AfDB outlines grand plans for execution of Power Africa initiative

The African Development Bank (AfDB) is set to roll out its 10-year strategic plan next month to turn the African continent into a global economic pole, the bank’s President, Dr Donald Kaberuka (pictured), in an interview with Emmanuel Muga, talks about the bank’s plans for Tanzania.

Question: Your visit to Tanzania was meant to support Barack Obama’s Power Africa initiative through which he has pledged support to double access to electricity in Sub-Saharan Africa. The AfDB says it is going to spend three billion dollars in the next five years but the Americans didn’t give figures. How will the US-AfDB partnership work?

Answer: I think the Americans gave numbers in terms of 8,000 megawatts and doubling access to electricity.

Q: But, they did not say how much specifically they will spend in specific countries!

A: Power Africa is not about money alone and less so about public money only. Power Africa is about public money, private investment, power sector reforms, partnership between American financing agencies and us—it is not about the American Congress appropriating seven billion dollars.

It’s about ensuring that seven billion dollars flow into African energy sector from OPIC (Overseas Private Investment Corporation), Exim Bank… I want to believe that what happened in the mobile phone revolution in the early 2000 when the sector was de-regulated, cleaned up and opened up will happen in the energy sector too.

Q: Utility companies in Africa are very ineffective, take the case of Tanzania where over 20 per cent of power generated is lost. Exactly how are you going to turn the utility companies around?

A: If you want to increase private investment in energy, you first have to resolve with that ineffectiveness and Power Africa has that component of working with the government of Tanzania to complete power sector reforms and have solvent national utility company in place.

Gas can lower the cost of power because right now the energy crisis some years back hooked the country into costly sources of power. And this is not only a Tanzanian problem, it is a problem everywhere. So, we will work together to make those reforms happen as was the case in telecommunications.

Q: What would you do specifically to clean up the utility companies?


A: Oh, this is not a rocket science. Restructuring national utilities is something we do daily. There are several models on the table—splitting the company into several components, generation, distribution and billing; formation of two companies, or having state firm managed differently. But, all said, two things are critical if you have to attract private money into power sector.

There has to be an independent regulator, who is truly independent in law and fact, to set up tariffs and arbitrate issues between government and companies. Two, is to avoid a mismatch of cost in which you buy and sell power because such deficit has to be paid by someone one day.

Q: East African countries have discovered gas and oil. How will the AfDB help integrate this component into the wider energy sector development plan?

A: It’s a good thing that the region will be able to use fully their natural resources—oil, gas and mineral products. But for the countries to benefit fully, they have to negotiate good and equitable contracts. That’s the beginning of the beginning. And we would like to help them on that side through African legal support facility.

Having negotiated good contracts, you need now to fill out the management model which will balance consumption and investment, current consumption and future consumption, current investment and future investment, the mode of savings, so that you avoid what has commonly been known as Dutch disease or resource curse.

Q: I have read about your 10 year strategic plan to turn Africa into global economic pole. To me it sounds utopian. What will you do differently from what the World Bank and other donors have been doing since the 1970s?

A:Well,I can speak for the African Development Bank. There are two answers to your question. One, Africa has changed in the last ten years. So, Africa of today is not the Africa of 30 years ago. Economies have grown and the continent’s GDP has increased three times in ten years.

The way to move forward, and that’s the essence of our plan, is to ensure that the benefits of this growth are spread far and wide—that as many people as possible feel the benefits and that’s how you grow the markets and create trust in equity through people’s participation in creating economic prosperity.

While it’s good to grow the economies, it is even more important to transform the economies, because when the economies are expanding, we need to move up, join the global value chains, that are what will create jobs, for the people and once they have jobs the benefits are spread wide. Ours is the strategy for inclusion and transformation that will create industrial society, which will create jobs.

Q: You are talking about taking the benefits of growth to many people, how will this be achieved?

A: We have our ten-year plan adopted in Marrakech. We will tailor all our operations to ensure that inclusion is part of what we do. For instance, we will be launching a special programme about small and medium businesses this month.

We will select in every country a number of financial institutions that have close links with small businesses and we will do whole selling facilities for them so that small businesses, which create jobs, can access affordable capital. We will also under power Africa initiative increase the level and affordability of power.

Because it is one thing having power available but quite another thing having that power accessible by majority people in rural areas, in particular.

Q: The AfDB has grown in importance in the last 10 years. What has sparked this unprecedented growth?

A: Your right that in the past eight years in particular we have seen dramatic increase in the bank’s activities, partly because as Africa is growing, the needs of the continent expand and therefore the bank had to respond.

