www.the-african.org
The global economic crisis is having a devastating
effect on Africa: exports are suffering, mines are
closing down and thousands of jobs are being lost.
It now also emerges remittances to Africa are being
cut by up to 30%.
Liesl Louw-Vaudran spoke to
Mr Donald Kaberuka, president of
the African Development Bank, in Tunis
Initially there was the impression that Africa
would be isolated from the global financial crisis?
In the beginning people were saying: this crisis is
not for us, it is for others.
My thinking then was no, this crisis will reach us
through secondary level channels.
It will take time to reach us, but it will.
So we set up a committee of five ministers and
five governors of central banks.
This committee met twice in Cape Town and
Dar es Salaam and drew up recommendations which
we gave to the British Prime
Minister Gordon Brown and which we fed into the G20.
The analysis is very clear of what has happened
between November and now: real GDP growth on
the continent has been cut by half, to 3.5%.
This might look like an innocuous number,
but it means two things:
§ In many African countries population growth
is 2 to 3%.
If you have economies growing at the same rate
that basically means there is no growth,
because whatever growth you're having
is being eaten up by a growing population.
§ The second implication is that for Africa to attain
the Millennium Development Goals (MDGs); you need
a growth rate of 7%.
So if you fall below that 7%
the MDGs are compromised.
Are all countries in Africa going to be hit by
the crisis in the same way?
Africa has 53 countries and the number
I'm giving you is an average.
However, one of the most worrying aspects of
the crisis is that the large economic engines of
the continent have been the hardest hit: Nigeria,
South Africa, Egypt, Kenya
and others. Why is this important?
Nigeria is 60% of ECOWAS. Slow down
the economy of Nigeria and you slow down
the neighbourhood.
These engines were hit through several
channels, but mainly through exports; i
n the case of South Africa minerals, Nigeria oil
and in Kenya it was mainly tourism
and other exports like flowers.
I was in Zambia recently and I requested
the president Rupiah Banda to visit the Copperbelt,
which I did. What I found was $8000
a ton of copper in November, and now $3000 …
there has been a huge impact: the mines
are struggling badly. Energy and
transport costs are high and at $3000
it is hardly worth it.
So if people say the crisis is not for us,
they should look at the figures.
What about the banks?
We have not had a banking crisis or
banking failure because the banks are
not exposed to toxic products.
But if the private sector starts to suffer – in
the oil sector or the mining sector – there is
no way the banks can escape it.
Banks lend to these clients and as
the clients fail to pay,
they have less money to lend.
How has the ADB reacted to the crisis?
We have done three things: we are practically
doubling our lending; we provide
trade finance and we make liquidity available.
But in the end what we are doing is
a drop in the ocean. I will give you
some confidential information.
Though I'm not sure how you give
confidential information to journalists? (laughs)
The requests we are getting at the bank for
urgent help is something I have
never seen before.
And the requests are from
unexpected countries.
Some are coming to look for a billion,
some half a billion to support the budget,
because the drop is sudden.
So I'm going to ask our governors to give us
additional instruments that are best
adapted to times of crisis.
The instruments we have at the moment
take time: you submit your proposal and
you get your funds in six months.
However, the requests we have now
are very urgent.
You said you are going to double
your lending. What is the state of
your balance sheet and how far
can you stretch it?
All the strategic areas of the bank are still
in the comfort zone, unlike the Asian
Development Bank, for which the G20
is asking a 200% capital increase.
For the American Development Banks,
and for us the resolution says: demonstrate
the need.
My answer is as we stand now,
true, we still have headroom.
Without the financial crisis, we would not
have needed a general capital increase until 2013.
But now we need a general
capital increase much earlier.
Commercial banks seem so reluctant
to give loans.
Are you talking to them to find
some kind of solution?
Or is that not your mandate?
We certainly are investing in banks – second
and third tier banks, because these are
the ones we are interested in – and we
encourage them to lend to small businesses.
Commercial banks must decide for themselves
what are the risks.
But I disagree with you that they
haven't been lending.
It's a question of concentration, they've only
been lending to certain sectors.
That's what we're trying to change.
Many of these companies on the continent
have to find the balance between debt
and equity and I'm not sure if piling debt
on them is the best solution.
They should be more selective.
Are there any indications of when the crisis will end?
I've been in this business for a long time and if
there is someone who knows when we hit the bottom,
I'd be very surprised.
I've heard figures from one to five years.
There are some imponderables here: the first is
whether all these fiscal stimuli are actually
creating confidence that will get
credit moving again?
Are they creating confidence fast enough?
I don't know.
The second imponderable is whether
the internal demand in the Chinese economy
can move fast enough to compensate for
weakening international demand.
The Chinese economy was very much driven
by export demand but it has plenty
of internal potential.
What lessons can we in Africa learn
from the current crisis?
There are definitely lessons to be learnt.
One issue, which is very important to note is
that if this crisis happened 20 years ago
it would have found a continent in great crisis.
However, many countries internally have over
the last number of years been doing the right thing.
They are better placed to deal with the crisis
than what would have been the case 20 years ago.
