AfDB weighs options for Africa’s economic transformation
As Africa’s premier development finance institution, the African Development Bank has kept faith with its mission by positioning itself at the centre of Africa’s transformation in line with its 2013-2022 Ten Year Strategy.
Anchored on two pillars – inclusive growth and gradual transition to green growth – the strategy has infrastructure development, regional integration, private sector development, governance and skills and technology as focus areas of the Bank’s intervention.
Catering to the needs of fragile states, boosting agriculture and food security and striving to enhance gender equity in development are the Bank’s priority funding areas.
Thus, infrastructure development has benefitted from huge investments to the tune of US $28 billion in the past decade compared to US $18 billion invested in the sector in four decades (1964-2004), according to a financial presentation made at the ongoing 50th Annual Meetings of the Bank in Abidjan, Côte d’Ivoire.
The presentation jointly made by the Vice-President for Finance, Charles Boamah, and the Officer-in-charge of Treasury, Hassatou N’Sele, also looked at the potentials, challenges and plausible scenarios for the continent’s transformation.
Africa is home to nearly 30 percent of the world’s mineral reserves, 95 percent of its untapped hydropower; 10 percent of oil and eight percent of gas. The continent will be home to the youngest population in the world for the next 40 years. It is watered by some of the highest annual rainfall (Congo Basin) in the world.
Under normal circumstances, these strategic natural endowments should be able to propel Africa, which is currently the second-fastest growing continent outside Asia.
However, the continent is also beset by acute impediments to growth, including high poverty rates with over 400 million of its people living on less than US $1.25 a day, according to the analysis.
Worse, high poverty rates are further compounded by an acute lack of energy with current estimates indicating that some 620 million people in Africa are not connected to any electricity grid.
Furthermore, Africa, with 54 countries and micro markets, is so fragmented that the idea of developing economies of scale in most these countries seem far-fetched. Thus, trade among and between African countries is currently estimated at 12 percent.
Governance is also considered to be a major development issue in Africa as it impacts negatively on the cost of doing business in a critical ways.
However, the good news is that, in spite of these challenges, many African countries have been on the growth path in the past decade with West and East Africa registering the highest growth rates at 6 and 7.1 percent, respectively, in 2014.
“The factors driving such growth included increased investment in infrastructure, a growing private sector, and greater agricultural and mining production,” the presentation noted.
It also pointed to the growing importance of Africa’s diaspora remittances, which reached US $67 billion in 2014, surpassing Official Development Assistance and Foreign Direct Investment, both of which have been the dominant sources of investment finance to Africa in the past.
AfDB believes that with better infrastructure and greater trade facilitation, GDP growth would be higher than seven percent, a rate that is higher than population increase. At that point, it becomes feasible to pave the way to the continent’s transformation.
To download the full 2014 Annual Report: http://www.afdb.org/en/knowledge/publications/annual-report/