African Inventions that could make a difference
This week the leaders of the G20 meet in Pittsburgh; they will no doubt take steps and consolidate previous measures to ensure the world navigates safely out of the financial crisis. There is little doubt, even as we begin to see the light at the end of the tunnel, this is a crisis which has laid havoc in its wake that will take time to repair.
In a gathering such as this many will ask me the questions: What has it all meant for Africa; how long will the continent take to recover; how much damage has been done? The question is even more pertinent given the phenomenal and momentous progress African economies were making in the decade leaving to 2007.
I am here to reassure you that, yes, this has been a major setback but Africa is beckoning; it is in business and for the long haul. I am here to tell you that in the African Development Bank you have a reliable partner who understands Africa – ready always to go with you in mitigating any risks – as a partner, an advisor and a financier.
But first, while the crisis has been a major setback, the continent has shown a remarkable resilience, unimaginable, say, 15 years ago. We are, as you are aware, more than 50 linked but yet heterogeneous economies; the situation varies from region to region. The transmission of the crisis from its epicenter to our shores was not so much financial but, rather, the real economy: lower export earnings; reduced investment flows; weakening of the fiscal positions and current accounts; and, of course, contraction in private sector activity, especially where strongly dependent on international demand – countries whose economies depend heavily on mining suffered significant shocks. But in the midst of it all you have countries and regions – non-oil, non-mineral dependent – still posting 6% growth per year!
As for the financial sector, it has remained generally stable, well regulated, well capitalized; there remains vulnerability which, of course, requires vigilance. As the real sector contracts, this feeds back into increasing non-performing loans or, as we have seen in trade finance, parent/subsidiary bank relationships manifest areas of weakness. But, on balance, the stability of our financial sector remains rock solid.
It is also a fact that before the crisis accessing capital markets, though still limited to a few countries, was growing, with several successful sovereign bond issuances. Now we see that rising risk aversion means that countries that were set to follow suit have postponed tapping the international capital markets. This is disappointing.
Before the crisis set in, as part of our Medium Term Strategy, the African Development Bank had significantly ratcheted up our non-sovereign financing activities from a modest 300 million dollars a year in 2005 to roughly 1.5 billion dollars in 2008 through direct lending, equity participation, guarantees and syndication. Our core areas of interest remain infrastructure, financial institutions, equity funds and developing local capital markets. Almost half of our activities are in low income countries and the demand is growing.