The Michigan Daily sat down with University of Michigan alum Vera Songwe to discuss her career in international development and sustainable economic growth in Africa Wednesday afternoon.
Songwe is a senior fellow at the Brookings Institution’s Africa Growth Initiative, co-chair of the Food System Economics Commission, former United Nations Under-Secretary-General, former UN Economic Commission for Africa executive secretary and founder of Liquidity and Sustainability Facility, an organization that aims to improve African sovereign debt sustainability.
This interview has been edited and condensed for clarity.
The Michigan Daily: Could you share your journey with us? What led you to become a senior fellow at Brookings and a prominent figure in international development?
Vera Songwe: It’s the desire to improve and give to people who are less fortunate an opportunity and use some of the skills that one has to help improve livelihoods, deliver prosperity. Make the world a better place. It’s the Michigan dream.
TMD: How did the University motivate you to pursue an international development and economics career?
VS: When I was studying here, we had professors visiting the economics faculty from Europe. Europe was beginning to form the European Union. It was an interesting experience and gave me exposure to the things happening in other places that sounded interesting. I think what remains one of the really big strengths of the University is its ability to bring good scholars. People who are excellent and thriving in their fields come and meet young students, so that students at least have a sense of where all this hard work ends up. I then left Michigan; I went to Belgium, which is where the European Union was being formed and created, to work with a professor there who had visited Ann Arbor, and then I stayed on with a different professor to do my Ph.D.
TMD: What key factors will drive sustainable economic growth in Africa over the next decade in your opinion?
VS: Good leadership, resources and a skilled set of labor. We must do it in a sustainable way. So it has to be with an acknowledgement that while we do grow, we have to protect the planet.
TMD: How have you seen progress, and have you been able to gauge the extent to which progress has been made in these areas?
VS: It depends on where one is measuring progress. If you take the long view, there has been a substantial reduction in poverty in Africa. Many more young girls are going to school; many more young girls are actually getting into university. In the last 20 years, outcomes have improved, and educational outcomes have improved. But the quality is not as good, so we now have to make improvements in the numbers they are enrolling.
We also see better leadership in many more parts of the continent. Yes, there’s been a resurgence of instability, but some of that is also because of the COVID crisis and the shock to society. But Africa had the longest period of growth between 2000-2015; they grew at an average rate of 5-6% from 2000 to 2010, lifting millions of people out of poverty. So, there has been some progress. If we look at places like Kenya, where we have the IT center of the continent, and some science and technology from Kenya, we can share the news in other parts of the world today. Clearly, that means Africa is beginning to contribute even more to the modern economy, and we’ve always contributed to economies with raw materials. But I think now, in the service, technology, innovation, knowledge and contribution, you’ll begin to see more African skill sets.
TMD: As the Liquidity and Sustainability Facility founder, how does the organization contribute to addressing these challenges?
VS: What we do at the Liquidity and Sustainability Facility is a complicated but very simple thing. We’ve created repo markets or emerging market economies; repo markets are repurchased markets. I usually like to use the analogy of the infrastructure for the financial system. Essentially, when you issue bonds in the United States, they can lend over U.S. Treasury bills. There is a secondary market where you can resell the bonds and then get some liquidity back to go back and reinvest in whatever else you want to do. This did not exist in the emerging market or was not significant. What we’re doing is we’ve created an instrument where if bonds are issued, they can be repoed, or repurchased. And what that does is it reduces the cost of borrowing. It makes for a lot of conversations about how expensive borrowing is for emerging markets in Africa. Because the cost of borrowing is so high, many countries get into debt distress very quickly, so you compress the cost of borrowing. Today, some African countries are borrowing at 11%, which is not enough to be able to get a return on the investment. Essentially, you want the rate of return on the investment to be high enough to pay for the loan. If the investment hasn’t yet materialized, and you already have to start paying for the loan, you get into trouble. What we’re trying to do is see whether we can one drop the yield curve but extend maturities so that they’re synchronized with the length of the investment, whether it’s a power plant or industrial factory.
TMD: How do you envision the role of technology and innovation in advancing economic progress and sustainability goals in Africa?
VS: First of all, one of the things that technology and innovation are doing is allowing us to provide services much better, much faster to populations further away from service centers. This is true for every population community across the world. The advent of technology has allowed the use of drones to distribute blood packs and COVID-19 vaccines to faraway places that you otherwise would not be able to do. You can do remote consultation, so you do not need the primary care doctor to be at the source; you can do it from a distance. In countries like Rwanda and Malawi, this is having an effect that’s been studied, and we see positive results. On the financial side, there is huge financial inclusion because more people can now have bank accounts or wallet accounts and have access to financing, and what we’re seeing is that if you create devices for savings for healthcare and children’s education; people are using those savings wallets.
One of the problems with development on the continent is that we’re not saving enough. What the population saves is what governments invest, or the private sector can borrow to invest to create growth. If you’re not saving enough, it’s very difficult to find the investment to generate growth. And so the culture of savings begins to come because people have access. The beauty of the technology is that you can open a bank account on your phone without the need for collateral or proof of identity or, in some areas, your husband’s permission to do that. That has created gender equality to some extent because, now, women can take ownership of their resources as well. It has also allowed remittance transfers; remittance transfers are one of the highest sources of foreign exchange on the continent because you can remit immediately to a phone. You don’t have to remit to a bank account, or a source for somebody has to go and provide an ID, where 30% of the population does not have a legal ID yet. Finally, it has increased productivity and created new streams of production. In Morocco, for example, they are producing cars, and in Senegal, they are able to produce vaccines. We wouldn’t have been able to do without technology.
TMD: You have achieved significant milestones in positions and in a field dominated by men. What advice would you give to women who want to follow in your footsteps?
VS: The first one is that they need to work hard, which is probably the advice to everybody. Just stand your ground and be sure of the fact that your contribution is valued and valuable. Never doubt yourself. More importantly, look for somebody to rise up because success in our gender is not good enough if you’re alone. You must crowd in, so part of the job is when you’re there, make sure that you can crowd in one or two more so that if you leave, there are one or two who stay. That’s the only way that we can monetize. It cannot be one-for-one. It has to be one-for-five; by that, we can increase the population and bring in a little more gender equity.
TMD: Why is giving a talk on Africa’s role in strategic economic growth crucial now? Are you motivated by specific factors?
VS: It’s always pertinent, but it is even more relevant now because we have this big conversation about hegemony and the role of the United States and China in international economics. Where does the rest of the world fit into that conversation? We see different reactions in the international space, particularly at the School of Public Policy and in diplomacy, where the conversations around hegemony are being moved into trade spheres, and conversations around market economics have been skewed or turned around. It’s important. At the UN, as well, it is important to talk about the role of Africa as having its own agency. People also tend to forget that you need to align with the interests of your population, with the interest of delivering prosperity to your population is where you should align. When that happens, there is a surprise. There shouldn’t be because that is the basis for general conversation.
Daily Staff Reporters Andrew Baum and Arnav Gupta can be reached at asbaum@umich.edu and arnavgup@umich.edu.