ANALYSIS-Africa struggles to develop rainy-day funds

Reuters

17 Feb 2011

ANALYSIS-Africa struggles to develop rainy-day funds

LONDON Feb 17 (Reuters) - "It's raining now," politicians told then-Nigerian finance minister Ngozi Okonjo-Iweala seven years ago, when she began to develop ways to save the country's oil wealth for a rainy day.

Okonjo-Iweala's brainchild Excess Crude Account (ECA) began its short life in 2004, growing to as much as $20 billion in 2007. The ECA then dwindled to less than $1 billion, a victim of political wrangling between central and local government.

Now Nigeria is giving resource revenue saving another try -- under a different government, with a fresh set-up, initial capital of $1 billion, and a new legal framework.

As sub-Saharan African countries unearth new resources -- Ghana and Uganda are turning on oil taps for the first time -- they face unprecedented chances to transform themselves.

The World Bank estimates Africa needs to spend $93 billion a year in infrastructure, and is only spending half of that at the moment.

Africa-watchers say the continent does not have the ability to spend efficiently on infrastructure and is better-served saving some of its nearly-3 percent fiscal surplus for future needs.

However, attempts to do so appear to be running into obstacles, not least in the struggle to stop governments from squandering their new-found wealth...