We must reject doomsday narratives on Africa – Kaberuka

In Bangui, Central African Republic, projects of the African Development Bank were looted when violence broke out; in South Sudan, the day the fighting begun, the bank had just signed a $25 million energy project; and now Burundi... In an exclusive interview with The New Times’ Kenneth Agutamba, the outgoing President of AfDB, Dr Donald Kaberuka, explains why he is optimistic about Africa’s growth potential. Excerpts;- After a decade at the helm of the Africa Development Bank (AfDB), what kind of institution are you leaving behind? I leave behind a triple A rated bank, in spite of the global financial crisis. AfDB is very financially sound in all the metrics, an institution that has doubled its portfolio under my tenure, from $5 billion a year to $12 billion, an institution which has multiplied its private sector lending ten times, from $200 million to $2 billion a year; an institution which has seen its capital grow from $32 billion to $100 billion. So I am proud of the institution I leave behind. But every human action is not perfect so I am sure there are things that I could have done differently but that’s up to my successors to follow through. What are those things that you could have done differently? I wish I could have done more on inclusion, because growing the economies, is okay, but I think what I learnt from events in Tunisia and elsewhere is that you also have to accompany growth with inclusion and I am hoping the bank can make progress on this in the future. When you first took over the bank as president, after a solid mandate of 78 per cent of the governors’ vote, did you have any doubts that you would not succeed? A leader cannot behave like that. You don’t set out to fail. You set out to do your best. In the end, you may not achieve but people will judge you on the question, did he or she do their best? Did they do what they said they would do? So there’s an issue of credibility. I am sure, in the end, you have done a great job, everyone says so; but how do you feel with all the praise? I thank people for being so kind but I am more interested in lessons learnt because a legacy of this nature is a shared legacy, it’s not some genius Kaberuka who came here and did all these things; as a leader, you provide a vision, you provide leadership, you provide encouragement and then the people around you will do the rest. So all this personalisation of whatever I have achieved, I would like it to be seen as collective legacy of the thousands of staff that have worked under me at the bank. Many will remember your commitment to funding Africa’s infrastructure development, but as you leave, do you see tangible outputs of those efforts? Oh yes! When I first came here, and assessed where Africa was going, one thing I was determined to do for sure was to make a big push for infrastructure; so I shifted 60 per cent of the entire bank’s portfolio to infrastructure, and in the last ten years, we have put $28 billion in infrastructure. You’re from East Africa, look around, at all the new roads in the region; chances are that we had a hand in their funding. But now the issue for me is that there’s so much more to do because as the economies of Africa grow, the demand for energy increases. So the question is how do we now raise the money to fund the gap? And that’s where ‘Africa50’ initiative comes in, as a response to that need. Good you talk about financing gaps because I know the deficit is around $42bn every year; you believe Africa50 is the way out of this conundrum? Well, $42 billion might sound like a lot of money, but compared to the global pools of savings out there, it’s quite trivial. Investors are looking for a return and what we are trying to do is to show that infrastructure is an asset class that can give them that return; so what Africa50 will do is to prepare bankable projects and raise money to fund them. It will play an intermediary role between governments and investors, which has been missing. You called yourself a ‘foot soldier’ for Africa’s development but what have been some of your major frustrations over the past decade at the bank? Frustrations may not be the right word; its overcoming obstacles and my biggest while president was always how to get some of these African countries to do the right thing, when I knew exactly what they needed to do. Let me give you an example; I was the first bank president to put my feet in Bangui, CAR, spent three days there, opened an office, rolled in place a large portfolio and then, a year later, mayhem erupted during which our projects were looted. In South Sudan, the day they started fighting, we had just approved a $25 million project for energy for the (capital) city, it means we have to go back, and now as I look at the crisis in Burundi, it will be the same. That’s a big frustration for me because you can do much only to be set back to start from zero. Africans need visas to visit Africa. Rwanda removed visas for Africans in 2013, why don’t other African countries see the point of that? Well, that’s a fair point. It’s been one of my fights here. We have a special passport here for the bank’s staff to travel everywhere in Africa and I have suggested that maybe the African Union could consider having an AU passport, which governments could choose to issue to, say, business people. But this thing will require a lot of political will because the other reasons given (for not doing it) don’t make sense. So I agree with you, it’s a fair question and has to be resolved one way or the other soon. Capital markets are becoming popular in many African countries as an alternative source of financing, a good thing, but what does it mean to the role of the AfDB? I encourage African countries that can access capital markets to do so because nations all over the world have developed by tapping into global trade and capital markets. But what we have to be careful about is simply debt management, that’s all. Build capacity to manage debt, invest well and borrow wisely. The AfDB’s own commercial window is also open to both middle and low income countries where they can borrow at as low as 2.5 per cent, with a five year grace period and up to 20 years to repay the money. So what we are saying to countries is that they can mix all these portfolios, capital markets, commercial window of the AfDB, World Bank and this can help them manage debt in the long term. Recent developments saw China lead other countries to start the Asian Infrastructure Development Bank (AIDB) seen by many as a rival of the World Bank; the US scoffed at it. What should be Africa’s reaction? I have said publically that I commend Asians for doing this; I think it is a very excellent initiative and I hope we can find ways in which the AIDB and AfDB can collaborate and in fact, I have already met the Chinese regarding this matter. In fact, I am travelling to China in July, before I retire, to talk to them. So it’s a most welcome development in the world of global finance. The slump in oil and other commodity prices seem to present good and bad news with the recent World Bank report painting a mixed outlook for the continent, what’s your own reading? I am