Did the Bank’s Annual Meetings meet with expectations this year?
The 52nd Annual Meetings in Ahmedabad, India, were a resounding success. They concluded on a very positive note generated by high appreciation for the Bank’s strong financial performance, the early successes of our ‘High 5’ strategic priorities, and the reception of the new leadership team, which is ready and raring to go.
We are grateful to Prime Minister Narendra Modi and the people of India for their generous hospitality. Over 3,500 participants from all over the world, including the governors of the Bank, government officials, business leaders and representatives of civil society, academia, the media and the youth engaged in discussions on pertinent topics under the theme “Transforming Agriculture for Wealth Creation in Africa”.
The events were also graced with the presence of two African Heads of State – Presidents Macky Sall of Senegal and Patrice Talon of Benin – as well as John Mahama, Ghana’s former Head of State, and Daniel Kablan Duncan, Vice-President of Côte d’Ivoire. This was a sign of the strong support of African leaders for the Bank and its recognition as a trusted partner of choice.
The Governors of the Bank applauded the very strong financial performance of the Bank Group and endorsed urgent actions to finance our High 5 priorities: light up and power Africa; feed Africa; industrialise Africa; integrate Africa; and improve the quality of life for the people of Africa.
Boosting the Bank’s capital base, along with other measures to optimise its balance sheet, will move the needle for us to get the job done. I was very pleased with the strong support of the Board of Governors for our achievements and the encouragement for us to do more for Africa.
Can India’s economic take-off be transposed to Africa?
In a relatively short space of time, India transformed itself from a basket case to a food basket with its green revolution. African nations should learn from this experience. Political will is the key. Political will is the currency for development.
Second, Africa can learn from India in terms of solar energy systems. India has been able to roll out solar systems at scale and is determined to achieve universal access to electricity by next year. Incredible!
Third, in terms of financial inclusion, it has rolled out systems that have allowed over 250m people to have access to digital bank accounts, all within one year. For someone like me who wants Africa to develop very fast, I am always looking for models that we can learn from. India’s experience is not far from that of Africa. I was delighted that Prime Minister Modi said India would strongly support Africa in these areas.
We are also promoting greater bilateral trade and investments between India and Africa, and we expect bilateral trade to reach $100bn by 2018. But Africa will develop on its own terms, not by copying others. The Bank’s High 5s are Africa’s way to accelerate its own development.
What reforms have you put in place at the AfDB and how are they progressing?
Since I took up my post in September 2015, we have embarked on bold reforms to sharpen the Bank’s strategic focus and institutional structure to ensure that it is fit for purpose to accomplish its mandate. The transformation process we launched in April 2016 is geared to get the Bank closer to its clients and enhance operational effectiveness.
The High 5s are the primary accelerators of Africa’s development. According to a recent UN Development Programme analysis, if implemented, they would help African countries achieve 90% of the Sustainable Development Goals and the African Union’s Agenda 2063 goals.
The Bank is doing more than ever before. In 2016, lending approvals reached $10.6bn, the highest in the history of the Bank. We disbursed $6.4bn, also a record for the Bank.
We raised $10.5bn on the global capital markets to finance our operations, the highest in the history of the Bank, which shows you the strong confidence in the Bank. Despite the tough global economic environment, we maintained our AAA rating.
We have set up five regional development and business delivery offices to help accelerate the pace of our delivery for our clients. There is no substitute for being on the ground, closer to the countries, closer to the private sector, as that allows us to work better with other partners and improve the quality of our operations.
We are reforming our internal processes to do more, better and faster. For example, in the past year, we reduced the time between the approval of loans and their becoming effective by 28%. Similarly, we have cut the time between loan approvals and disbursements by 17%.
Perhaps more significantly, total disbursements have increased by 55% over the same period. I applaud the staff of the Bank for their heroic efforts in ensuring that all our performance metrics are moving in the right direction.
Today, the AfDB has the lowest administrative cost compared to adjusted common equity among all multilateral development banks in the world. We will continue to drive for greater efficiency in all our operations.
What tangible benefits is the AfDB bringing to Africa?
We are accelerating the impacts of our financing on the ground to improve the quality of life of Africans. At the end of the day, only results on the ground matter. And we rigorously measure the impacts of our work.
