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Growth Must Be Shared

Growth Must Be Shared

Over the seven years since he was elected to head the most important development financial institution in Africa, Donald Kaberuka has transformed it almost out of recognition. He has changed what was a well-meaning but slightly ossified organisation into the developing world’s most dynamic agent of economic transformation. The previously lumbering institution has become very light on its feet, able to rapidly assess and adapt to fast changing global and regional circumstances and execute policy with speed and clarity. The bank has also gone beyond its immediate remit and now acts as the continent’s prime think-tank and Africa’s most important economic research and knowledge repository. Hichem Ben Yaïche went to meet the man behind the AfDB’s spectacular transformation at the bank’s headquarters in Tunis, Tunisia.

African Business: With three years to go before the end of your term, what legacy would you most like to leave in terms of actions and accomplishments?

Donald Kaberuka: We should not talk in terms of legacy. Today there is a job to be finished off and it is a very important one. I think it would be better to concentrate on two things: firstly, to ensure that the current growth trend for the African continent continues for the long term. That’s very important. The process has been going on for a decade. It must consequently be supported.

The second thing is that we must not be satisfied simply with impressive figures. Growth must be shared. To summarise, the new strategy of the bank is therefore directed at the challenge of growth, but growth that is shared – and the bank has the strategy and the means to achieve this.

 

Q: Since your arrival you have implemented a policy of decentralisation. The AfDB now has 35 instead of 25 offices. Does this help with making decisions to execute projects?

A: It is too early to say; we need a little more time before being able to assess the 35 offices, including pilot regional centres that have just opened in Nairobi and Pretoria. However, the model itself has to succeed, because we cannot manage projects in Malawi from a base in Tunis or in Abidjan. We need to be close to the customers.

And if we really believe that it is the countries that should lead development activities, then we need to be on site, close to our operations. That is the model that we need now. Hyper-centralised and bureaucratic structures can no longer function in today’s world.

 

Q: The bank has been reorganised with the arrival of new vice-presidents. What was the purpose of this?

A: You know, the bank has grown a lot. It is more complex today. Its balance sheet is practically twice the size it was in 2005. As for the head count, the increase is 80%. All this is explained by the fact that the shareholders decided in 2008 to broaden the bank’s remit. They did so by trebling the capital two years ago. Furthermore, the last two reconstitutions of the ADF gave us access to some $14bn. Our activities and the broader remit mean that we have to continuously make the right adjustments. That’s what is needed.

 

Q: AfDB is about to start the process of setting its long-term strategy for 2013–2022. In what sort of direction would you like to steer this work?

A: It is the shareholders who wanted such a strategy when they increased the capital. For, as you know, today we are working on the basis of a so-called ‘medium term’ strategy, which set up in 2008 and will end in 2012. With the increase in capital, the shareholders wanted us to develop a long term, 10-year strategy.

From experience we now know that the increases to the capital occur about every 10 to 15 years. And it all has to be supported by a clear strategy. It’s a long-term plan, that’s true, but it is a dynamic one…

 

Q: Meaning…?

A: That halfway through, it is time to review certain elements. Consequently, the new president, who will take office in 2015, can, if he or she wishes, make adjustments according to the internal and external situation.

 

Q: You are the man who turned the AfDB into the ‘World Bank of Africa’. Even if the shareholders play a key role in setting broad policy, your personal touch nevertheless remains important. Do you have any particular area in which you would like to leave your mark over the remaining three years of your Presidency?

A: I am not focusing on the three years that remain to me because the bank is a permanent institution. More than such and such a president, Africans want a strong bank. That is what counts. It is not the bank of the President in office, it is the bank for Africans.

However, each president leaves his mark and has his own personal touch. When I arrived, I believed that it was necessary to change the bank’s direction to reflect the current conditions in Africa. And I am delighted that the choices made by the bank today have been those of the Africans of today; infrastructure, integration, private initiative and so on. I therefore believe that the institution did extremely well to take this path.

As I said before, Africa is currently undergoing huge changes. In the current situation of global crisis, it is the continent enjoying the second-highest rate of growth, after Asia. That means that we must take a close look at what needs to change about our strategy. For, even if we are the second-best continent in terms of growth, we are also the continent with the second-worst rate in terms of inequalities. These are many and place us just behind Latin America.

