Amaechi Ogbonna and Juliana Taiwo-Obalonye, just back from Washington DC
The President of the African Development Bank, Akinwumi Adesina, sees financing of Africa’s entrepreneurs and infrastructure as the driving force of his management at AfDB.
This he has demonstrated through the various initiatives the continental development finance institution has created to support small and medium startups, as well as large corporates operating across Africa.
Adesina, who spearheaded the cassava bread revolution as former Minister of Agriculture and Rural Development under President Goodluck Jonathan’s administration, believes that African economy may not attain the desired growth targets to compete with Europe, America and Asia, if the quality of its infrastructure, human capital and financial empowerment of its youth fail to hit global standards.
In this interview with Daily Sun at Willard Hotels in Washington DC, USA, on the sidelines of the just concluded Annual Meetings of the International Monetary Fund and the World Bank, the AfDB boss spoke on a wide range of issues, including women empowerment, infrastructure finance , education opportunities for African youths and entrepreneurs, among others.
Excerpts:
How we’re supporting women entrepreneurs
The African Development Bank is supporting women entrepreneurs in the belief that when Africa gets the issue of women empowerment right, it can get everything else right. And so there is this financing scheme that we provide through Affirmative Action for Women in Africa (AFAWA), which aims at helping women in business to grow bigger and expand their businesses.
In this regard, we are mobilising, $3 billion for businesses for women on the continent.
On the other hand, we actually supported another fund which is called the Alethia Identity Fund, which has just closed at $75 million to support growth capital for women run businesses, including the small, medium and the large businesses for women that we are supporting.
Finally, I will like to see financial institutions in Africa being held fully accountable when it comes to financing women.
And so African Development Bank will soon be launching what we call the Women Financing Index for Africa in which all financial institutions in Africa will be rated based on their lending to women, both in terms of volume of lending and in terms of their development impact on women.
So under this initiative, those institutions that lend more to women will get more resources at a more discounted rate from AfDB so they can lend more and have more impact. We are therefore focusing more on how we can drive investments for women using this Index.
Already we have raised $251 million from the G7 leaders when I was in Beria with President Emmanuel Macron of France recently.
AfDB Green based loan facility
Let me just say more generally that that is a bigger issue, when it comes to driving Green growth, that achieving the goal in the continent is not an externally imposed issue. It is in Africa’s interest to actually have Green growth, to have clean air, clean water and to grow in an environment where people have quality life.
And so, you can have GDP growth but if this growth is occurring in an environment of huge amount of emissions, water pollution, and air pollution, it’s not going to improve anybody’s life. So, I won’t be bothered about anybody telling me from any part of the world a country’s GDP is growing at a particular rate. That won’t be my concern.
My concern actually should be at what cost? What does it mean for the lives of the people.
So for us at the AfDB, we are very big on renewable energy.
Today, we have doubled climate finance as an institution from $12 billion to $25 billion by 2025. Secondly, about 50 percent of our climate financing is on climate adaptation. Because, we see a lot of draught, a lot of floods, all of these extreme weather patterns that are happening and we are actually doing a lot to support countries to adapt to climate change.
Desert to power initiative
The other thing of course we are doing is that we have just launched an initiative called Desert to Power Initiative which is to provide universal access to electricity all across 11 countries in the Sahel zone in the West and Central African countries.
The Sahel zone has the least access to electricity but it also has the highest rate in terms of immigration to Europe, the highest insecurity rate, the highest fertility rate. If you look at the birth rate like that of Niger for instance that has almost 0.8 percent of rural access rate, the fertility rate is 7.2 percent per woman. This is one of the highest in the world, so there is a direct correlation between not having electricity and rising fertility rate. We are leading these efforts which will provide electricity for 250 million people across the 11 countries and 90 million of those will be off grid because of the sparse populations there.
It is going to be the biggest and world largest solar zone. We have started in Burkina Faso with a project called Yeleen Rural Electrification Project which is a solar based project of Agence Française de Développement (AFD), (French Agency for Development).
We have another one done in Chad that is called N’djamena Solar Power Plant Project and another one in Mali and other places as well. And of course it will include northern Nigeria because we are working on a thousand megawatts solar power project that is going to be in Jigawa. So we take the whole of the Sahelean part of that.
Just to conclude on that, we are also launching something called the Green based loan facility that will be $500 million, that will allow us to support countries that want to move out of dependency on coal or other fossil based energy sources towards renewable energy. So we are able to provide financing at a cheaper cost to be able to make that transition.
