Fortune News | Jul 11,2021
For the first time in two years, an African Union summit was held in Addis Abeba earlier this month. On the agenda were COVID-19, political instability and debt sustainability. One of the attendants was Akinwumi Adesina, president of the African Development Bank (AfDB), who sees the summit as a mark of Africa's recovery from the pandemic-induced economic crisis of the past couple of years. He sat down with Christian Tesfaye, deputy editor-in-chief of Fortune, to discuss the prospects for Africa in a post-pandemic era and explain why he is cautiously optimistic.
Fortune: During the AU summit last week, various issues came up on the agenda. You have attended the meetings and followed them closely. What jumped out for you?
President Adesina: I must commend African heads of state for their decision to determine the focus for this year to be nutrition and food security. There are 283 million people in Africa that go to bed hungry every day. There is no way this makes any sense. At the AfDB, one of the High Five strategies is to feed Africa. It was an opportunity for me to share with the heads of state what we are doing about that.
We have a program - Technologies for African Agricultural Transformation – which has helped over the past two years to deliver technologies for almost 12 million farmers at scale, including Ethiopia where we provided heat tolerant wheat varieties. I was speaking this morning to Prime Minister Abiy Ahmed (PhD), and he said to me that Ethiopia will become self-sufficient in wheat in the next three years. This is because of these programs. It is not just in Ethiopia. In Sudan, we helped farmers get access to heat-tolerant varieties that they planted on 292,000ht of land.
The AfDB is going even farther. We are working towards the African financing facility for food security and nutrition. It will mobilise a billion dollars to support access to climate-resilient agricultural technologies for 40 million farmers, which will produce 100 million tonnes of food, which, in turn, can feed 200 million people.
For another year running, COVID-19 continues to be a headache and a burden on African economies. It was also an agenda at the summit. Any breakthroughs on that front?
Africa’s economic recovery still depends on the pace of access to COVID-19 vaccines. Africa has about 11pc of its population fully vaccinated. There is just 16pc with only one dose. Look at the developed world. Some with 80pc of their population already fully vaccinated; some are getting booster shots. The issue of access will determine how Africa recovers.
I raised with the heads of state the importance of a healthcare defence system, built on three big pillars. First is primary and tertiary healthcare infrastructure. The other is for Africa to have robust a pharmaceutical industry. The continent imports about 70pc of its pharmaceutical products. The third element is the capability to produce vaccines for COVID-19 and other diseases.
The AfDB plans to invest three billion dollars in support of the pharmaceutical industry and vaccine production. It is good that we are supporting local manufacturing of vaccines.
One of the biggest crises created by COVID-19 is also debt. Economic meltdown started because of lockdowns. Commodity prices went down, fiscal deficits expanded, debt levels went up. However, it is not as terrible because the International Monetary Fund [IMF] issued special drawing rights [SDR] of 650 billion dollars for the world. Africa received 33 billion dollars out of that. The heads of state have stressed a reallocation by developed countries of at least 100 billion dollars of SDR to Africa.
They have also chosen the AfDB, as the continent’s premier financial institution, so that some of those SDRs reallocated from developed countries should go through the bank because we can leverage it more for the countries themselves.
Despite the SDRs, how concerning is the debt issue? Some 70 low-income countries around the world owe over 30 billion dollars this year. Ethiopia, Chad and Zambia have been asking for debt relief under the G20 Common Framework but that does not seem to be going anywhere. You must be worried.
The debt-to-GDP ratio has gone up from about 60pc to 70pc because of COVID-19. The most concerning for me is the structure of the debt. Over 40pc of Africa’s debt comes from Eurobonds and commercial debt. It is short-term and very expensive. It used to account for only 17pc of Africa’s debt.
So I am concerned but not too worried because the economies are recovering and countries will be better placed to service their debt. However, there are different instruments being used globally to support that. There is the debt service suspension initiative set up by the G20, which ended at the end of last December. Because of the slow pace of economic recovery, it may need to be extended.