The second reason has to do with the financial crisis of 2008 when the bank stepped forward with significant counter-cyclinal programme to minimise the damage on the African economies. I may recall that in 2008/2009 we actually doubled our lending, becoming the biggest lender to the African continent.

In 2010 the capital of the bank was tripled, from about 32 billion to 100 billion dollars, giving us additional fire power.

Q: The bank seems to be putting infrastructure on top of its development agenda. What informs your choices?

A: The strategic choices of the bank around infrastructure, economic integration and private sector are appropriate because they respond to an African agenda for growth, trade and investment. Africa cannot maintain its seven per cent growth rate unless we are able to overcome infrastructure obstacles.

Q: It seems AfDB is determined to champion African development agenda. Can you surely propel the continent from aid dependency?

A: I can tell you that aid plays an insignificant role in national budgets if you leave out countries coming out of conflicts, or very small poor countries. Many countries use their own domestic taxation, remittances and foreign investments to drive the economies. In some countries, aid contributes less than five per cent.

Resources being deployed for African development now are Africa’s own resources. However, aid has always been meant to be temporal and transitional—it was meant to come to a point when countries graduate from aid. But with the international trade regime which is biased against Africa, the process of trading out of aid has taken longer.

In many countries where aid has been used well, optimally, it has actually contributed to these benefits, I know at least of my own country where aid was used well and contributed to many good things we are seeing today. Q: Grants and loans from your bank come with no strings attached.

Does this Chinese way of doing business with the African countries work? A: We have a very rigorous mechanism in place to ensure that our money is used properly, for the purpose of which it was intended. The mechanisms apply whether it is a loan or a grant. And thank God up to now, I have not seen a significant case where our money has been badly used.

I think the word ‘strings attached’ is a bit old fashioned, conditionalities have gone out of fashion, now it is about ownership, every country must own its future. So we dialogue with a country, try to understand what they are trying to do and if we are convinced that they are going in the right direction, then we commit our resources.

Ends Money matter No blind faith when it comes to money Have you ever come across a situation where your spouse has bought a costly fridge, Television or car without consulting you, just to surprise you on your birthday or wedding anniversary?

Or have you got home from work one day to discover that your wife has already sold your house without consulting you? Then how can you allow any third person to buy or sell stocks on your behalf without your express permission? I normally advocate for hiring the services of an expert investment advisor or stock broker.

But this is meant for delivering an expert advice and not to play around with your hard earned money. I have come across many instances when with passage of time the investment advisor wins your trust and start playing around with your money without your express consent.

In such a situation the end result is known, as there is a good likelihood for you to loose money. When as a kid you watched a magic show for the first time, you were amazed how one pigeon turned into two... But then your dad explained to you that it was an illusion...

Similarly, when someone promises to double your money in a jiffy, he might also be showing you an illusion... If you fall prey to such illusions then you are bound to loose money in one way or another. On similar lines, we often hear stories or instances when the so called trusted servant has committed a heinous crime and vanished with all valuables from the house. Why has it happened that way?

Because, with passage of time, we compromise our security and start having a blind faith in the person we have hired. There is nothing wrong in trusting somebody; but there should always be an upper limit with necessary check and balances. The same applies on ‘Money Matters’ too.

Whether it is your banker, stock broker, cashier or investment advisor, please desist from having a blind faith in any of them. When it is the question of dealing with your hard earned money; always keep the ‘remote control’ in your own hands. Evaluate carefully the advice offered by these financial operators. Don’t take instant decision on an advice if on the face of it, the given advice looks lucrative and too good to believe.

Always keep yourself abreast of market trends. If the prevailing interest rates on long term deposits are hovering around 10-12 per cent per annum and if somebody promises you a return of 20 or 30 per cent then for sure something is amiss. Check the credentials of your advisor or broker as well as of the scheme offered.

Take pains to visit the office of the said scheme operator and I am sure truth will come out. Never ever have a blind faith on any financial operator when it is the matter of dealing with your money. Do necessary due diligence before you take a decision to sign on the dotted lines.

A little caution on your part—at the time of taking the decision—will save you from many hours of misery at a later stage. People often make excuse that they are busy and thus can not devote their time on finding minute details. But you have to devote time because it is the question of your own money.

You must always insist from your agent a signed copy of the benefits illustration, which gives an indication of the returns and other benefits the fund will yield. It is mandatory for life insurance companies to provide this copy. Your agent may promise the sky, but this document will acquaint you with the ground reality and help prevent a wrong decision on your part based on a mistaken premise.

Before I conclude our today’s topic, let me remind you where I started by cautioning you that “No Blind Faith Please – when it comes to money matters”. Follow this mantra religiously and I can assure you that no untoward incident will ever happen with your hard earned money.
Source: The Daily News, reported from Dar es Salaam, Tanzania
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