In 2016 alone, some of the achievements include: 3.3m Africans benefiting from new electricity connections; 3.3m people benefiting from improved water supply; 5.7m people benefiting from improvements in agriculture; 7m people benefiting from improved access to roads; 156,000 small businesses provided with access to financial services, and 9.3m people benefiting from access to better health care services.
Let me cite a few examples of projects making tangible impacts on the ground and impacting peoples’ lives in Africa; In Morocco, the Ouarzazate project will provide 500MW of concentrated solar power. This is the largest concentrated solar system in the world.
It will provide clean energy at affordable and competitive tariff while contributing to the diversification of Morocco’s energy mix and reducing CO2 emissions. The Côte d’Ivoire–Liberia–Sierra Leone–Guinea (CLSG) Interconnection Project will boost regional security and the overall economic integration of the Mano River Union Countries with Côte d’Ivoire through increased power trade and security of energy supply.
The project will also contribute to climate change mitigation through replacement of thermal-based generation with hydropower. In East Africa, the Ethiopia–Kenya Electricity Highway Project, which entails construction of a 1,068km transmission line with a transfer capacity of up to 2,000MW in either direction, will promote power trade between countries in East Africa region and serve as a transmission backbone to link the power pools in East, South and North Africa.
The Dakar–Bamako Road Corridor has contributed to a fourfold increase in bilateral trade between the two countries while significantly reducing the travel time for passengers and goods transit.
In Senegal, the Bank’s participation in the Dakar–Diamniadio road highway project through a €375m loan crowded in debt and equity financing from the private sector. With travel times reduced from 90 minutes to 15 minutes, the project has led to improved urban mobility in the Dakar metropolitan area and opened up the suburb of Diamniado as a new urban growth pole.
But we are also supporting accelerated development in fragile states, especially for infrastructure. Our Private Sector Credit Enhancement Facility was designed specifically for transactions in low-income and fragile countries. We have used this to provide a $20m loan to an Independent Power Producer (IPP) in Sierra Leone to build and operate a 50MW power plant, the largest base load power plant in the country.
In 2016, the Bank approved financing of $1.7bn for power sector operations across 19 countries while leveraging $5–7bn in line with its New Deal on Energy for Africa initiative. This is expected to increase to $2bn this year. We have also set up a $500m Fund for Energy Inclusion with $100m seed capital to provide finance on affordable terms to companies investing in the renewable energy space.
Feeding Africa is an urgent priority. Africa’s annual food import bill, currently at $35bn, is estimated to rise to $110bn by 2030. To reverse this trend, agriculture must be seen as a business. That’s why the Bank will invest $24bn in Africa’s agriculture sector over the next 10 years, with a sharp focus on food self-sufficiency and agro-industrialisation.
In 2016, we approved 29 operations under Feed Africa amounting to $837m for 25 African countries, which represents an increase of 74% over the previous year’s lending. We are also making great efforts to improve the image of agriculture among young people and entrepreneurs. Africa’s next set of billionaires will come from agriculture and agro-allied industries.
To this end, we are supporting young agripreneurs through our flagship ENABLE Youth programme. Some 34 countries have expressed interest in the programme and so far the Bank has approved $529m of financing for Sudan, Nigeria, Democratic Republic of Congo, Cameroon, Malawi and Zambia.
Why is the African Development Fund experiencing difficulties?
Well, as you know, the global economic environment is tough for everyone. Development financing rises when there is strong global economic growth, and declines when global economic growth slows down. Many donor nations are faced with major challenges domestically, especially with slow economic recovery in Europe, the migration crisis, high domestic unemployment and other social and security challenges.
Some donor countries are also becoming more inward looking and withdrawing from global commitments. So funds normally intended for official development assistance are either being reduced or diverted to cope with domestic challenges.
The African Development Fund (ADF), which we use to support low-income countries, through loans on concessional terms, witnessed a 13.2% drop in donor contributions due to these factors. It should, however, be noted that it’s not just the AfDB that was affected. Donor contributions to other Multilateral Development Banks also declined, some at even higher levels than ADF.
But let me assure you that there is overwhelming strong support from our shareholders. As the economic situation improves globally, we will see some improvements. We are already seeing some countries in the past few weeks increase on their original levels of commitment.
