Washington, DC — Not enough attention is being paid to African success stories, World Bank President Paul Wolfowitz told an Africa investment forum last week. Citing a decline in active armed conflicts on the continent from 16 in 2002 to six today and the fact that 15 Africa countries have had medium growth rates of better than 5% over the past decade, he said the trend is encouraging, although higher growth is required "to make a dent in poverty."
Africa has a disproportionate share of the world's poor, he said, which is why the region has been a priority for him since he took office just over a year ago. "It is not a healthy world when a major part of the world is falling behind," Wolfowitz told an audience of Africa government officials and business leaders on Wednesday. Joining Wolfowitz on the panel to discuss how to stimulate higher investment flows to Africa was Don Kaberuka, president of the African Development Bank, along with Erastus Mwencha from the Common Market for East and Southern Africa and the heads of two U.S-based Africa private equity funds, Tom Barry from Zephyr Management and Thomas Gibian from EMP Africa.
The panel moderator, Rosa Whitaker, president of the Washington-DC-based consultancy The Whitaker Group, said the forum was organized to spotlight how to stimulate capital flows to Africa, which currently receives less than three percent of foreign direct investment worldwide. After delivering the conference key note luncheon address, Don Kaberuka, a former Rwandan finance minister who became the seventh president of the African Development Bank last September, spoke to AllAfrica about his ideas for making Africa a more enticing investment destination and the role he sees for the multilateral financial institution he leads.
You said you are often asked why investors are not flocking to Africa, even though many governments have put sound fiscal and economic policies in place. What is your answer?
There's a gap between policies and practices. You must first adopt good polices. Then you must apply them for a sufficiently long period of time for them to be effective - but also for them to be believed. The danger is that, either because of lack of capacity or lack of political will, [the policies] are not fully implemented. A policy gap results when [governments] are not able to sustain policies for a long enough period of time for them to gain creditability. We have to sustain sound policies. That is what creates an attractive investment climate.
We also have to combat corruption and create good governance. The anti-corruption agenda should not be seen as a donor agenda. It has to be an African agenda because it affects African lives and Africa's future and it affects the investment climate as well.
You also mentioned the problem of Africa's image.
There are a number of positive developments that are often not recognized. Africa has had many peaceful transitions from one elected president to another. In the 1960s and 1970s, there were many coups, but not so today. And as Paul Wolfowitz mentioned, conflicts are down. Sudan is still a challenge. Somalia is very difficult. But in almost all the other countries there is progress.
There are investors who are very active in Africa at the moment.
Yes, the South Africans, who know Africa very well. Indians know Africa very well. The Chinese. They read risks differently and they are investing actively all over the place. But I am convinced that other companies will be coming to Africa. This is why the sustainability of policies is important.
And what are you trying to do at the Bank in this regard?
We are addressing the key bottlenecks that have to be broken so the investment climate can improve. We are trying to help Africa close the gaps I mentioned - the credibility gap but also the gap in infrastructure, because better infrastructure is critical. In this regard, the Bank has put an emphasis on road building and on providing access to water for rural people across the continent, We also support our member countries' efforts to consolidate good governance, especially good economic governance. And we focus on regional integration, regional projects, and on vocational and technical training because that also is part of what is required to improve the investment climate.
The African Development Bank (AfDB) has triple-A ratings from four international agencies (Standard & Poors, Fitch, JCR and Moody's). You manage over $11 billion in liquidity and make up to $2 billion in loans annually. How does AfDB compare with other regional financial institutions.
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From a financial standpoint, AfDB is one the most successful development banks in the world. It compares favorably with the InterAmerica Bank, the Asia Development Bank. AfDB has had a triple-A rating for a long period of time, and its risk-bearing capacity is even bigger than other third world development banks. The financial standards of the AfDB are quite high. And we have reorganized our institutional structure and improved our policies and procedures.
How would you sum up the challenges that Africa faces?
Africa is in transition - economic and political transition. We are rich in natural resources, and we are finally largely at peace. But it is important to recognize that over 60% of Africa's population is under 25 years of age, and soon the continent will have one billion people. We have 53 countries and 800 languages. Such diversity requires painstaking efforts to establish national identity within the boundaries created by colonial powers across ethnic, religious and tribal divides. We have to find a way to build consensus across those divides. And we have to have leadership to get our political institutions and economic management right.
