8 November 2012

Uganda: Infrastructure and Education Key - AFDB

It is not a secret. While Sub-Saharan Africa continues to print enviable economic growth figures there is an urgent need to see these benefits spread more evenly around the population. As head of the African Development Bank this single challenge is Don Kaberuka's biggest raison d'etre.

During a public lecture on Tuesday sponsored by the Bank of Uganda, Kaberuka raised the bar even higher, "Economic transformation is a process and not a goal in itself," he said. "The goal is to eradicate poverty." Economic transformation is now the buzz word just as economic growth was in 1980s and 1990s.

Hobbled by poor economic policies that emphasised centralised planning, poor discipline in public finances, the capture of state resources by ruling elites and failed states, Africa did not live up to its earlier promise.

In the last 25 years, thanks to a shift to economic liberalisation policies and greater political stability on the continent, economic growth has taken off.

But: "The quality of Africa's growth during the past 10 years has not been inclusive, with too few jobs created especially for the young people in the booming economies," Kaberuka told the gathering at the Serena Conference Centre, adding that youth unemployment last year stood at 20%, twice the global average.

Economic growth is important as there can be no transformation without it.

So, then, the question remains how do we translate the continent's prodigious growth figures into improved welfare for its citizens?

Using the examples of Brazil, South Korea and China, who are well on the way to economic transformation, Kaberuka said agricultural reform has been shown to be key.

"It is now almost a truism that economic transformation begins with reforms in agriculture to raise productivity ... productivity-led agricultural growth is more important for economic transformation than merely sending surplus labour to urban industry," he said.

And this can still be managed by small holder farmers who are capable of adopting new technologies but need support to overcome external shocks and other impediments.

The provision of quality education across the board would greatly help in rapid adoption of these technologies by farmers. "Research indicates that smallholders with some education are more willing to adopt new agricultural technologies, such as use of fertilizer and command higher incomes," he said.

And finally improved infrastructure to lower the cost of production and to open up markets is critical.

"Africa will require $360b in infrastructure investments in the next 30 years.... A total of 51 priority regional infrastructure projects worth $67.9b in energy, transport, ICT and trans-boundary water are planned for implementation by 2020," he said.

The sums are enormous and financing the continent's transformation cannot be left to governments alone. Already countries like Kenya, Ghana, Nigeria and Zambia have tapped the international markets for funds using infrastructure bonds.

Zambia's bond issue was oversubscribed more than ten times over with a yield that was more competitive than for many of the distressed economies of southern Europe.

Kaberuka also mooted an investing of 5% of the continent's $500b in Central Bank reserves, about $22b. Governments would not only get a better return from the AfDB with whom the money would be invested but would also contribute to infrastructure investment on the continent. The technicalities of operationalizing such a plan are not insurmountable, Kaberuka said.

Economic transformation cannot be achieved without visionary governments he said. "I gather that Uganda is shooting for first world in the next 50 years. None of these ambitions are misplaced. Africa has the resources and the manpower to achieve most goals. The new technologies will make the process easier in some respects," he said.

His bank would still push for a maintenance of current growth trends but in the next ten years will be focused on making this growth more inclusive by pushing for improved agricultural productivity, promoting higher education and subsidies targeted at the poor, he said.

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