Mail & Guardian Africa

12 Jun 2015 09:25

'Mr Infrastructure', the outgoing president of the African Development Bank, tells all in a wide-ranging chat with Mail &Guardian Africa.

The outgoing president of Africa’s leading development institution sat down with M&G Africa deputy editor Lee Mwiti at the World Economic Forum to talk about his tenure, when the Chinese link made him furious, his greatest challenges, his legacy, and what he plans to do next.

Mail & Guardian Africa: Mr president, if you were to give a ‘state of the AfDB speech’ today, what would you choose to highlight?

Donald Kaberuka:  We leave behind an institution which from a financial viewpoint is perhaps the strongest in Africa. There are not many AAA-rated organisations now, as measured in equity reserves plus paid in capital of $9.7 billion. We have doubled the portfolio in 10 years. We have done for infrastructure alone—energy, transport—twice what the bank has done in 40 years.

MGA: The bank that you have described has undergone structural changes in the last two decades or so. What in your view have been the most significant?

DK: The bank is as good as can be. We have focused on big pushes in infrastructure, private sector, economic integration, and then the fragile states. These are the four big items of my administration. The private sector upped 10 times, from $20 billion to $200 billion a year, infrastructure we have done $28 billion, of which half was energy; we are probably the most important player in infrastructure for most countries in Africa, both national infrastructure and regional infrastructure. People have called me Mr Infrastructure, because that is what I have tried to focus on in my administration.  

MGA: But you are letting the Chinese take all the plaudits…

DK: Well, we provide the funding, the countries do the tenders. We only check if the tenders are in accordance with our regulations. So when a country does tendering European companies come, Chinese companies come. Chinese companies have been winning because they are cheaper. So people see this and they think it is the Chinese doing the building who are also funding. Often it is us doing it. I had to explain for example that in this highway in the middle of Nairobi [Thika Highway] that the Chinese were a very small part of it. It was we and the Kenya government. It is a communication issue. On the one from Nairobi to [Kenya-Tanzania border town] Namanga I had to insist they put panels that we built it; there was a lot of confusion. A major media house did a programme on it and they called it a Chinese-built highway. I was furious.

So, my administration was basically consolidating the financial position of the institution into a first class financial organisation. That has been done, even in the middle of the global financial crisis. 

MGA: What are you most proud of in your tenure?

DK: I am most proud that we leave behind an institution which has the financial strength, and therefore the means, the wherewithal to serve Africa well. I am also proud that it is an institution which is now recognised as Africa’s premier development institution.

And lastly of an institution which is focused on the things which Africa considers a priority—its infrastructure, private sector and dealing with countries coming out of conflict.

I do think that for the next stage, for my successor, is now to go to the next agenda, which is already contained in our 10-year strategy-an agenda for inclusion, because we have grown the economy, now it is an agenda for job creation.

MGA: So the strategy does not depend on who is in office?

DK: No, no, all the candidates were saying the strategy is good; I came in and had my first strategy, which was to keep finances strong, focus on a few things and do them well, figure out what African wants, and then move to the next stage, which was economic transformation and inclusion. 

So we drafted that strategy, which comes to an end in 2022, so my successor has a good strategy laid out, but now it is to be implemented. I think they will be judged on how well they implement the agenda for inclusion, and which is not easy.

During my tenure I realised that, it does not matter how well crafted your strategy is, you must also be ready, at all times, to respond to external shocks and crises. In my case it was the global financial crisis, so we put out a powerful countercyclical response to that, providing liquidity, trade finance, picking up projects to contain the damage to the African continent, we increased budget support operations—the biggest of which was a $1.6 billion loan to Botswana, where diamond prices had crashed.

That crisis, we handled very well. The bank remained strong at the same time, we helped countries cope.

My second crisis was the Tunisian revolution. We had to figure out again how to keep the bank strong, and how to support the Arab Spring countries cope with some of the after effects of the shock.