The other is the G20 Common Framework, which takes the debt from the commercial creditors and the private sector and tries to make sure that it is on common terms with the concessional ones. This continues to be a challenge because credit rating agencies are not enthusiastic about the approach.
The AfDB is setting up the African Public Financial Academy to help the countries manage their public finances better. The other one is how you manage the efficiency of public expenditures. It is not just how much money you have, it is the efficiency with which you deploy the money. This is getting rid of illicit capital flows and corruption.
Then there is the issue of Africa’s national resources – managing transparently, good governance – to ensure that Africa has a robust financial framework. If we manage well the minerals, metals and gas we have, we will not be in such a difficult situation.
No less concerning in Africa these days is insecurity. From coups to political violence and conflicts, it is not something neither the AU summit nor even the AfDB, even if a financial institution, can neglect. Can the AfDB have any role in this?
The insecurity in Africa is constricting the investable space. I share with the heads of state the establishment of what we call the Security-Indexed Investment Bonds which we will launch on the capital markets. It will help African countries upgrade their security defence architecture and rebuild damaged infrastructure in conflict-affected areas. It will also support rebuilding social infrastructure – like water, sanitation, schools and clinics - and protect areas with strategic investments.
Related to this and discussed at the summit is what I call Africa Financial Stability System that provides liquidity buffers for Africa when there are economic shocks so that we do not all fall down at the same time. This is to provide support for countries before they fall apart and require more drastic measures.
In Ethiopia’s particular case, there is also armed conflict. There are some encouraging signs of a negotiated settlement to the conflict somewhere down the road. The AfDB has a lot of experience in rebuilding and reconstruction. What is the country’s economic outlook in your eyes?
Ethiopia has a very strong economy. Very hard working and entrepreneurial people. A government that has a great vision and is delivering a lot in terms of their projects. The current situation is sad, which is conflict. I can only hope and pray that as it settles down all parties come to the negotiating table to be able to address the issues. We are supporting the peace and reconciliation process. We have provided financing for the office of the high representative, former President Olusegun Obasanjo, who is the mediator.
Sometimes, the teeth bite the tongue. But you need both of them. It is how you co-exist. I think that is going to happen. I am pleased with how things are right now, how people are coming to the negotiating table. It is time for peace, tranquillity, and to be able to continue to prosper as a country.
The AfDB has significant investments in Ethiopia, and we are very happy with them. It goes from energy, infrastructure, water and sanitation to agriculture and agro-industrial processing zones. My perspective of Ethiopia is positive, with thoughts and prayers that things will stabilise.
Two years ago, Fortune interviewed you and the last question we had was about the prospect of Africa. You said then that you were optimistic. In this post-COVID-19 era, has that changed?
The prospective for Africa’s growth and development are very strong. A population of 1.4 billion people is a market no one can ignore. The size of the AfCFTA is 3.3 trillion dollars. It is still there. The size of the food and agriculture market will be a trillion dollars by 2030. The fintech industry is growing rapidly as young people join. You take countries such as South Africa, Kenya, Rwanda and Nigeria, major fintech companies are springing up all over. In Nigeria, there are three unicorn companies worth a billion dollars. The COVID-19 pandemic also opened up opportunities in the digital space.
But we should also be aware of the challenges. We have also learned that Africa cannot, and should not, depend on global supply chains for pharmaceutical products, or even basic things like food. Developing and strengthening the AfCFTA is the way forward. The pandemic no less has led 30 million people to fall into poverty while 26 million jobs were lost.
We have to grow better, at a faster pace to be able to recover. The natural and human resources of Africa, the size of the market and the attractiveness of investment in critical industries make it a promising continent. Take the case of lithium-ion batteries. Lithium is abundant in DRC so we are working with the country. As electric cars take off, Africa will become fundamental.
Africa is still the investment frontier in the world. I am cautiously optimistic.
PUBLISHED ON Feb 12,2022 [ VOL 22 , NO 1137]
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