Oil Slump, Slow Growth Greets African Development Bank ChiefDaniel Magnowski
The next president of the African Development Bank will take over an institution entering a much tougher economic environment than the one Donald Kaberuka inherited when he won the job a decade ago.
Kaberuka’s successor, who will be elected on May 28 during the AfDB’s annual meeting in Abidjan, Ivory Coast, faces a slowdown in some of Africa’s biggest economies after a plunge in oil prices and rising political risk.
“There’s uncertainty about the commodity price outlook and there are security challenges in some more prominent markets like Kenya and Nigeria that weren’t there 10 years ago,” Ridle Markus, a strategist at Barclays Plc’s Africa unit, said by phone from Johannesburg. “There are a lot more medium-term challenges they’ll have to overcome.”
While sub-Saharan Africa has grown faster than any region in the world except developing Asia in the past 10 years, an almost 40 percent slump in the price of oil in the second half of last year and declining metal prices are clouding the outlook for economies such as Nigeria, Angola and Zambia. The International Monetary Fund last month lowered its economic growth forecast for sub-Saharan Africa by 1.25 percentage points to 4.5 percent.
In West Africa, where the worst outbreak of Ebola has crippled Sierra Leone, Guinea and Liberia, a 53 percent plunge in iron ore prices since the beginning of last year has hampered growth.
Economic growth on the continent can return to levels recorded before the global financial crisis in 2008-2009 if commodity prices stabilize, the AfDB said in its African Economic Outlook report on Monday. The bank is estimating 4.5 percent expansion in Africa this year and 5 percent in 2016.
Candidates for the AfDB presidency say the bank must increase efforts to keep wealth on the continent and share it more equally among citizens if it wants to stay relevant and meet its aim of reducing poverty.
“The biggest challenge facing Africa today is to transform the tremendous wealth of Africa for the benefit of Africans,” Jaloul Ayed, one of the eight contenders for the position and a former finance minister in Tunisia, said in a debate in Washington last month.
The AfDB’s financing in Africa is overshadowed by lenders such as the World Bank and China’s government. Loans and grants totaled $7.8 billion in 2014, 22 percent more than the previous year. The World Bank committed a record $15.3 billion to sub-Saharan Africa projects in the fiscal year ending June 2014.
AfDB lending is “fairly small in the context of Africa’s overall investment needs, and it has grown less quickly than the wider African economy,” Alan Cameron, an economist at London-based Exotix Partners LLP, said in an interview in Abuja, Nigeria’s capital. “It will take a higher-profile president to really make the bank relevant.”
Candidates for the top post, such Cape Verde Finance Minister Cristina Duarte, the first woman to run for the job, and Nigeria’s outgoing Agriculture Minister Akinwumi Adesina, have said the AfDB needs to focus on promoting investment by businesses.
Duarte said in a May 8 interview that a stronger African private sector would encourage more value-added industries to flourish on the continent, while Adesina said last month that the bank should provide more access to funding for businesses.
South Africa, the continent’s most industrialized nation, is backing Thomas Sakala, a Zimbabwean national who has worked at the AfDB for 31 years. He said in an April 28 interview that governments must raise more domestic funding for infrastructure projects to boost growth.
Other candidates for the presidency are Ethiopian Finance Minister Sufian Ahmed; Chadian Finance Minister Kordje Bedoumra; Mali’s Birama Boubacar Sidibe, a vice president of the Islamic Development Bank; and Sierra Leone’s Foreign Minister Samura Kamara.
The bank’s members include 54 African states and 26 non-African nations, including the U.S., China, Japan and U.K. The lender returned to Abidjan last year from Tunis to open its headquarters after an 11-year absence prompted by the outbreak of civil war in Ivory Coast in 2002.
During a visit to Ethiopia last year, Chinese premier Li Keqiang said his country would increase credit lines to Africa by $10 billion on top of $20 billion already offered, state news agency Xinhua reported. China also disburses funding from its $5 billion China-Africa Development Fund.
“For a lot of African governments, by far the most important lender is China, which in terms of continental influence dwarfs the African Development Bank,” Laura Barber, intelligence analyst at AKE Group, a political and risk analysis company, said by phone from London.
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