On Thursday, July 25, I was in Washington for an award ceremony at the US Treasury, in which two African Development Bank projects received recognition. Straight afterwards, I appeared on the Kojo Nnamdi show on Washington public radio alongside Lael Brainard, Under Secretary of State for International Affairs at the Treasury.
We were discussing Africa, and its new investment opportunities. The message from both of us was of a resurgent Africa, a place for business and for opportunity, drawing strength from internal positive dynamics and still resilient to the slowdown in the global economy. We both emphasized how the work of the African Development Bank was contributing – in funding, in sharing knowledge, and in mobilizing investment.
This message was very much in tune with what President Obama was saying on his visit in June to South Africa, Senegal and Tanzania. I was pleased to see that different parts of the US Administration were taking it forward, particularly on how to attract more US private sector investment in the African power sector. The emphasis is on what we can do with Africa, not what we can do for it. We are in a moment laden with opportunity for US business.
On “the Kojo Show”, listener after listener questioned the capacity and commitment of African leadership to see things through. Lael Brainard and I emphasized that – with the notable exceptions of conflict and post-conflict zones in Africa – there is a massive change in outlook across the continent.
Two other questions kept coming my way…
First: Given all the talk about new approaches to aid which mobilize private investment, was it not ironic that the reason for my visit to DC was to celebrate traditional aid, as administered by the Multilateral Development Banks through their concessional windows, such as the African Development Fund (ADF), and the International Development Association (IDA)?
Second: How would Africa’s fortunes be affected by the slowdown in the emerging markets? All week, the media had been reporting on the global slowdown, and especially the large emerging markets such as China, India and Brazil. Over the last six months, the price of copper is down from $8,200 per tonne to $7,000, and of iron ore from $155 to $128, up from a low of $115 in early June.
On the first question: Indeed, the African Development Bank came to the podium twice at the US Treasury ceremony, to receive awards for what the ADF does in fragile states, and for what it does to increase farmers’ productivity and incomes. It was the first time an organization has received two awards, in a strong field of 70 submissions.
I stressed the point that the ADF has been a powerful partnership between developed and developing countries. I said that we were getting results, and impacting on people’s lives in meaningful and lasting ways, and that the two projects were perfect exemplars of what was being achieved.
The first project, in Cote d’Ivoire, represented our commitment to gender equality, to inclusion, and to fragile states. The transformation of Africa requires that no one is left behind, and that men and women receive equal opportunities so that each can play their part in building the prosperity of their nations. We know that in places where there is conflict, women and girls suffer disproportionately, so the issue of gender is central to inclusive development.
The second project, in Uganda, represented our commitment to empower rural farmers by enabling them to increase their incomes. We do this by providing public goods and opportunities to help them move up the value chains, however modestly, and to lessen the dependence on aid and handouts.
The results were plain for all to see. Across 26 districts of eastern and central Uganda, thousands of kilometres of roads were built, rural markets were established, and units of agro-processing production were built, from coffee and rice hullers, to maize mills and milk coolers. The rise in farm-gate prices was as astounding as it was quantifiable: the price for cassava went up 2½ times, maize 20 times, milk four times, bananas two times. Travel costs and times involved in taking produce to market were cut in half, and post-harvest losses were cut by a fifth.
This project strengthened my belief in several things. First, in how relatively small investments can generate very large returns. Second, in how international institutions working together (in this case we worked with the International Fund for Agricultural Development, IFAD), each in their field of comparative strength, yields a superior result. Third, in how infrastructure is critically important for agricultural development. (Some have said that the Bank’s strong focus on infrastructure means that it neglects issues like food security – I think that the case of these Ugandan farmers lays that argument to rest.)
So was it ironic that we were celebrating the work of the ADF (an aid instrument) and seeking to mobilize additional resources for it, while saying that we should be focusing on trade and investments?
My answer was simple. We are proud of what we are achieving. The two projects show that aid money can be very effective, especially (as in the Uganda project) when it frees the recipient from aid dependence. It enables people to step up and step out, or to “graduate”. This ties in with my fundamental belief that the time is ripe for what we should call “smart aid”, which leverages further resources from the private sector, remedying social ills but also paving the way for graduation. The concept of aid as a closed envelope has come to a close.
The Ugandan farmer whose incomes have quadrupled may now be able to take a bank loan, and probably will not require help to send his kids to school. Aid that is effective has a “sell-by date”. The time has come to examine in detail how to bring our aid tools and our concessional windows up to date. There is a whole range of ideas on the table. We need to be less doctrinaire, and to rise above the tendency to answer modern problems by asking old questions and using old tools.
On the second question: Was there too much hubris in Africa at a time of trouble in the global economy? There can be no doubt that a bad global economy is damaging to all, especially in the way it impacts on demand for commodities.
I found myself poring over the numbers I had received earlier in the week from the Bank’s Economics Department. As I said, the prospects for key commodities like copper, iron ore and gold (and even soft commodities such as coffee) are not looking too good. So what was the growth outlook for 2013? Twelve African countries will see growth above 7%, 27 African countries will see growth above 5%, and only five countries will grow at a rate below that which can cater for population increase. Among the twelve star performers, only five are heavily dependent on oil, gas or minerals.
So my answer to the skeptics is that yes, the darkening clouds in the global economy are ominous the world over, and yet I remain persuaded that the real risks lie within Africa (political management, fair and good government), and so do the lost opportunities (through a lack of regional integration, and poor management of natural resources). Individually and collectively, we have to meet these internal challenges.
If we can do that, it is clear that – as I kept hearing in DC last week – this young, dynamic, entrepreneurial, creative Africa will continue to “graduate” from being part of the global challenge, to being part of the global solution.
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