The third one was Ebola. No sooner had we moved back to Abidjan when there was the Ebola crisis. Again the bank stepped up, $230 million in two months.

The temptation is, you have a good strategy, and then you change your strategy. Mine was stay focused, but now respond to the external shock.

Senegal’s new AfDB-funded toll road.

MGA: What would you say is the biggest challenge to Africa?

DK: I think the biggest challenge in every Africa country is how to deal with the problematic area of turning economic growth into economic transformation. This is where jobs are created. In the 1970s, 1980s, Africa was getting poorer, so population increase was outstripping economic growth. So per capita, we were getting poorer. From the 2000s economic growth started exceeding population increase. It’s not fast enough to reduce poverty quickly, except in Ethiopia where they are having double digit growth. So you need to get this strong growth to change the structure of the economy.

MGA: Looking into your crystal ball, where do you see the bank in 10 years, post the current strategy?

DK: If the bank executes well, the current 10 year pro-inclusion strategy, the bank will be in a very good place. But of course they have to keep adjusting it to any external factors. We can’t tell what will happen in 2020. When I assumed office in 2005, I didn’t know Lehman Brothers would collapse three years down the road. Let me say this, even in the global financial crisis, I concluded that the strategy of the bank was the right one, stick to it, but pull out countercyclical response to whatever shocks. So I hope they can stick to this very good strategy, adopted by the shareholders of the bank, which is about transformation, job creation and inclusion.

And also keep the financial position of the bank robust. There has been some misreporting around this. Since I came into office, we doubled the portfolio, but because of low interest in the developed markets, the first increase in the portfolio does not show a proportionate increase in the investment income, because interest rates in the markets are very low. So that is an external factor. But because we’ve got huge amounts of reserves, we were able to continue assuming risk, because our risk bearing capacity was very strong; at the end of the day you lend money based on your risk capital. This is why the bank was able to retain its AAA rating even in the middle of the global financial crisis.

MGA: Regional integration. Where can you say we are at, and what can the bank do to further support this?

DK: First of all I am glad that finally the tripartite [EAC-Comesa-SADC] will be signing this agreement in Sharm el-Sheikh [Egypt], because the bank has been a big supporter of the tripartite, financially, technically and in institution building. If they can pull off this, it will be a major way forward.

I do not think tariffs will be an issue, but I think Non-Tariff Barriers (NTBs) remain very much work in progress. So I am asking of these regions to really do everything we can to work with the issue of NTBs and the free movement of business people. These are the two big items, which I think we should focus, because a long time ago it was tariffs, but now tariffs have been harmonised and they are very low. But NTBs are a big issue. As an organisation which has funded many regional integration projects, many single border posts, I still see sometimes a wasted opportunity, because the highway is a means to an end. I once travelled from Nairobi to our annual meeting in Arusha [Tanzania], and I chose to go by road. At Namanga I found queues of trucks. I asked drivers, “How long have you been here?” “Three days.” This is supposed to be a single border post.

At the Kazungula bridge between Zambia and Botswana, I found trucks which can wait up to a week. There it is the infrastructure missing, we are now working on this, but at Namanga it is the NTBs.

MGA: We have been talking about NTBs for a very long time…are we really doing anything about them?

DK: Progress on NTBs is very slow, I have to admit. I wish I had a straight answer on this. I think it is a mixture of zero-sum game calculus, and institutional barriers. Zero sum in the sense of if I open up for free movement of people I lose you win, yet Kenya, Uganda and Rwanda have just shown that we can actually all be winners. The second is institutional communication. I have been to border posts where I found immigration, customs, security [pulling in different directions], there is lack of communication. I do believe in the next 10 years, if we do NTBs, we will make huge progress, especially in the eastern Africa region, because this is the most dynamic part of Africa—total trade now in the broad eastern Africa region is at 27%, the same as the ASEAN region.

MGA: Is there any difference in economic growth between Francophone regions and Anglophone regions?

