Just how can Africa mobilise resources for its own development? One particularly successful initiative that has tackled this question has been the African Finance Corporation, a pan-African institution. It sponsored a debate at the AfDB’s annual meeting that explored both the current position and the way forward. Stephen Williams reports from Arusha, Tanzania.
It was, everyone agreed, one of the most interesting side events of the African Development Bank’s (AfDB) annual meeting held in Arusha, Tanzania. It was the Africa Finance Corporation (AFC) debate, organised by IC Events, titled Africa transforming Africa.
The AFC is an African-led international financial institution working for African development. Established in 2007, with the enthusiastic support of the then Central Bank of Nigeria governor, Professor Chukwuma Soludu, its shareholding structure includes the Central Bank of Nigeria, with a 42.5% stake; seven of Africa’s biggest banks that hold a collective 47.6%; and various industrial and corporate groups.
Having a war chest of around $1.1bn, the AFC’s mission is to improve African economies by developing and financing infrastructure and industrial and financial assets while providing a commercial return to its shareholders.
Acting as an investor and financier of various initiatives, the AFC has become the benchmark institution for financing the development of infrastructure, power and other projects throughout Africa. Providing advisory, debt, equity and treasury products, with key partners such as the AfDB, it has built a diversified investment portfolio.
It is involved with projects as varied as the Main One sub-sea cable; the financing of aircraft for Ethiopian Airlines; toll-road construction in South Africa; power stations in Nigeria; wind farms in Cape Verde; and East Africa’s second largest cement factory. Since its inception, it has disbursed well over $700m.
The AFC-sponsored debate at the International Conference Centre in Arusha, where the AfDB was holding its annual meeting, featured a high level panel of Andrew Alli, the AFC’s president and chief executive; Donald Kaberuka, president of the AfDB; Ngozi Onkonjo-Iweala, Nigeria’s finance minister; and Eleni Gabre-Madhin, founder and chief executive of the Ethiopian Commodities Exchange.
There was hardly any need for the moderator as each of the panel members eschewed overly elaborate discourse for a hard-hitting conversation that pulled no punches in both describing Africa’s many challenges and opportunities.
Alli, for example, pointed out that many infrastructure projects today are being implemented and financed by indigenous African institutions, citing the 12,378km Main One undersea fibre-optic cable project, running from Portugal to South Africa, as a prime example. With landing stations in key markets across Northern, Western and Southern Africa, the Main One project, in which the AFC was a lead investor, is now facilitating a rapid rollout of telecoms and internet communications along Africa’s Atlantic coastline.
“The advantage is that an African will have a much more nuanced understanding of what’s happening in Africa and having to overcome certain problems,” Alli explained in describing just why indigenous development finance was so effective. However, he called for an improved co-ordination within the continent’s regional economic communities to facilitate administrative procedures, such as the approval of various licences.
Gabre-Madhin echoed Alli’s position by saying that regional economic communities should be able to create the necessary templates to scale up the continent’s successful initiatives.
Alli also made the important point that although much had already been achieved, further effort needed to be made to improve Africa’s investment climate.
Interestingly, he said that he believed that despite all of Africa’s needs, there was actually a shortage of large-scale projects to attract investors on the continent – and here he made it clear that he meant both international and domestic African funds that were searching for investment opportunities.
Early in the debate, Okonjo-Iweala spoke of Africa’s need for an economic growth that was equally shared across society. To this end, she called for a focus on creating employment and here proposed an emphasis on the continent’s agricultural sector as a key driver of jobs and economic development.
She also proposed stimulating greater access to mortgage finance to match the continent’s housing needs and also to create construction sector employment. The minister then went on to describe the need for infrastructure as pivotal to the continent’s progress.
Indeed, she described infrastructure as a global requirement in regions as diverse as the Indian sub-continent and Latin America, and observed that China’s phenomenal economic surge over the past decade had been kick-started by the government concentrating on infrastructure.
The AfDB’s president, Donald Kaberuka, took time to acknowledge the achievements of Nepad, for developing and creating the continent’s own economic blueprint. Without that blueprint, Kaberuka contended, many of the projects that the Bank had financed, including those co-financed with the AFC – with its clear emphasis on infrastructure and power projects – would have remained unfunded.
Okonjo-Iweala then sought her colleagues permission “to be a little bit provocative” and called for the political will to develop implementation strategies on a regional basis, subsuming national deliberations so as to enable large-scale cross-border projects to be agreed and executed by the regional economic communities, and obviating the time and effort currently taken to obtain multiple individual national agreements.
Clearly, this type of regional vision would enable the more effective and timely construction of cross border transport infrastructure such as roads, rail and waterways. But this would only be one part of the challenge as it was generally agreed that the infrastructure gap was formidable.
Nigeria’s finance minister suggested that the continent required around $96bn annually but only had some $40bn at its disposal, and described some of the measures including the issuing of sovereign bonds, that held out the promise of meeting this funding gap. Later, a comment from the audience suggested investigating Islamic finance models. Responding, both Alli and Kaberuka said that all means of raising resources should be explored fully, including the established and emerging sovereign wealth funds such as Nigeria’s proposed fund.
Sovereign wealth funds in many countries have resources that lie idle. But it was also noted that the Diaspora had a role to play in raising finance. While Okonjo-Iweala noted the size of the Nigerian Diaspora alone, and the $10bn scale of remittances (according to World Bank estimates) that underpin consumption trends in Nigeria, Gabre-Madhin added that it was important to attract back to the continent the skills that Africans had acquired overseas. She also spoke of the vital importance of Africa’s demographic dividend – with its potential to be beneficial as well as a force for instability, and urged that Africa’s youth must be better engaged in future policy making.
Significantly, Okonjo-Iweala also spoke both about the Diaspora Funds that Nigeria is seeking to establish with World Bank assistance, and of a creative Nigerian government initiative to attract skills back to Africa – a new initiative that might also be replicated by other African countries. Just weeks old, it is a programme that seeks to bring Nigerian graduates home to work as interns for multi-national companies with the government paying their salaries for a fixed term.
This programme has received so much support from the multinationals operating in Nigeria, who always find it difficult to attract appropriate skills within Africa, that they have suggested to the Nigerian government that they are prepared to pay salaries themselves if the graduates can be attracted back under this scheme.
Okonjo-Iweala complemented the AFC for sponsoring the event and urged for a further high-level conference to be called on the theme of Africa transforming Africa, turning to the Bank’s president Kaberuka to perhaps facilitate such an event under the aegis of the AfDB.