Criteria for eligibility to benefit from the renewable energy programme
It is open to any country that wants to access it. The key requirement is that you must have a bankable project that can be used and you will meet all the conditions that the bank will normally require. It is an open thing for any of the countries willing and interested in doing it, even the private sector by the way.
Total amount of AfDB funding to climate change fund for Nigeria
You know the issue for us with climate finance is that we build climate finance into our projects. For instance, I just informed you that we are supporting a project for 1000megawatts of solar to be located in the Jigawa area, which is huge for us. We provided about $200million for the evacuation of power in Nigeria with the Transmission Company of Nigeria which is a big problem in Nigeria because of the liquidity crisis in the sector.
We also provided support to the Nigerian Bulk Electricity Trading (NBET) so that it can meet some of its own payment requirements to companies supplying gas.
The only thing that we are doing obviously that is linked to climate is the north of Nigeria where we have put about $350 million into the north east area project. Because most of the challenges we are facing are linked to climate, population growth, urbanisation, and environmental degradation. So some of the challenges you find in Nigeria comebfrom that part of the country. So that is how we build things into our financing in the sector.
What AfDB is doing to grow investments in Nigeria’s agriculture sector
Indeed our work on Nigeria’s agriculture sector is going to focus a lot on what we call special agro industrial processing zones. Because, as a person I have very little or zero interest in projects, I want things that are structural, systemic and sustainable. So our discussion with the government is on how we can support these agro industrial zones to enable them with infrastructure- power, water, roads, ICT and also with irrigation facilities. Also there will be zones wherein private food and allied industries will be located close to where the farms are. So you will have the processing value addition to all commodities done within those zones, create market for the farmers, stop the movement of raw materials, create jobs within rural economy and in fact, turn the rural zones away from what I call today, zones of economic misery to zones of economic prosperity. That conversation is going on very well with government and we are very much in support of that and I hope that will continue.
We are also financing other works on the fertiliser side by investing on a few fertiliser companies in Nigeria. Work is ongoing in Dangote fertiliser plant which we are supporting among others in Nigeria.
The other thing we are also doing to support Nigeria is to help get young people into agriculture as a business because this is a wealth sector.
I mean I was in Iowa where I unveiled my own personal foundation to support young people in agriculture as a business. I put together $1.1 million of prize money I won from World Food Prize in 2017 and the Sunhak Peace Prize in 2019, I endowed foundation to support young people to go into agriculture as a business.
You see, the young people in agriculture have to see it as a thriving business in Nigeria. I’m excited that since I started this in Nigeria, agriculture good for everyone in Nigeria and think that is the way it should be.
To connect Africa on infrastructure what new projects are we expecting from investors at Africa Investment Forum
I think the whole issue of regional integration is very important for Africa today within the context of the African Continental Free Trade Area (AFCFTA). The AfCFTA gives you a market of $3.3 trillion which is the largest free trade zone in world since the World Trade Organisation was set up. But for that to work well, we will continue to make more investments on infrastructure to fast track it.
So let me just give you some examples of those critical regional infrastructure. The bank is financing already for ECOWAS the development of the feasibility studies for Lagos, Abidjan highway that will connect that whole corridor as a big highway that will go all the way to Dakar. If you look for example what we have done with the Deep Seaport in Togo, it has helped a lot in opening up the economy of Togo. We supported also airport infrastructures for modern airport facilities in Morocco, Ghana, Kenya and other places just to make sure that we have access to quality transport infrastructure.
But, as one thinks of regional connectivity, it is not just roads, you need digital connectivity, so the bank is investing heavily in digital infrastructure.
For example, we financed what is called the Trans-Sahara Fibre Optic Network, linking Nigeria, Niger, Chad to Algeria.
We supported the Central Africa Fibre Optic Submarine System, that is linking DRC Congo with Central Africa Republic and also West Congo itself.
Then of course in East Africa, we supported what the East Africa Backbone, connecting all of the East African countries together.
Why are all these investments important.? First we need vibrant digital payment because to be able to do trade, you are not going to carry cash around. Second, is to be able to have entrepreneurs that are digital entrepreneurs to emerge, because, in a digital world you won’t just want to have digital entrepreneurs but they must have the backbone infrastructure for the service industry like Jumia and others to be able to emerge.
The last thing of course is that even if we have all of that infrastructure to connect coastal and landlocked countries, they will not be good enough unless people can physically move.
So you can have tarrif free zones but you must also have literally borderless Africa in terms of labour mobility. And so the bank is supporting a lot of work in that area.
