AFDB’s Plan to Promote Africa’s Economic Growth
East African Business Week (Kampala)
26 November 2007
Posted to the web 26 November 2007
By Geoffrey Kamali
The African Development Bank (AfDB) has for some time now been on a campaign to involve African intellectuals into dialogue on the African development agenda. Recently, the AfDB, the UN Economic Commission for Africa (UNECA) and the African Economic Consortium, convened the second African Economic conference to encourage such dialogue. East African Business Week’s Geoffrey Kamali caught up with the President of AfDB, Dr. Donald Kaberuka over the new partnership and below are the excerpts.
The idea you initiated to involve African economists and researchers into debate on development issues affecting the continent appears to be wide, how is it going to work?
It is working already, because the idea to widen debate on African development issues to include African economists, the think tanks has results.
These are researchers from universities and the think-tanks and they come here to share ideas. The objective of this conference is to allow African economists and think-tanks to share scientific thinking on the development issues of the day. We were in Tunis (last year) and we have done so now. Every year, we add to our stock of knowledge on how things will work or not.
Has the process started feeding into policy making?
It’s still too early but there have been extensive discussions at this conference on managing the natural resources boom. Clearly now, there is positive dialogue, but this is quite bigger. If it is feeding into policy immediately, maybe not. But at least policy makers now have got a wide range of instruments that have been produced by the economists.
When is that time coming when research findings should feed into policy making?
Policies are made over a long period of time. Policies are not static, they evolve everyday. And my take will be that they are already getting together economists and policy makers in an understanding. On one hand you have practitioners handling issues on a daily basis, and on the other side you’ve got economists who handle things maybe on a theoretical point. Now, there are realities of both sides. As they interact, I expect the quality of policies to keep improving.
But the thinking of African economies is mainly done outside Africa and there’s nothing wrong with that. International financial institutions and agencies have in as much driven the African agenda, but what is happening here is now an African perspective to drive that agenda. Africa’s own economists are adding in their own perspective. It is the totality of this perspective that we are talking about.
Is this process going to work like a charter to legally compel African governments to implement such policies?
No, African governments are democratically elected. They are accountable to parliament, not to economists. This is not about a government receiving, it’s an exchange of experiences and there is an academic, theoretic confrontation of data, objective facts, with day to day realities.
It is the interaction of the two which improves the quality of policies. It’s a confrontation of policy realities, which enables Africa’s own thinking on Africa’s own problems.
Please understand this, there is such a difference to continue thinking that you got governments here receiving ideas from economists only is wrong.
There are economists in universities, in ivory towers, they have never been confronted with managing a country or managing a ministry or the Central Bank. But economists also have information, which can be useful. I expect yearly improvements. For example, next year, we will concentrate on an issue, such as growth. So, we’ll get economic growth at the centre of the agenda.
Now, you can come to economic growth from very many angles; institutions, investments, governance, education, whatever you want. But the finality will be the growth agenda, which is issue-based.
What’s important is that African intellectuals themselves and African policy-makers feeding into policies in Africa. It is not an exclusion of non-African ideas, far from it! It is aiding to those ideas in another perspective, by Africans and Africans in the Diaspora.
Various issues were raised at the conference, such as corruption, infrastructural challenges and governance, aren’t these likely to affect the process of this dialogue and policymaking?
The issues raised are numerous and they are all important. They recognise such challenges by governments and all the things you have mentioned. So here are experts, the AfDB and others to debate over them. Now, the issue is how is it done? Fighting corruption for instance is critical, getting experiences and sharing them.
Some recommendations made, such as private sector credit support and lowering interest rates by a half, are unrealistic and likely to be disruptive…
Okay, there is a recommendation to lower interest rates, for example. Well, let me come to it from this perspective. I expect economists to go back to their countries and look at the cost of capital, the competition in the banking sector, level of government borrowing and barriers, which influence interest.
And then, depending upon the findings, we see if the mechanisms are efficient enough to lower interest. There might even be cases for raising interest! So a scientific subject like this cannot be made into a recommendation…it cannot be.
Certainly, interest rates vary from economy to economy and so, we cannot declare them from here. I think the issue is that competition should be increased in the banking competition. But these are highly technical issues, such as excess liquidity in the economy… the Central Banks know what to do.
Africa’s current economic boom is pegged on newfound and existing resources such as oil and minerals, yet you seem to disagree.
Well, what I said on geology is not new. There is not much geology (resources that are under the ground) in India and China; there isn’t much under the soil. But they are the ones now driving the world economy. I said, use the resources from the boom to develop other resources. And among these other resources, I put talent as number one.
What time frame have you given this process (of interaction between economists and researchers) to feed into policy?
Each country is different, what we call initial conditions are different. Take a country like Liberia, which has just emerging from 20 years of crisis. You cannot have one formula for different countries. The important thing is to kick- start the economy to make it move.
You said the AfDB will support African universities to promote scientific training, how will this be achieved?
That support started before I came to the bank. It is part of a comprehensive approach and some examples of the support the Bank is doing is the Kigali Institute of Science and Technology. It has been getting this support.
This was not because of me because I was not there yet. Now, if we could find centres of excellence like this in every region…like the Jomo Kenyatta University of Agriculture, it is an excellence centre. There is some idea to identify in every region, centres that have built excellence or where excellence can be built, and then we support them.
We have limited resources, we cannot do this in every country or university but at least…in West Africa, Central Africa and East Africa, we will identify centres of excellence and go there and support them. Technicians of AfDB will identify how to support and see the missing gaps…like the Bank tha just started… the Bank has supported to build laboratories and providing equipment.
You said AfDB has decided to adopt a particular economic approach for fragile economies. Please explain.
Every country has got its own natural resources endowment, like Liberia. Before Liberia went to civil war, at least it was a middle-income country. It made huge profits.
Liberia is a country rich in natural resources but it is a traumatised country in terms of institutions. Now, to help Liberia is not the same thing like helping say, Botswana…the problems are different. You need to appreciate that we cannot have a formula, which fits every country.
There is a new policy for fragile states, any of the fragile states emerging from conflict. The Bank has in the past helped them to clear the debt arrears…that was the first step, so they can re-engage with international financial institutions.
Once you have cleared arrears, you must now kick-starts the economy. And money alone is not always enough, you need to help them rebuild institutions. A country like Mozambique had to be helped to rebuild its institutions, especially the customs on its coast. So we are helping the to, one, clear arrears, kick -start the economy and then building capacity.
What in the Bank’s view should the citizens of Africa expect to achieve in the next 10 years?
Now, AfDB is one of the players, the biggest player in every country is that country itself. International organisations come in to support. We have no different agenda from other countries. Our agenda is to promote economic growth…I would hope that in 10 years, we will have attained the Millennium Development Goals and economic growth which is necessary for the MDGs. I hope that our share world trade and investment is growing everyday…now it is 2%. Asia is 8%, so I would hope our share also increases. Our dependence on foreign aid is declining. For that to happen, it means that we expect our institutions to have become stronger and governance is strengthening every day. If that happens, I think we will have contributed to what the countries themselves want to do.