I'm saying this so we don't draw the wrong conclusions
from the crisis.
We shouldn't now abandon market reforms,
abandon integration, abandon globalisation ...
these things have made the continent
much stronger in the face of external shocks.
The deficits are much more contained and
the banking is better capitalised
to withstand these shocks.
But Africa has certain structural problems.
Firstly, there is an excessive reliance on commodities.
Zambia depended on copper in the seventies,
it still does.
When there is a recession they suffer.
The same goes for Katanga and other regions.
Secondly is the very poor state of infrastructure.
The mines I saw in the Copperbelt not only
suffer because of low prices, but also because
of power outages and bad roads.
On this same road I travelled to Ndola,
what do you see?
Trucks and trucks transporting copper.
You can't carry copper and expect
the roads to last.
When they depend on world prices and
profit margins decrease, this becomes a problem.
We must definitely reduce the cost
of doing business because
we can't control international prices.
Thirdly is this issue of internal trade,
this definitely has to improve.
On the last point, you were at the launch of
the North-South Corridor last month in Lusaka.
Do you believe these initiatives
can make a difference?
These initiatives are absolutely marvellous.
We have pledged $600 million in the next 5 years
on the North-South corridor.
However, what worries me about these corridors
is the slow progress on man-made barriers – papers,
bureaucracy…
The second concern is maintenance.
We need more road maintenance.
We are told that to construct 1km of road on
an easy terrain costs $600 000 and $1 million
on complicated terrain.
So imagine if there is no maintenance
what it costs to rebuild these roads every year?
At the same time we are told that to construct
1km of rail is $1 million.
I believe we really need
to rehabilitate our railways in Africa.
Have the big projects like
the promised huge Chinese infrastructure
projects in Angola and the Democratic
Republic of the Congo
gone ahead despite the crisis?
Many projects large and small have
been cancelled or scaled down and we,
as the Bank, have in many cases
picked up some of the projects.
However, I remain optimistic: one aspect
of the crisis is that for years people have
been saying Africa is high risk, but more money
was lost on Wall Street than in Africa in
the last two or three decades.
It is clear there has been a systematic
undervaluation of Africa's assets because
we are supposed to be so high risk.
We're hoping that when the markets
recover we will continue attracting
investment.
Our banks are safer,
we are better regulated.
What about remittances from those
in the Diaspora sending money
back home to their families?
Remittances are definitely hit by
the crisis. For some countries
like Ghana for example, remittances
are more important than the combined
value of foreign aid and exports.
They're also much more predictable
and politically insulated.
The figure we've received is a decline
of up to 30%.
However, we have to wait until
the end of the year to see
a clearer picture of this decline.
Apart from the present crisis, are you
concerned about the impact of
global warming and environmental
change on African economies in the longer term?
We are the continent most affected
by global warming.
What I find regrettable is that
much attention and resources has
gone to financing mitigation – reducing emissions
or their rate of increase – and
not enough to adaptation.
What we need in
Africa is adaptation.
For example, in Bangladesh the sea levels
are rising and the paddy farms
are being flooded.
They're now being adapted
to become prawn farms.
In Africa the challenges are huge,
but we don't have the same resources.
The second issue to be addressed
in Copenhagen (the United Nations
Copenhagen Conference on Climate
Change in December 2009) is the ability
to develop hydropower – whether it is
the Nile or the Zambezi or the Congo River.
We have enormous difficulty raising money
for these big projects.
The third issue is Africa's forests.
We have a programme here at the bank on the
Congo Basin to fund agriculture so that
the Congolese and others don't cut down
their forests.
There is nothing in the Kyoto protocol
that makes provision for that.
Looking at Zimbabwe: you said that
unless there's a proper government
you're not going to give a dime to Zimbabwe?
I've said just the opposite.
I've said that the agreement in Zimbabwe
between the parties is the best
we can get under the circumstances.
It's a compromise accepted by
the international community..
It is showing signs of beginning to work.
My judgement is that the international
community should stop sitting
on the fence.
We are part of that community.
However, we do have to figure out
a way out of Zimbabwe's debt problem.
It is around $400 million.
And we are working at it.
Zimbabwe's debt is not the biggest debt
settlement we've had to deal with: we've done
the Democratic Republic of the Congo and
we did the Ivory Coast, which was concluded
only last month.
Now that economic laws are coming back
to Zimbabwe, there is multicurrency income
coming into Zimbabwe.
I hope it doesn't take too long.
It took us two years to settle Liberia's debt and
it took us a few months to sort out
the Ivory Coast's debt, which was bigger
than that of Zimbabwe.
--
J-L K.
Procurement Consultant
Gsm: (250) (0) 78-847-0205 (Mtn Rwanda)
Gsm: (250) (0) 75-079-9819 (Rwandatel)
Home: (250) (0) 25-510-4140
P.O. Box 3867
Kigali - RWANDA
East AFRICA
jlkayisa@yahoo.com
http://facebook.com/kayisa
Blog: http://cepgl.blogspot.com
Skype ID: kayisa66
No comments:
Post a Comment