Today, as an African you can only visit 25 percent of African countries and get visas on arrival. For another 24 percent of it you will have to apply and cannot even get it on arrival. And so if labour cannot move easily, it becomes a challenge.
So it’s both physical infrastructure and soft infrastructure.
What AfDB is doing on human capital development and health
Let us take the case of human capital. First and foremost, we are investing today in universities of science and technology, centres of excellence in science and technology. We have one in Nigeria, we have one in Kenya, we have in Tanzania, we have one in Egypt and then in South Africa. These are called Mandela Centres of Excellence, basically to develop world class talents in science and technology. We are in an era of 4th industrial revolution, and automation is going to be important with artificial intelligence, robotics, big data, quantum data analysis. These are things that are already driving the world, and would be the future of the world. So, Africa must prepare people, and be ready to use its own people for the jobs of the future, not the jobs of the past. And so when we take a look at universities, what do we find? We find that no more than two to three per cent of universities have people that are in science, technology, engineering and mathematics. I don’t want Africa to be a laggard when it comes to innovation in a rapidly digitised world or in the fourth industrial revolution. So, that is one component of the science and technology.
Let me give an example of what that looks like: we invested, for example, in Kigali, it’s called the Kigali Institute of Science and Technology. That centre today is producing world-class students in ICT. One hundred per cent of all the students get jobs before they graduate.
They are connected with some of the biggest companies in the world, whether it is Google, Microsoft and all of that. This just tells you that this is where the future really is and we are financing that.
The other area that I think is important is coding, computer coding. It is going to be the currency of the future. So, a lot of companies outside are going to outsource their coding, and therefore positioning yourself with the necessary human capital to be able to tap into that huge coding market is very important. At the bank right now, we are supporting efforts to develop about 123 computer coding centres in Africa that would allow young Africans to be able to benefit. Another area which is very important for us is the whole issue of how do you support young entrepreneurs in the ICT space with access to finance. In this regard , we the bank has a number of private equity funds that we have already set up. In the case of Nigeria, one of the companies we are working with is called TLcom Tide. It is a private equity platform we are working with and it is actually run by Nigeria’s Omobola Johnson who is doing a fantastic job. She was my colleague when I was a minister in Nigeria. So, I think human capital is the key, but having said that, we can build all the human capital that we want, if the young people can’t find jobs, it’s a crisis. We’ve got a third of young people in the continent, that don’t have jobs, we’ve got a third of them that are underemployed. The rest are probably employed and maybe not happy. So, that is a big challenge, and I believe that it is time to begin to put our capital at risk on behalf of young people. If we don’t, we are all going to be at risk. That’s why the African Development Bank is really supporting a major effort called Jobs for Youths in Africa, which is our big programme to help countries to create 25 million jobs for young people over a 10-year period, in agriculture, in small and medium enterprises and in the ICT sector. You can imagine when you have 673 million young people on the continent, but you don’t even have financial institutions that would support them. That is not acceptable. So, young people walk into a bank, they look lost, they are like in a forest. They don’t even know what to do, and the instruments are not developed for them.
I have said it many times and I will say it again. I don’t believe in youth empowerment at all, because when you say you have empowered somebody and then you train them but there is no financing, investments for them to grow their businesses, what is good in that. So, we must move from youth empowerment to youth investment. We must invest in the youth and unlock their potential. That’s why I have been saying that we need to have youth entrepreneurship and investments banks specially developed, and dedicated to young people; where a young person would enter, and feel at home; feel welcomed because it is fully dedicated to them.
When we had challenges with micro businesses having access to finance because you have no institutions, we developed micro finance institutions for them. In the case of young people in Africa, you have government failure, you have institutional failure, and you have missing markets to support them. They are just there, floating; there is nothing around them. So, I believe it is time to really set up Youth Entrepreneurship and Investment Bank that would basically support young people to thrive. That’s a big issue for me. So, it’s not just the capacity, but we must create opportunities for young people to thrive. You see, the young people are not just the future of Africa, I don’t believe that. They are the today of Africa if you take a look at it. So, whatever we have to do, it has be now.
How will Jobs for Youths in Africa programme create 25m jobs?
The 25 million jobs target, as ambitious as it is, is not enough because you have 11 to 12 million young people entering the labour market every year, but only three million of them can get jobs. So, we are only doing the maximum we can. Even at that it is not enough. So, the question really is: we are doing that in three ways: First is within our project as a bank, we do roughly over 10 billion dollars of lending every year. We set up all of our projects, we want them to be mainstreamed to create jobs for young people, and women, by the way.
