.org/sites/default/files/PEFA%20pillars%20of%20performance.png

The African continent has made significant strides towards moving its citizens towards a better state of livelihoods. In fact, where development declarations have been set out, our continent has made some noteworthy progresses and equally so missed a few opportunities.

Corruption still accounts for a huge portion of why the continent still lags behind. Mismanagement and improper distribution of national wealth increase the inequality gap. The impacts are too extreme mainly in basic services such as housing, health care, education, sanitation. Such impedes the development narratives of the continent altogether.

Frequent cases of mismanagement of public finances have diminished donor confidence and raised serious concerns about the capacity of grantees to manage adequately the resources for a common benefit. A weak domestic accountability system for PFM reform is proving to exacerbate the widespread challenges for achieving agenda 2063 and SDGs goals.

National and continental initiatives have been launched with the objective to strengthen PFM. To name a few:

- 275 PEFA assessments have been conducted across 46 African countries to assess the strengths and weaknesses of their PFM

- 35 Member States have joined the African Peer Review Mechanism (APRM) established in 2003 for monitoring performance among Member States in the areas of democracy and political governance; economic governance and management; corporate governance; and socio-economic development

- In South Africa, the King Report on Corporate Governance is a cutting-edge booklet of guiding principles for the governance structures and operation of companies listed in the stock exchange. Though applicable mainly to the private sector, it encompasses principles and tools that can easily be transferred to the public sector.

Needless to say despite the efforts made, much more is needed to embed a strong PFM and realise the aspirations of a sustainable economic development in the coming years and decades in the continent.

My view is that an inclusive and continental driven initiative is required in addition to the existing measures:

- Define a continental framework on public finance management using best practices and existing initiatives. Under the auspices of the African Union, it could be could be a convention, charter or protocol

- Nominate a Champion with the mandate to advocate at the highest level of stakeholders 

- Engage with the decision makers to define a continental roadmap toward the implementation of IPSAS and result based budgeting

- Capacity building: Increase the level of expertise by including newly developed modules on public finance management in all relevant fields of studies (management, accountants,...), create and support Centers of Excellence

- Align Professional Accounting Organization (PAO) structure and governance with the requirements of the public sector (minimum representation of public sector in the governance of the PAOs, recognition of professionals accountants working in public sector,...) to attract or retain qualified accountants

The establishment of a continental initiative should offer prospects and tools to recognise, measure, improve and benchmark good practices in financial management and bring harmonisation in governance & accountability.

References:

  • The World Bank -Political Economy of Public Financial Management Reforms – Verena Fritz, Marijn Verhoeven, Ambra Avenia

  • PEFA : Framework for assessing public financial management

  • IFAC: How Does PEFA Stimulate Better Public Financial Management?- Lewis Hawke, PEFA Secretariat | October 10, 2017

 

Assietou Sylla Diouf will be speaking at in Abu Dhabi on 23/24 September.

 


 

  • Assietou Sylla Diouf
    Assietou Sylla Diouf

    director of programme, budgeting, finance & accounting directorate at the African Union.

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