Continent needs nations to help it rise
Development bank finding ways to tackle issues, writes Donald Kaberuka
AFRICA is at a turning point. For the first time in a generation, the optimistic view looks to be correct — that Africa is at last truly rising.
Apart from a few countries at war or in transition, economic output is back to levels before the financial crisis.
Despite the slowdown in the global economy, Africa is reporting 6.6% growth this year. Export performance and inward investment are strong.
Intra-African trade and investment is growing. Our cities are booming behind strong retail demand for goods and services. Gross domestic product (GDP) has multiplied five times in 20 years.
Africa’s per capita GDP has crossed the $1,000 barrier. Mortality is down, life expectancy is up. Seven out of 10 Africans own a cellphone. In fact, there are now more cellphone subscribers in Africa than in North America and Europe put together.
However, outside Africa, the picture is mixed. Our emerging economic partners — Brazil, Russia, India, China, South Korea, Turkey and others — are still growing strongly and this is a positive sign.
But in the US, growth is sluggish and Europe’s major economies are contracting.
At the same time, official development assistance (ODA) no longer constitutes the core of the money coming into Africa. With the weakened fiscal positions in the advanced economies, ODA flows have declined and are expected to remain low. This slowdown in Europe and the west is the biggest challenge facing the world, one that carries the risk of knock-on effects for Africa. A 2% slowdown in the global economy implies a 1% decline in Africa’s annual growth.
It is now time to unlock African potential and the first question is: How? It is clear that the policies are in place. It is clear we are making progress. However, for economic growth to become economic transformation that truly lifts Africa out of poverty, we need to scale up in several areas.
First is infrastructure. Over the past five years, the infrastructure-spending need excluding natural resourcebacked projects, has been put at some $100bn per year. Of this amount, the public sector and development finance institutions have provided about $40bn and the private sector has accounted for just under $10bn. That leaves a gap in Africa infrastructure financing needs of about $50bn a year.
Second, we need to unlock our considerable domestic market of 1-billion people by integrating better our economies. We need to lower the trade barriers so goods can flow across borders quickly and cheaply. Among the greatest impediments to intra-regional trade are procedures.
Our average customs transaction involves 20-30 different parties, 40 documents, 200 data elements (30 of which are repeated at least 30 times), and the re-keying of 60%-70% of all data at least once.
Third is the issue of fragile states. Areas of our continent are sinking deeper into misery and crisis — from the Sahel to Somalia to the Central African Republic. The spillover into neighbouring countries is often the most destabilising factor. The Somali crisis has affected not just the Horn, but the greater Eastern Africa. Kenya is said to house the biggest refugee camp in the world — bigger even than the country’s third-largest city. Equally, the Mali crisis has had far-reaching consequences in West Africa.
The African Development Bank is working on effective ways to tackle some of these issues. Last year, the bank pro-
The result could transform the infrastructure financing landscape, operating on a purely commercial basis
posed bringing infrastructure financing to scale for bankable projects by mobilising Africa’s own domestic resources. The result could transform the infrastructure-financing landscape, operating on a purely commercial basis. It will unblock Africa’s traditional weaknesses in attracting private capital in infrastructure, which are, first, its ability to bring projects to bankability and, second, its ability to manage associated risks: commercial, political and regulatory.
The fund that the African Development Bank is proposing will benefit from the bank’s long experience in this domain. That experience has enabled the bank to fund infrastructure to the amount of $6bn over the past six years. The result is that a total of $53bn was mobilised. This is truly important and Africa needs to give its full support because this is Africa’s fund for Africa’s future.
Working to scale up regional economic integration is among the bank’s priorities.
The question of fragile states is one area where the African Development Fund — which supports low-income countries — has done a remarkable job and where it remains relevant and very much needed.
Through the fund’s $600m Fragile States Facility, the bank has done its utmost to support the recovery of the affected countries. The bank has an outstanding record here, with the two best examples being Liberia and Sierra Leone.
With the help of Liberian President Ellen Johnson Sirleaf and a group of experts, the bank is crafting a new approach to help such countries to recover much faster and to minimise the effect on the neighbours.
As Somalia returns to normality, the bank will bolster its support. That is how, for the last three years, the bank has been able to help Somalia to put together the basics of a financial management system. It is also why, at the recent Somalia Conference in London, I was able to announce a $20m, three-year programme, to help the country rebuild its capacity to manage its own resources and those of donors.
In the same spirit, at the recent European Unionsponsored conference on Mali, the bank committed $240m over this and next year to support the country’s recovery.
This is a country in which — prior to the crisis — had a robust portfolio, especially in infrastructure, water management, irrigation and food security. It is poised to, and will, play our full role in Mali and in the Mano River area, in line with its regional plans.
In respect to the Central African Republic, the bank stands to be guided by the countries of the region on how best it can help.
Dr Kaberuka is president of the African Development Bank Group.