Tunis — 4th Replenishment Meeting
Statement by Shriti Vadera
Junior International Development Minister, UK
10 December 2007, London
President Kaberuka,
Mr. Chairman,
Ministers,
Deputies,
Executive Directors,
Ladies and Gentlemen,
Welcome to London. The UK government is pleased to be hosting this final ADF replenishment meeting as a sign of Britain's and this Prime Minister's longstanding commitment to Africa.
We should consider this meeting not just as a replenishment for the ADF, but a reminder that we are half way to the MDG target date of 2015. But, as the front page of The Guardian shows us this morning, in Africa we are a long way off track.
If we are serious about giving Africa a chance, then we have to be serious about backing African institutions. The one lesson we have learnt is that for development to work in Africa it has to be led by Africans and not by donors.
20 years ago, poor performance and mismanagement led to the AfDB losing the support and trust of its shareholders. What followed was a long period of reform - starting with consolidating the bank's finances and more recently overhauling internal processes and building capacity.
I first met President Kaberuka when he was Rwanda's finance minister and one of Africa's leading economic reformers. I believed his presidency gives the AfDB the best chance it has had in a long time to complete these reforms - and for the drive for results to become a part of the institution's DNA.
To the senior managers of the AfDB here, I urge the energy, commitment, teamwork and the accountability to deliver results for the continent.
The contribution that the AfDB makes to development in Africa is the first and arguably the only test that matters.
The effectiveness of the board is central to the ability of the AfDB to make this contribution. We as shareholders need to guide the strategic issues, not manage the micro ones. And we need to serve the interests of the continent not represent those of our individual nations.
I have an enormous sense of urgency about the relevance and effectiveness of the AfDB, not just because we are half way to the MDGs.
But because we are at a critical point of Africa's growth cycle.
Perhaps for the first time we have a sense of optimism in Africa with many, if not all, countries growing at better rates than ever before. An average growth rate of 5% is the highest since the 1970s.
But we know it's easier to initiate growth than to sustain it. Although there are many constraints to growth, you don't need to remove them all at the same time to initiate growth.
The challenge that we have to worry about is the more difficult one of sustaining growth at that is what leads to poverty reduction.
Statistically, in any 10 year period, countries have 1 in 4 chance that they will initiate a growth spurt. Though there have been over 80 such growth spurts since the 1950s, few were sustained beyond 8 years.
We are arguably getting beyond the half way point of Africa's growth spurt. And in some countries this growth has been led by commodity prices not productivity gains. The success of African growth in the past few years cannot be a guide to the future. And business as usual will not sustain this success. And so if we want our efforts at poverty reduction to succeed, we need the continent's bank to be effective, fully funded and leading the way in ensuring African continues to grow rapidly, equitably and sustainably.
First, by promoting private sector development. Unleashing Africa's entrepreneurial energy is necessary. Only private economic activity can provide the future employment and the ongoing tax revenues needed to support investments in basis services. I'm pleased to see the bank's private sector portfolio expanding so rapidly, and look forward to a strategy on how this work will develop further.
Secondly, by investing in infrastructure. In every African country that I have visited, leaders have identified lack of energy, transport and communications as the top of the list of major bottlenecks to growth.
The AfDB has a clear comparative advantage in removing these constraints.
Third, in improving governance. Governments need to be transparent and accountable. Corruption is worse than theft. It can stop growth in its tracks. A study of Nigeria found historically not only that oil wealth has been squandered, but it had fundamentally altered governance, contributing to lower long term growth by at least 0.5%.
And I believe only the AfDB can uniquely help to connect and therefore create Africa's markets. I firmly believe regional integration is the only way forward for Africa's domestic markets, limited as most are by small populations and low incomes. 39 African countries have a population of less than 15 million people - and 21 countries with less than 5 million. 32 countries have per capita incomes below $500 a year.
And this is compounded by 30% of people living in landlocked countries compared to the world average of only 1%.
Africa's future growth will depend on linking its internal markets to create more sustainable ones, as well as connecting to the global economy.
Regional integration provides economies of scale, stronger competition and more domestic and foreign investment. This should raise productivity and enable diversification in production and exports. It also helps manage shared natural resources and make reforms deeper and less reversible.
The example of COMESA, which Rwanda and Burundi joined in 2007, is telling. Evidence shows a 5% reduction in the costs of doing business across borders, and a 25% increase in intra-regional trade. As a result of larger potential markets, business confidence has risen by 40 %.
Investment levels have also improved, for instance with large-scale investments by companies such as the mobile phone company such as Celtel, into a single East African network.
Much remains to be done. There are still major delays at borders.
Revenue sharing agreements have yet to be formulated. Customs and red tape are still burdensome, and critically many infrastructure projects will be viable on a regional basis.
I am pleased that the AfDB is concentrating its efforts in country and regionally on developing infrastructure. NEPAD gave the AfDB a specific mandate on infrastructure, and the Bank provides the Secretariat of the Infrastructure Consortium for Africa.
I encourage the Bank to work with other development partners to help African countries and regions prioritise the infrastructure that will unlock and sustain growth. I'm particularly pleased that the AfDB will be working with DFID and the World Bank in DFID's first country growth analytic programme in Rwanda. Working with the government we will prioritise the precise actions needed to remove the immediate constraints to sustained growth.
We all know the special challenges of fragile states: Weak institutions, dysfunctional governance structures, poor policies, and the inability to deliver basic services. This undermines economic growth, deepens poverty and makes countries vulnerable to natural disasters. I'm pleased that the AfDB has taken a bold step in developing a strategy to enhance its engagement in fragile states. The spill-over effects of conflict and fragility make this agenda important for the growth of the entire continent, not just the countries themselves. I am also pleased to see that the Bank has made a conscious effort to ensure that more resources are provided to post-conflict and post-crisis countries. I look forward to reviewing progress at the mid-term review.
Lastly, I would like to mention climate change as potentially the most damaging barrier to economic growth in Africa. Even though the continent is not to blame for the effects of climate change, it will be the first to suffer from them. Africa needs to find its voice in international discussions on climate change and avoid being marginalised in the carbon market. I'm pleased the board had a constructive discussion on the CEIF just last Friday and urge the Bank to take this forward rapidly.
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From access to low carbon energy to maintaining Africa's lakes and forests, regional cross-border interventions are needed. The AfDB, as the premier financing African institution, is uniquely placed. We welcome the Bank's participation in the Congo basin initiative. I hope the ministerial conference in February will take forward this discussion.
This is a large agenda but there is no choice but to fulfil it. The people of Africa nedd the AfDB.
But they also need us as donors to keep our promises. I am pleased that the Secretary of State announced two weeks ago that the UK will provide £417 million or over US$825 million to the African Development Fund for this replenishment, doubling our contribution to the largest the UK has made to the ADF.
For those donors here still hesitating to make their best contribution, let me say that we are poised at a special moment in time. We have a continent experiencing its best growth in decades; sustaining and capturing the benefits of this growth needs a special effort beyond business as usual; we know this can only happen with African-led solutions and institutions; we have the continent's bank finally able to be effective; we have a bank president leading from the front demanding results; we are half way to the MDGs and we promised to get all the way there. But we have a continent still left behind, a source of instability in a changing world. So the only question I have for you is, if we are really serious about making Africa a part of our globalising world, when were we planning to act? If not at this confluence of opportunity, when? If not now, when? I urge you to make it today.
