SCEPTICISM about Africa is waning, says African Development Bank (ADB) president Donald Kaberuka. He points to the high growth figures predicted for the continent — 5% this year and up to 6% next year — as proof that real change is happening.
This growth is not only about resources, he maintains. “Something has happened since 2000 that is not simply explained by the price of raw materials. That is maybe 30% of the momentum — the rest is accounted for by fundamental reforms taking place at the macroeconomic level.”
Interviewed in Tunis at the ADB’s recent annual African Economic Conference, Kaberuka highlighted the increasing financial contribution African countries are making to their own development.
For every $40bn of aid coming to Africa, African countries were raising $400bn through leveraging pension funds, bonds, remittances and other mechanisms .
“There is increasingly an understanding that aid will not solve everything and with the withdrawal of capital from the developed countries, Africa is starting to fend for itself.”
He believes the private sector has a strong role to play in building the continent and, in line with this, has introduced more support from the bank for building capacity and improving the investment climate. For example, the bank is now an investor in African-focused private equity funds and can take up 24% in any fund.
However, he also believes governments should do more to find sustainable internal sources of funding, such as building a strong tax base: “But to do so, African states need to persuade their citizens that their taxes are being used for the public good.”
Kaberuka, who is known to be media friendly, was unhurried at the interview, despite the clamour for his attention at the event, declaring Business Day to be one of his “favourite” newspapers.
From Rwanda, Kaberuka is an economist by trade and a former minister of finance and economic planning in President Paul Kagame’s cabinet, who has been credited with helping rebuild the country into an African success story. He also has extensive experience in the private banking sector, dealing with trade finance, international commodities and development issues.
In 2005, he was elected the seventh president of the ADB Group, chairing the boards of the ADB and the African Development Fund, the soft-loans arm of the group.
Kaberuka has proved to be a popular choice and was re-elected earlier this year. He has focused on making the bank more efficient and more responsive to the continent’s real priorities.
“The shareholders tell me they appreciate what we have done in terms of strategic choices and moving the bank away from trying to be all things to everyone. We have focused on a few things we can do well and that matter for African growth at this time — infrastructure, regional integration, private sector development, governance, higher education and post-conflict development.”
The ADB’s shareholding is split between 53 African countries and 24 international members, drawn from the US, European and Asian countries, including China.
SA joined the bank in 1995 and earlier this year was voted on to its board.
Kaberuka’s initial election to the post was hard won. At the voting in Nigeria in 2005, he stood against candidates from six other countries, including former Zimbabwean finance minister Simba Makoni.
In the final round, his main challenger was Nigeria’s Olabisi Ogunjobi but the voting ended with no clear winner. In a subsequent voting round some months later, Kaberuka finally won a sufficient majority. ADB presidents have all been from North and West Africa, with the exception of Zambia for five years from 1980.
The bank had its headquarters in Cote d’Ivoire until 2003, when rising conflict in that country pushed it to relocate to temporary headquarters in Tunisia.
But Kaberuka says the bank is considering going back to its former home and the buildings are being refurbished. Cote d’Ivoire recently held its first election in a decade and there are signs that peace is returning.
Asked about a perceived bias in the ADB towards Francophone Africa, given its history, he replies that if that was the case, it had changed since 2005.
“Today, the Southern African Development Community region is the largest borrower from the bank — bigger than North Africa, which previously had the largest portfolio.
“There is no bias against southern Africa. It’s just that many countries in that region became independent in later years so they joined the bank later than countries in other regions.”
In June, the bank opened a southern African office in Pretoria, which forms part of its decentralisation strategy.
Kaberuka says that despite the fact the ADB’s capital base has just been increased 200% to R700bn, it is still a long way off meeting the considerable challenges of the continent given the large deficits from infrastructure through to education.
Although more than half of the ADB’s funding is dedicated to infrastructure, there are also soft issues that are hindering development in Africa.
For example, in the energy sector, which swallows about half of the bank’s infrastructure spending, there are a number of policy constraints to attracting private sector investment to plug the gaps.
These include the quality of regulation in many countries, a dearth of viable national off-takers, unrealistic tariff policies and poor billing systems. “There is not enough public money to finance the large energy gap, so we must attract private money, and the only way to do so is to ensure we have financially viable off-takers, such as Eskom,” he says. The ADB has shown its confidence in Eskom’s viability with a loan of more than R11bn for the construction of the Medupi coal-fired power station.
“We see a huge appetite for independent power producers. What we are trying to do is work in the area of policy reform.”
Kaberuka says another weakness is the failure by countries to adequately maintain costly infrastructure once it is in place. “Maintenance is fundamental and we are looking at ways of building this into our lending programmes,” he says.
Kaberuka is a strong supporter of regional infrastructure and development corridors, but says progress can be slow because of the nationalistic focus of many countries in terms of politics and funding priorities.
“Infrastructure on its own will achieve very little unless you have the political will to handle the soft issues. But everyone accepts that regional integration is imperative. It may be slow in some parts but I don’t know of any country today that says it is not a priority for them.”
Kaberuka’s work is about priorities. As a Rwandan national, is it difficult for him to view the continent dispassionately?
“Being president has not taken away my nationality, but I treat all countries the same. We have a policy in the bank not to take political positions on our countries — we are very clear about that. For me, as president of the bank, the 53 countries of Africa are my clients and we treat them all equally.”