Despite the current “feel good factor” in many African economies, this moment calls for sober reflection rather than hubris, African Development Bank Group (AfDB) President Donald Kaberuka said here Thursday.
“The possibility is real that things may get worse and not better,” Kaberuka told the opening session of the 47th AfDB Annual General Assembly that has brought together representatives of the 54 African and 24 European and North American member states of Africa’s top development bank.
Australia is also represented at the meeting as an observer.
Urging sub-Saharan African countries to maintain their growth momentum that clocked 5.9 percent in 2011, with a few seeing double digits growth, Kaberuka cautioned that internal socio-political setbacks posed risks in some countries.
“Look at the dramatic situation in Mali and the threatened partition of the country, the chronic instability in Guinea-Bissau, the 22-year mayhem in Somalia as well as the drought in the Sahel and the Horn of Africa regions.
“These are certainly isolated cases, but they are an indication of some of the potential risks on the way,” he said.
The Bank is holding its meetings in the wake of a shifting global economic landscape where unpredictable events have led to a reordering in priorities for international development, and in particular development assistance to Africa that has been the major beneficiary.
Governors of the AfDB are at this session reflecting on the likely implications of the global situation to Africa, amid challenges of making the continent’s growth broad based and inclusive to maintain the hope of the majority youth population for getting jobs.
But, while the North African economies are going through a delicate transition phase, the rest of the continent has to brace itself for the impact of the eurozone turbulence.
“Information now available indicates that already some of the smaller countries are beginning to experience problematic access to trade finance; several frontier markets have postponed the launch of sovereign bonds as borrowing gets costlier as European banks retrench deleverage,” Kaberuka said.
He said “there are heavy clouds on the horizon” due to the lagged effects of the European recession that combines with uncertainty about how the emerging giants of Brazil, Russia, India and China (BRICs) will fare in 2012.
The direct implication here concerns investment flows to Africa and demand for African exports.
This time round, Africa’s resilience is not as robust as it was in 2008 when the global financial crisis hit its apex. Africa’s shock absorbers and fiscal space are weaker and some countries have tumbled to double digit inflation.
Kaberuka elaborated the prevailing situation, saying it is important for African leaders to make the important distinction between “economic growth and economic transformation”.
He said many of the countries have posted impressive headline growth statistics, but that the structure of the economies hardly changed, with much of the growth propelled by a very narrow range of traditional commodity exports.
Since the strong headline growth did not come from innovation and diversification, Kaberuka said it “has not commensurately translated into jobs, opportunities for the young and visible improvement in people’s lives.”
He suggested that targeted safety nets adopted as a policy choice must be part of any inclusive growth agenda, otherwise it serves to undermine public finances, breed corruption and capture by the elites.
“African citizens have high expectations. We must quickly bring to them the benefits of economic growth,” Kaberuka urged, even while conceding that there was no quick fix.
“There are choices in public policy that are possible and feasible – from agriculture and food security to small businesses, resolute focus on gender and financial inclusion.
“We have an opportunity to learn from best practices combining robust safety nets instruments and access to education by children of the poor. The Bank will continue to mainstream these issues into its work,” Kaberuka assured.