- Development - Finance
African economy boosted as AfDB rises to challenge
The 45th summit of the African Development Bank (AfDB) that took place between May 27 to 29 in Côte d’Ivoire presented a rare opportunity for the continent’s main lender to triple its share capital. The increased capital should enable the continental financial institution to fund major infrastructure projects. Another positive piece of news revealed in a report on the sidelines of the summit showed that the continent has shown resilience in the face of the global economic crisis.
The African Development Bank (ADB) is becoming an international force to reckon with. Its funds have increased from 33 to 100 billion dollars after a landmark decision, taken at its 45th summit, saw the tripling of the largest continental development institution’s capital. The primary targets of the 200 per cent stake increase will be directed towards four main areas, including large scale infrastructure projects, the private sector, new technology and higher education.
Chairman of AfDB’s Board of Governors, Ivorian Minister of Planning Paul Antoine Bohoun Bouabré, believes that the tripling of the capital is a "significant decision". "We have resolved to empower the bank to fulfill its historical mission," he said.
AfDB President Donald Kaberuka, on his part described the decision, which will enable the African bank to raise more funds on the markets, as a "sign of confidence in a resurgent Africa." Mr. Kaberuka, the only person to have presented his candidature run unopposed and was reappointed for a five year term by governors representing 53 African and 24 non-African shareholders.
Ten years after the annual meeting of the African Development Bank took place in the Ivorian capital, the Governors reaffirmed that AfDB headquarters will remain in Abidjan, although the present political situation does not favour a permanent return to the West African country as yet. In the meantime, the temporary relocation period of the institution to Tunis will be extended for an additional 12 months from June 3. Another review is set to take place at the 2011 AfDB annual meeting.
Africa resists global economic crisis
Before the financial and economic crisis, the capital increase was expected in 2013. But with the crisis, many African countries have lacked liquidity and funding requests have increased. In Africa, the AfDB now exceeds the World Bank in terms of aid funding.
During the Summit, AfDB, OECD (Organization for Economic Cooperation and Development) and ECA (United Nations Economic Commission for Africa) released the 2010 edition of African Economic Outlook. 80 per cent of the 50 African countries covered by the 2009 Annual Report recorded a positive growth despite the global economic crisis.
"The good news is that the continent has shown resilience in the face of the crisis," said Henri-Bernard Solignac-Lecomte, head of Europe, Africa and Middle East at the OECD Development Centre. "Africa on the whole is still fairly resilient, because in spite of the crisis it has kept growing ... This year we expect it to go as far as 4.5 per cent, and even more than 5 per cent in 2011," Mr. Solignac-Lecomte said in a recent interview on RFI.
The bad news, however, is that, despite the revival of expected growth, "with the slowdown or the recession of OECD economies, the impact of the continent has been to bring that period of sustained growth to a halt". And this slowdown, according to him, could make it more difficult for some African countries achieve to the Millennium Development Goals which aim to cut the number of people living in poverty by half by 2015.
The OECD official said that the annual report of the ADB indicates that the slowdown of growth was not as a result of the "financial contagion" but rather as a result of external trade. "The contraction of the demand for the type of products that Africa produces in OECD countries... resulted in a drop in exports". Other channels that contributed to the African slowdown was "the drop in foreign investments" as well as the decline of "remittances" from Africans working in richer countries.
Mr. Henri-Bernard Solignac-Lecomte, argues that the worst could be over for the continent. The report, according to him "shows that there will be a rebound for Africa. Partly because Africa is able to rely on more diversified economic partners today than it did ten years ago. Today, China and the fast growing economies in Asia account for a much bigger share of the trade and investment for Africa. Africa is no longer just trading with its traditional trade partners in Europe and America".