In an exclusive interview on the sidelines of the UN General Assembly, Akinwumi Adesina, President of the African Development Bank underlines the urgency to accelerate investment in Africa. He’s making it his personal mission to change mindsets and channel a portion of the trillions of dollars of assets under management to the continent. By our publisher, Omar Ben Yedder.
I meet Akinwumi Adesina, President of the African Development Bank (AfDB) at the Hilton opposite the United Nations headquarters in New York. It’s 11.00am and Adesina is finishing his breakfast: eggs, smoked salmon and some toast. Or is it breakfast? The President of the AfDB has slept a mere 15 minutes in the past 24 hours.
I’d briefly seen him at two events the previous day championing the African opportunity, crowding in new partners and calling for greater engagement with the continent. As is his usual demeanour, he was ebullient and energetic; statistic after statistic flowed from his lips – he is very much a numbers man. Throughout the years I have followed him – his time at the Rockefeller Foundation, then the Ministry of Agriculture in Nigeria and now at the African Development Bank – he has always demonstrated high energy and enthusiasm.
An agricultural economist by training, he was one of Nigeria’s star ministers during the Jonathan Goodluck administration. At one particularly sensitive time, when floods had ravaged the country and threatened to destroy the livelihoods of millions of farmers, rather than reacting to anecdotal evidence and blindly sending help and assistance, he decided to put together a clinical response. He mapped out the affected territories to identify which areas needed the most support and to enable the appropriate action to be taken, including helping those farmers most in need, as well as offering financial support. He demands evidence-based responses to problems.
Four years into his job at the Bank, Adesina is very much at ease in his position as Africa’s chief cheerleader amongst the investment and development community. He has all the facts and figures at his fingertips and is comfortable with a wide range of issues, having studied and thought them through in detail.
It was the first time I have seen him looking somewhat tired and he was embarking on another long day ahead. UNGA week is relentless and Adesina is known to run himself and his team hard.
Having followed the Bank for over a decade, it’s evident that it’s not an easy institution to manage and yet it has a critical role to play as a driver and enabler of development. For many international institutions, it’s the yardstick by which they make decisions about their engagement with the continent.
When he took up the post, rumours circulated that Adesina had started on the wrong foot by alienating his board and staff within the Bank were unsure about the way he was re-structuring the Bank and decentralising its activities.
When I asked him about his current relationship with the board and the reaction to the reforms he is instituting to see through his visions, he replies confidently: “I have an excellent relationship with the board. The Board is an oversight board and will not always agree on everything – that’s normal, that’s what it is. But apart from that, we have a perfect engagement with the board. When we sent a document to our shareholders for the general capital increase of the Bank, it was unanimous.”
We started our conversation by discussing the relevance of multilateral development banks. Today governments can go to the international markets to raise capital –there are today over $100bn worth of African Eurobonds outstanding from next to nothing a decade ago. He says that the Bank is still the cheapest source of capital, and in any case, the infrastructure financing gap, depending on estimates, is anything between $68bn and 108bn.
He is determined to unlock the $1.8 trillion of assets under management by African institutional investors, sovereign wealth funds, pension funds and insurance pools to finance African development. Governments he says, account for 65% of all investment in infrastructure. There needs to be a mind-set change – and the accompanying regulatory reforms – he says, so that these funds shift their investments from low yielding assets (read US Treasury bills) to investing on the continent.
The Bank’s role is to make infrastructure an appealing asset class, and use the Bank’s capabilities and its AAA-rating to de-risk some of these investments, including creating new instruments to enable this. Mobilising more capital seems to be his personal mission. He has worked over the past two years on the Bank’s capital increase (a decision was due on 31 October).* The Bank estimates that Africa needs to invest $1.2 trillion yearly. The SDGs will require between $400-600bn. He is therefore working to mobilise more capital from other multilateral development banks and he says the Bank has spoken to 22 big insurance investors globally to see how they can channel some of their investments towards Africa.
He estimates that assets under management globally total $113 trillion, and having taken over the chairmanship of all the multilateral development banks he is working with his peers to see how they can ensure a percentage of that is diverted to infrastructure globally.
I have sensed some impatience in recent pronouncements by Adesina. He still waxes lyrical over the African growth story – “foreign direct investment coming to Africa actually grew 11% last year, whilst if you look at the rest of the world it contracted 13% globally and 23% in developed economies. Asia grew by a tepid 4%…so Africa’s story is compelling and it is not just about sheer optimism,” he says – but in his interventions at international events, he does say that progress is not taking place nearly as quickly as it should and is calling for a lot more urgency.
I am not sure whether this is aimed at his teams at the Bank, shareholders – i.e. foreign governments – or African leaders and policymakers. He says that he “simply cannot accept that Africa will fail on the SDGs” and that he doesn’t like excuses. “I guess that what I feel is just a compelling sense of responsibility to make sure we can deliver faster”.
He cites the ‘Desert to Power’ initiative in the Sahel – a solar project that will generate 10,000 MW for a market of 250m people – as an example of how creating an environment of urgency can generate results.
I question him on the quality of leadership on the continent and whether there is the political will to get things done. He says that Heads of State are supportive and want a bigger Bank to help do more and that the demographic shift means that governments have no option but to create jobs: they have no choice but to act.
Is he worried about what is happening globally, in terms of the trade spat between China and the USA and isolationist policies that could impact Africa, either directly or indirectly?
They are both massive trading partners he says, $61bn (US) and $116bn (China). So the weakening demand from those large economies are headwinds he is watching “very very closely” he says. Not to mention implications for investment and overseas development assistance because of nativist policies.
He seemed especially concerned about how this will translate in terms of global monetary policies, interest rates and the value of the dollar, all of which have direct repercussions for African economies, in terms of borrowing costs, the flow of capital, and thus the fiscal space and debt management issues of different countries.
Manageable debt levels
When pressed on African debt exposure he points out that “Africa is not in any debt distress at all.” Debt to GDP may have gone up (from 25% in 2015 to 37% today) he says but it is “way below sustainable debt levels”.
Debt servicing – what people worry more about – he says is also still within manageable limits, having gone up from 15% in 2015 to 24% today.
He does admit that certain countries need to be attentive but that they are aware of the risks and are more prudent than previously. He adds that the Bank is extra vigilant and very stringent on good governance, accountability, debt transparency and sustainable debt management.
How does he assess his four years in office? Once again he prefers for the numbers to speak on his behalf: “We’ve connected 16m people to electricity; we have provided 70m people with access to agricultural technologies; we have been able to provide access to improved transportation for 55m people; we have provided access for 31m people to improve water and sanitation.”
He’s also happy with the way the Bank is closer to its operations on the ground. He has overseen a wide decentralisation programme that means that today 56% of its staff are based in their country and regional offices and that 73% of their operations are being managed locally. This has meant better engagement with their stakeholders in-country and has resulted in better quality and more effective operations.
As I end our interview, leaving him with a full schedule of meetings, he closes by reminding me that we are “blessed with oil, minerals, gas, agriculture and everything else and what can become the world’s largest workforce. All we have to do is make sure we unlock our potential fully. When we do that, Africa will be unstoppable.” What is sure is that his enthusiasm and drive will take some stopping.
“We have a perfect engagement with the board. When we sent a document to our shareholders for the general capital increase of the Bank, it was unanimous.”
* On October 31, AfDB’s board approved a 125% capital increase from $93 billion to $208 billion. The decision marks the group’s largest capital boost in history, that will allow the bank to expand its lending operations.