Just yesterday I got a letter from the government of Norway raising their financing contributions significantly to NOK1.7bn ($206m), stating “We welcome the progress made in implementing the new development and business delivery model of the Bank, and the focus on the Bank’s High 5 priorities, and value your visionary and able leadership.”
But we are not just waiting for others. We are moving to mobilise greater domestic resources within Africa. That’s why we are supporting efforts to integrate and deepen the capital markets in Africa, including the African Domestic Bond Index and the launch of the $200m African Domestic Bond Fund.
We are also launching the Africa Investment Forum to serve as a transaction platform to leverage the pool of long-term savings from institutional investors, including African and global pension and Sovereign Wealth Funds, for financing transformative infrastructure and major private sector investment projects.
Is it time for an increase in the AfDB’s capital?
Africa is already late in its development, so everything for Africa’s development must be fast-tracked. We have got to create jobs massively for the rapidly growing youths, end the migration crisis to Europe, boost economic growth to drive down poverty and unlock Africa’s full economic potentials. That’s why our Board of Governors strongly endorsed our High 5 priorities.
Other world leaders are calling for accelerated actions to support these High 5s. I set up a High Level Panel led by former President of Germany Horst Kohler, former UN Secretary General Kofi Annan and several leading global figures. Their report, Fast Track Africa, noted that achieving the concrete goals set out in the High 5s could be a beacon for poverty reduction and inclusive growth on the continent. They can fast-track Africa and make this continent a new pole of economic growth.
The report called on AfDB shareholders to support proposals to equip the Bank to scale up its financial support to member countries, which will require a substantial increase in ADF resources and the Bank’s capital.
At the Annual Meetings of the Bank, the Board of Governors called for the Bank to accelerate its work on the High 5s and said that it would consider, at the appropriate time, a General Capital Increase. There is no doubt in my mind that the time is right to begin those discussions. We must fast-track Africa.
How do you see Africa’s status in 2017?
Africa is resilient and buoyant despite the dip in GDP growth in 2016. The continent’s economic performance is expected to reach 3.4% in 2017, up from 2.2% in 2016, and trending upwards to over 4% in 2018.
Many factors account for this optimism; the recovery of commodity prices, which is expected to continue for the rest of 2017 and in 2018. For example, oil prices increased by 8.6% in May 2017, compared to 2016; copper prices increased nearly 20%, and the metal index rose by 17.5%.
Perhaps most remarkable is the fact that some of the best-performing economies are resource-poor and even landlocked, which shows evidence of the continent’s real transformation. Most of Africa’s major economies – Nigeria, Angola, Egypt – are expected to register higher growth in 2017 although the challenges in South Africa may continue.
Let me underscore the diversity of growth of African economies. In 2016, 32 countries grew at 3–5 %, with 12 countries growing at well above 5%. Côte d’Ivoire grew at 8.2%, Ethiopia at 8%, Tanzania at 7%, Senegal at 6.7%, Rwanda and Kenya at 6% respectively.
These are impressive growth rates. These countries demonstrate the resilience of African economies despite the global and regional headwinds. Being mainly non-oil exporting economies, they also point to the need to diversify the sources of growth in African countries, including measures to increase the share of the manufacturing sector and boost intra-regional trade; increase agricultural productivity; as well as sustaining good macroeconomic management and structural reforms to maintain international competitiveness.
Africa is also reforming its business and regulatory environments to be able to turn these growth rates into higher levels of foreign direct investments. Africa accounted for 30% of the global improvements in business and regulatory environments in 2015.
This year, 34 out of the 47 African countries in the World Bank’s Doing Business Report have also shown at least one improvement in the business and regulatory environment. Importantly, Sub-Saharan Africa is doing well, accounting for five of the top 10 performers.
Africa is now witnessing an increase in foreign direct investments, which is expected to surpass $57bn this year, compared to $10bn in 2000. Things are looking up for Africa. Average inflation should come down to single digit this year.
The terms of trade, one the most important indicators of macroeconomic performance for open economies, will turn positive to 3.4 % in 2017, from –1.9% last year. Total external debt is projected to remain under 30%, well below the 40% threshold that is generally considered safe for developing economies.
New, bold, and visionary African leadership is emerging in many countries. Many African countries are pursuing structural reforms to boost growth and create employment in industries with competitive potential. The African Development Bank, with its High 5s, will help Africa to speed up its economic transformation. We must fast-track Africa!
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