 

Q: How do you explain these discrepancies? Africa is enjoying rapid growth but the inequalities remain very distinct.

A: There are two major reasons. The first is that in a large number of African countries, growth is driven by natural resources – principally fossil fuels and mining. These are sectors with very low employment elasticity. This means that they do not create many jobs.

But they are also sectors that constitute a potential danger – what we call ‘Dutch disease’ – leading to agriculture dying off and other sectors suffering. When considering a country whose growth is driven by oil and where agriculture is becoming weaker, we see problems and difficulties, especially with employment. We know that agriculture employs the majority of the labour force in African countries and so it is easy to understand the size of the problems.

The other reason is that if you take a good look at the countries where growth is not driven by fossil fuels or mining, the inequalities are lesser. But there are other causes, which are historical. I could mention the case of South Africa, where it is the legacy of the apartheid era. There are therefore both objective aspects and other aspects that require closer analysis. At the AfDB we think that with the support of technical education at all levels, including to the SME’s, a positive dynamic can be created. With the Arab Spring we now know more than ever that opening up to democracy is part of development.

 

Q: Yes, that means that with the Arab Spring, you have introduced a new parameter. That of the quality of development of a country…

A: It is undeniable that it has created a new dynamic. But it also reminded all of us – development agencies, governments and so on – that development that is not inclusive is not sustainable. That is what happened in Tunisia. The country was producing some impressive figures and was being talked of alongside the best performers in Africa. But poverty and inequality … ended up leading to the Arab Spring!

 

Q: You have announced the imminent return of the AfDB to its Abidjan head office. Is that a political message? Is the bank really ready to leave for Côte d’Ivoire?

A: But that has always been our objective – to return! It was only a question of time. However, will the security situation allow it? At the moment there are no security grounds to prevent it. We are simply waiting for the infrastructure works to be completed – schools, accommodation and so on – so that we can move back to Abidjan. That’s all.

 

Q: 70% of the staff at the bank have been recruited during the period spent in Tunis. Are they prepared to leave the country? Is there a risk that the move could cause a problem within the bank?

A: I don’t think so. Actually, when we recruit we ask the question and the recruit signs a commitment to work where the bank’s business takes him, in Tunis or in other locations. The employees are aware of this.

But apart from that,I believe it is true that for the past five years, a lot of people have retired. So, we have recruited a lot since 2007, because the AfDB has become bigger and more complex. We now need to stabilise.

As you know, we have been in an unstable situation for 10 years now. Thanks to help from Tunisia – especially the government – we have been able to work in suitable conditions, but we still need to get back to our head office as soon as possible.

 

Q: You have met the new president of the Development Bank for the Brics countries – BNDES. Have you discussed possible partnerships between the two institutions?

A: We wish to have closer cooperation with all the Brics development banks – China Development Bank, Brazil’s BNDES that you just mentioned, and the others. Relationships today between Africa and emerging countries are very strong. What could be more normal than cooperating in fields that interest us such as the food industry and infrastructure?

I will be in Brazil in June for the Rio Summit where we will continue the discussion, which is itself the continuation of a meeting that I had with President Lula da Silva in New York two years ago. He wanted to strengthen cooperation with Africa.

 

Q: The AfBD will soon celebrate its 50th birthday. How will you mark this special day? And what challenges do you now face?

A: I am not concerned about being remembered. I prefer to make sure that the bank is meeting the needs of Africa as they stand today.

These needs, by definition, are not the same as 50 years ago when the AfDB was founded. For this anniversary I think it is important to see where we stand with the Africa of today, to decide what sort of financing is needed to meet the requirements of our times. That is what’s important!

 

Q: In any governance, the personal touch and style count as well…

A: I’ll leave the personal touch to the shareholders. I was elected in 2005. The shareholders unanimously renewed my term in office in 2010. For me, that’s what counts. They decided that I had done the work for which I had been elected well.

Clearly, by 2014 the bank will be 50 years old, but it is not my opinion that counts. Africans need to reflect together about the nature of the financial instruments the continent needs today.

I see the celebration more as a moment to reflect on all these issues in order to embrace them with our strategy.

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Written by African Business Magazine

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