DK: It’s not about language, but openness of the economy. The reason East Africa is doing much better than the rest of the economies is because it is the most open on regional trade issues and free movement of people. It is not rich in gas, or oil, but it has enabled the three factors which have driven African economies in the last decade, to go the next level, that is investment, domestic markets and regional trade. The second is ECOWAS, where we have got Anglophones, Francophones, Lusophones. So I look at this countries from the angle of geographic openness, movement of people and  regional trade. The language they speak is frankly speaking, irrelevant.

MGA: How can we change the African response to crises, some of which you have mentioned?

DK: A lot of it is up to you guys in the media. I mentioned the way Ebola was reported did not do justice to Senegal, Mali and Nigeria, which were able to stop it within a matter of weeks. In countries where the basic systems existed, Ebola was stopped. But Ebola had broken out in the most weakened systems of West Africa, post-conflict countries. But elsewhere it was very well contained. For me, the narrative which I found disturbing, was the doomsday narrative instead of swinging into action, which scared healthworkers and investors. International organisations also contributed—someone in the World Health Organisation announced that Kenya would be the next to be affected, making Nairobi take the next logical decision of stopping flights to those countries.

MGA: Were you proud of the bank’s response to that particular crises?

DK: Oh, people can tell you, when I heard of the crises I flew to those countries and spent several days there, even as bank doctors advised against it. As a leader you have to lead from the front. I concluded that we had to support these countries in three ways: provide budget support, support first-line healthcare providers, and then come in to rebuild the shattered systems. We are now in that third-phase. For me, the bank’s response to Ebola showed it at its best.

A Liberian Ebola survivor (centre) celebrates emotionally with friends. (Getty)

MGA: Africa is a most vibrant place. What three things most surprised you about it during your term as president?

DK: No one expected the collapse of Lehman Brothers, not even the Americans. Or the Arab Springs. But what surprised me was the resilience of the African economies. The general wisdom out there was that African economies would suffer huge damage. That resilience, I see it post financial crisis, post terrorist acts. It is something which is beginning to help in the reshaping of the narrative. I am not starry-eyed, we certainly have to rebuild out shock absorbers, which were weakened by the crisis.

Equally surprising for me is the way the macro-economic managers of our economies are beginning to somewhat outsmart some of their peers elsewhere.

Many countries are also able to innovate and leapfrog, such as Kenya in mobile technology, people are now going there to learn about something that has huge implications for financial inclusion.

Also, how Africa has been able to attract increasing investment from outside, such as from China, say Ethiopia in particular, what I see as nascent industrial beginnings.

MGA: How should we see China on these shores?

DK: As a major partner from an investment perspective, an infrastructure perspective, and a major partner to learn from, but not to copy, because we are different. But we need a long-term strategy of how to deal with these emerging markets. I am hoping this can be ready for the next FOCAC [In December in South Africa].

MGA: How important in the African middle class?

DK: I think we are wasting too much time on the definition of middle class and the cut off point, it is a sterile debate. A dynamic middle class that rises with the sea increases domestic demand, the diversity of the economy, the resilience of the economy, and they also stabilise the politics of a country as well, since they have a stake in the system.

MGA: What next for a man of 63 years? There is a very loud whisper you are going into private equity on other shores?

DK: Everyone asks me this question.  Private equity is going places in Africa, and I think if I can play a role in bringing those investments into different African countries, I would definitely play that role with a lot of excitement. I am looking at different options, but I have not made that decision yet.

MGA: How would you judge your own legacy?

DK: Legacy has always to be shared. If not so it is not particularly meaningful. At the bank I found excellent staff, I worked on leadership and vision, and together we were able to do the things we have done. It is not my legacy, it is about the quality of achievements under my leadership.

MGA: Are you planning on writing a book?

DK: I am writing one. Give it a year or so. I will probably take a sabbatical at one of the universities and finish this book.