Investment Financing in Africa
President Kaberuka calls for improvements in business climate and pursuit of economic reforms
- Economic reforms carried out over 25 years have begun bearing fruits
- SME are biggest job creators in Africa
Kigali, 23 May 2006 – Addressing a group of business people, investors and financiers in Kigali within the framework of the 3rd National Investment Conference, President Kaberuka said investment conditions in Africa were improving, but African countries must do more regarding their efforts to improve the business climate as well as pursue economic reforms.
On invitation to speak on the theme: "Where to find resources? Financial engineering at the service of investment and growth, the African Development Bank Group president recalled that African business people have often been wondering about finding the resources to finance their businesses whereas, in reality, "the issue is not that of finding resources, but that of creating the conditions that will enable Africa to have a share of the excess liquidity in the world."
Part of this excess is going to other regions of the world. For example, each year China alone earns US$ 50 billion of this excess money which is in search of investments; India earns US$5 billion, while direct investments in Africa have mainly concentrated on oil and mineral extraction.
Mr. Kaberuka advised that never has Africa been in a better position to attract investors. Most armed conflicts that devastated the continent (six just a few years ago) had come to an end, adding that good governance was gradually taking root on the continent. With regard to economic indicators, they are really promising; with average growth standing at 5.5% across the continent – though higher than demographic growth – it is still not enough for the attainment of Millennium Development Goals.
These performances, the Bank President analyzed, could not be solely attributed to the strength of the global economy which is sustained by high raw material prices. Non oil producing African countries also benefited from this growth, registering on average 4.5% growth.
"This is the outcome of 25 years of economic reforms which have begum bearing fruits," Mr. Kaberuka explained. These reforms take a long time to produce results, whereas African countries usually lack the means to sustain the reforms and these results in them giving in to immediate pressure, the Bank president said.
Also, the closeness of African markets also discourages investors from considering Africa as a huge market, although its population will soon exceed 1 billion. President Kaberuka therefore advised that micro-economic convergence policies should be carried out within the region in order to build a large economic bloc reinforced by economic infrastructure integration (roads, electricity…).
President Kaberuka pointed out that improvements in the investment climate require that small and medium scale enterprises be taken into account in the wealth creation process. It is SME, indeed very small enterprises which create large number of jobs. At the same time, they are facing difficulties that prevent them from developing such as obtaining long term financing and low guarantees. President Kaberuka advised that ADB had a wide range of financial instruments which make it possible to take the needs of SME into consideration.
The same interest must be given to the African Diaspora whose remittances are very important and are, above all, regular resources. "At US$1.8 billion per year, remittances from the Ghanaian Diaspora are more than export earnings from traditional products," Mr. Kaberuka said. At the continental level, Diaspora remittances stand at US$ 12.5 billion, that is, more than international aid payments! What is now left is for these resources to be channeled in an organized system.
In order to help African countries in their efforts to attract investments, President Kaberuka has launched a series of institutional and strategic reforms aimed at reinforcing the support that the Bank is providing to regional member countries. The reforms approved by finance ministers of 77 ADB member countries during their just-ended Annual Meetings which held in Ouagadougou from May 17 to 18 provide, among other measures, that special emphasis be laid on infrastructure, the private sector and regional integration. A Vice Presidency was therefore created to be specifically responsible for these sectors.
During his speech, President Kaberuka congratulated the Government of Rwanda on its efforts to create an enabling environment for investments, adding that the country was succeeding in that regard.
Mr. Donald Kaberuka’s official visit provides for a series of audiences with top government officials and working meetings with a number of ministers. The visit will also be marked by a field trip to ADB-financed projects as well as the inauguration of the ADB Rwanda National Office. The president will also hold discussions with private sector representatives, development partners, the civil society, the diplomatic corps and the media.
The Rwanda investment forum was opened on Monday, 22 May by Rwandan president, Paul Kagame. The conference, which is in its third session, served as an exchange platform for business people as well as an investment facilitation platform in Rwanda.