African Development Bank (AfDB) President, Donald Kaberuka, on Monday, September 21, 2009, rang the closing bell at the New York Stock Exchange (NYSE) located on Wall Street. Wall Street is a leading financial symbol across the globe and this makes NYSE one of the most emblematic stock exchanges in the world. The ceremony took place within the framework of the Africa Investors’ Summit jointly organised by the NYSE and the Africa Investor’s Group.
Mr. Kaberuka gave a key note address at the summit. In his keynote address, Mr. Kaberuka said while the crisis had been a major setback to Africa, the continent had shown remarkable resilience. He expressed his optimismat the Africa Investor Forum held against the backdrop of a G-20 Summit scheduled to take place in Pittsburgh that will focus on the global financial crisis.
He said the transmission of the crisis from its epicenter to the continent’s shores was not so much financial, but rather in the real economy, lower export earnings, reduced investment flows, a weakening of fiscal positions and current accounts. It also implied a contraction of private sector activities, especially in countries whose economies depended heavily on mining. He however pointed out that in the midst of the turbulence, some countries and regions – non-oil, non-mineral dependent – were still posting 6% growth rates per year.
The financial sector, he said, had remained generally stable given that it was well regulated and well capitalized, though there was still some vulnerability which, of course, called for vigilance as the real sector contracts. “But on balance, the stability of our financial sector remains rock solid,” he stressed.
Mr. Kaberuka also pointed out that before the crisis set in; the AfDB had significantly ratcheted up its non-sovereign financing activities as part of its medium-term strategy; from a modest USD300 million a year in 2005 to roughly USD1.5 billion in 2008 through direct lending, equity participation, guarantees and syndication. He underscored that the institution’s core areas of interest remained infrastructure development, financial institutions, equity funds and developing local capital markets, adding that almost half of AfDB activities were in low-income countries and that demand was growing.
The crisis has presented us with a challenge, but also with opportunities to innovate, he pointed out. As the G20 called upon international and regional financial institutions to play a counter-cyclical role, we have introduced new frontloaded fast-paced, innovative instruments which range from trade finance - not a traditional core area for us - , liquidity facilities, infrastructure funding and in the case of one or two middle income countries, we have provided rather large budget support.
He said that while in the search for innovation, the AfDB had taken a leading role in creating several platforms, prominent among them, the African Financing partnership- an eight-institution collaborative, co-financing framework. In this regard, he stressed that “we are thus able to optimize the institutional market knowledge and project financing skills applying syndication principles. We have thus been able to crowd in more financing, diversification of risk and ability to do more with less.” He pointed to the “Main One Cable” project in Nigeria as an example. He added that if each of the eight partners took the lead in 2-3 transactions annually, such initiatives could bring in USD10 billion to the continent in project financing.
“We have also used our convening power to bring together leading private equity funds active in Africa. Given the strong market demand, we were looking at how to support the expansion of the network of such funds in Africa. We concluded that with due care in structuring, the quality of transactions, we could see a remarkable growth in equity investments in Africa that might outperform even other emerging markets. Today, the Bank has invested close to half a billion dollars in private equity funds and our target is around 20% of our non-sovereign portfolio,” he underscored.