glad you use the terms negative and positive because, for some countries, low fuel prices is actually a good thing as it means lower pressure on balance of payment reduced deficit for more fiscal space, so for countries in that category, this is a good window of opportunity to invest in social and economic infrastructure. For oil exporting countries, it’s really about re-prioritising their investments and to reform their subsidies because some countries have energy subsidies that are as high as 7 per cent of GDP. Now, it’s difficult to reform when oil prices are high, but when they’re low, that’s a low hanging fruit to grab so that you have more fiscal space. What I don’t buy into, though, is the preposition that low commodity prices will lead to low growth in Africa mainly because economic growth in Africa over the years has only been partially supported by commodity prices. The real factors behind growth have been investments, domestic consumption and regional trade; some of the fastest growing countries in Africa like Ethiopia and Rwanda are not commodity dependant, their growth has been due to those three factors. Such strong confidence in the continent’s growth, no wonder your counterpart at the World Bank called you a strong optimist in Africa’s development… And, I have been one since I took office, because I refused these doomsday narratives about Africa. I have managed two major crises in my presidency; the global financial crisis and Ebola. On the former, the wisdom out there was that Africa would be the first one to suffer; I called the finance ministers and all central bank governors to Tunis, Tunisia. We looked at the indicators and concluded that we disagreed with the analysis that Africa would suffer from the crisis. And we were right, the dip was brief and those that were affected have since recovered to pre-crisis levels. (The second was Ebola) On Ebola, you dismissed doomsday narratives and urged for ‘means and will to deal with the epidemic’. The will, maybe yes, but have we proven our capacity to deal with future outbreaks? Ebola now is almost beaten because we had the means and the will was galvanized when we went to West Africa to deal with it; I myself went on ground, in Sierra Leone to assess the situation; we came back here, held crisis meetings and we decided to throw in everything we had. By the end of January, we had probably put in over $230 million in various support interventions to the three Ebola struck countries. The doomsday scenarios were scary but we proved them wrong. There’s a belief out there that Africa can’t cope with crises, I am not prepared to go down that path. At the Africa CEO summit in Geneva, Switzerland, recently, you said it was hypocritical for the west to push African countries to use expensive renewable energy sources to drive industrialisation; didn’t your remarks attract some angry emails from activists? Oh yes! I got a beating. But I stand by my statements. Look, when the UK industrial revolution begun, it was on the basis of coal; later the US and others that followed, industrialised on the basis of oil. Now today, technology enables us to industrialise on a different path – a green path – but I remain convinced that fossil fuels have a big role to play. So it’s not a neither, or, black or white. It’s about resource mix for industrialisation including oil, coal and, of course, a lot of renewable energy for which Africa has in plenty. I understand you are writing a book, would you please give us a sneak peek into it? When should we expect it? I am writing a book about my 10 years as African Development Bank president where I reflect on lessons learnt during that time which I hope will be useful to development practitioners and young people of Africa. I think people who occupy positions like mine actually have a duty to do this. I am hoping as soon as I leave this job, I will take some months off and concentrate on writing. Rwanda, Kenya and Uganda are collaborating on some ambitious infrastructural projects on the Northern Corridor, including the standard gauge railway. Problem is, they have a bill of $7 billion, any idea where they can find the money? This looks like a lot of money but to a long term investor looking at infrastructure as an asset class, if the economics of the railway are right which I think they’re, this is a hugely interesting project. Remember, railways all over the world have been built by private money. So it’s not a question of money, it’s the capacity to demonstrate the economics of the railway. About poverty, people say we are having ‘jobless growth’ in Africa where countries are posting impressive GDP growth but with little impact on the people... It’s a misunderstanding. For two or three decades, Africa was experiencing negative per capita economic growth, which means growth wasn’t enough to cope with population increase. Population was growing faster than the economies and countries were getting poorer. However, in recent years, economic growth has outstripped population increase but it still needs more years to be felt because we begin from a very low base. Also, and perhaps the biggest misunderstanding, is that economic growth isn’t the same thing as economic transformation. The former is the expansion of the size of the economy while the latter is a structural change in the economy. This is gradual and as we move from economic growth to economic transformation, we’ll create more jobs and opportunities. Economies must grow faster than population. If we close the current energy gaps which are costing us, we can register double digit growth; this will also see poverty levels reduce. Just when armed conflicts are reducing on the continent, terrorism has emerged as the new thorn in the boot, how do we win? These are global threats. Al-Shabaab, al-Qaeda, ISIS... these are offshoots of international terrorism so defeating them requires international cooperation. But some of these groups feed on local grievances and turn them into their own instruments so it’s important to also deal with those local grievances where they exist; so it requires a combination of local approach and international cooperation. Finally, after September 1, when you’re not president anymore, what will you do. The Organisation of Economic Cooperation and Development wants you to be patron of an initiative to fight illicit financial flows on the continent, are you available? (Laughs) I am not on the job market for now but what you are saying is different, it’s not a job. Stopping illicit financial flows is one of those important initiatives for Africa. These are not jobs, these are initiatives that require all our support and if they feel I can play a modest role, well, I am ready but it’s not a job, it’s something I would do because it’s a responsibility. Last remarks, to Rwandans, East Africans? For Rwanda, my country, I am proud to have been sponsored for this job, supported by Kenya which seconded my nomination, Seychelles and the entire East Africa, I want to say thank you for giving me this unique opportunity. I hope I have done what I was sent here to do.

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We must reject doomsday narratives on Africa – Kaberuka