In the case of women, we have something that we call a Gender Marker System where every single one of our project, what is it going to deliver for women, that is one side. So, a lot of our projects are dedicated to making sure that they do that. Second, we set up a fund with the European Union Commission called Boost Africa. It is a $20 million fund; a private equity fund to support early stage growth of businesses for young people of the continent. I just talked to you about the TLcom Tide Fund in Nigeria, which is supposed to support digital entrepreneurs as well in Nigeria, but will all of these, at the end of the day be a more systemic approach through which the finance sector supports the youth. That is why I believe that helping to stimulate the establishment of the Youth Entrepreneurship and Investment Bank will be crucial, otherwise, we will just be dancing around the edges of the issue.
But because you asked me that question, let me turn in to the issue of women which I said before you cut in. Women run Africa, (32:33)but they don’t have access to finance. I was so delighted that President Macron did a great job of really helping us to launch this during the G7 meeting in Beria. It is a $3billion specifically for women businesses, and one thing that we are also doing is that we are establishing what is called the Women Financing Index for Africa. That will allow us to rate and rank all financial institutions based on their volume of lending to women and the developmental impact of their lending. What does that mean? It means that if you come to us soon, we are going to ask the banks: what have you done for women lately? We would be looking at lines of credit, we’d be looking at trade financing. We want banks to be lending more to women because no bird can fly with one wing. Africa has to fly with two wings
IMF has projected 3.5 % growth for Africa for 2020
Well, our own projections for this year for the growth of Africa is 4 per cent. Next year, we project 4.1 per cent, but of course you know that we are in an environment in which we have a number of global shocks, headwind issues, you have the Brexit issue and you have the continued trade tensions between China and the United States. Of course, it could and is already affecting opportunities for export markets for African countries. So, a number of issues that we want to really do to support countries is first and foremost, to make sure that we stimulate domestic demand, and to grow is to make sure that Africa builds its own domestic demand. Second, public expenditure for infrastructure must be sustained because infrastructure enables growth, and growth drives a lot of jobs and revenues. I think that’s particularly important. The third issue focuses on the importance of regional integration. Expanding that regional market is very important. But I will make two other points related to that, which is how to mobilise capital for Africa’s accelerated growth. Africa today has in its pension funds, in its sovereign wealth funds, and insurance pool of funds, mutual funds, over $1.8 trillion of assets under management. Those sovereign wealth funds, pension funds are being invested outside of Africa in money market instruments that are generating negative returns. Now, that’s my concern. If you are a pension fund and you are investing your money outside the continent and with such a negative return, let’s even assume you have good returns and you make annuity payments for people for the rest of their retired lives of what good is that? If they retire with very good annuity payments to live in societies, places without electricity, without water, without good hospitals; that is a well-paid miserable retirement. So, what we are working on at the African Development Bank is how do we get the pension funds, the sovereign wealth funds to actually invest in Africa. Africa sovereign funds, I mean invested in other sovereigns, should be invested in its own to create better wealth, better environment and quality of life for African people.
For me, that is very important. The second thing is, in terms of stimulating growth is the role of capital markets. The African Development Bank is supporting strongly the development capital markets to be able to mobilise domestic savings and to drive investments in the economy. The last thing that I may say is that when we talk about growth, nobody eats GDP. It’s just Gross Domestic Products, it’s just the value of goods and services produced in an economy. But how do you know that you are doing well is when you look at the quality of life of the people. So, the question that we continue to ask is growth at what cost? What kind of growth? What is the level of inequity in that growth process. Who are the ones that are benefitting from that growth process? So, at the end of the day, I am not just worried … you can grow at 5 per cent, you can grow at 6 per cent. … if you look at Africa today, for this year, we project 4.0 per cent growth. That doesn’t tell you the story, we have countries that are growing at more than 8.5 per cent. When you look at Tanzania, 7.2 per cent; Senegal, 6.7 per cent, Cote D’ivoire, 6.5 per cent. There are economies that are actually growing faster than the global average of 3.3 per cent. Take a look at Africa’s growth and look at the rate of growth in Europe, 5.4 per cent; Latin America, 1.3 per cent. So, Africa is actually doing well. Today, 20 African countries are growing at 5 per cent and above; 21 countries growing at 3 to 5 per cent. So, I am very optimistic about Africa. I think we just need to drive a lot more investments into the continent.