KEY NOTE ADDRESS BY H.E. DR. JAKAYA MRISHO KIKWETE,
PRESIDENT OF THE UNITED REPUBLIC OF TANZANIA, AT THE OPENING OF THE 2012 ANNUAL MEETINGS OF THE BOARD OF GOVERNORS OF THE AFRICAN DEVELOPMENT BANK (AfDB) AND THE AFRICAN DEVELOPMENT FUND (ADF), MAY 31st , 2012 – ARUSHA
Chairman of the Board of Governors of AfDB;
President Alassane Ouattara of the Republic of Cote d’Ivoire;
Former President Festus Mogae of Botswana;
Dr. Donald Kaberuka, President of African Development Bank;
Honourable Governors and Executive Directors;
Dr. Omar Kabbaj, Former President of the ADB;
Representative of His Majesty Mohammed VI, King of Morocco;
Dear Partners and Friends;
Ladies and Gentlemen:
It gives me great pleasure on behalf of the Government and the people of Tanzania and on my own behalf to welcome you all to our country and to Arusha in particular. Arusha is the hub of the northern tourist circuit of Tanzania. All the world renowned game parks and the Mount Kilimanjaro are only a stone throw away. Zanzibar is not too far away either. I hope you will spare time at the end of the meeting to visit them and cool-down after the intense discussions.
We in Tanzania feel greatly honoured and privileged to host the 47th Annual Meeting of the Board of Governors of the African Development Bank and the 38th Meeting of the African Development Fund. This is the first time for Tanzania to host the Annual Meetings of the AfDB. I thank you Dr. Donald Kaberuka, President of the AfDB and the entire Board of Governors of the Bank for bestowing Tanzania with this rare honour.
I commend you President Kaberuka and the organizers for a job very well done of organizing this meeting. I applaud you for choosing a very opportune theme for this year’s Annual Meetings. To me, the theme "Africa and the emerging global landscape: challenges and opportunities" captures well the current discourse on which Africa’s progress and aspiration are anchored.
Global Economic Situation
We are meeting against the backdrop of the second wave of the global economic crisis. During the first wave, four years ago, the world witnessed unprecedented upheavals including the financial meltdown, high food and oil prices and ultimately the economic slowdown. According to IMF data, world economic growth declined from 5.4 percent in 2007 to -0.6 percent in 2009 before recovering to 3.9 percent in 2010. The decline in the developed countries was from 2.8 percent in 2007 to -3.6 percent in 2009 before recovering modestly to 1.6 percent in 2012. In Africa, growth declined from 7.1 percent in 2007 to 2.8 percent in 2009 and recovered to 5.3 percent in 2010. As you see developed economies were more affected than African economies, but that does not make us better off.
During the first wave of the global economic crisis, African economies were able to ride the storm partly because our financial markets were not fully integrated into the international financial system. Also, because of stronger fiscal and external balances resulting from rapid growth, fiscal consolidation and the build up of foreign exchange reserves in the previous decade. I cannot predict what the situation would be in the ongoing second wave. I say so because currently, our economies are not as strong as they were during the first crisis. We are now faced with the daunting challenge of sustaining the pace of growth in the midst of the uncertainties presented by the current global economic situation. The process of recovery of the global economy is happening at a slower pace than expected. Moreover, the ongoing sovereign debt crisis in Europe and its threat to the stability of the euro amplifies the uncertainty and risks in the capital and commodity markets worldwide.
Ladies and Gentlemen;
In many of our countries in Africa, we now have to contend with inflationary pressures caused by high prices of food and fuel. At the same time, we are witnessing declines in markets for our traditional exports and in prices for our commodity. There is also, decline in investment inflows and development assistance. Unemployment is on the rise and so are the challenges and dangers associated with it.
All these developments are impacting negatively on our efforts to promote growth and eradicate poverty in our countries and erase it from the face of our dear continent. The achievements made in the social sectors are being seriously threatened with reversals. It is now evident that many African countries may not be able to achieve most of the MDG targets come 2015. These worrisome developments are causes of great concern to us. I hope this meeting of the best minds on this continent will reflect on this situation and advise accordingly.
Ladies and Gentlemen;
Despite the odds, Africa needs to continue to embrace the sound economic policies which engendered the progress being witnessed today. We must strive to maintain macro-economic stability and sustain it through tackling high budget and overall external deficits. We must, also, work tirelessly to reduce the high levels of inflation obtaining in many of our economies. I know it is not easy but we must do whatever we can to keep inflation at single digit. It is in the best interest of our nations and people.
I see regional integration, as a unique vehicle to assist Africa continue to build its capacities for self reliance and resilience against the uncertainties presented by the current crisis facing the global economy. Through regional economic integration arrangements intra-African trade will increase, thus presenting additional and alternative markets for our goods. When we trade more amongst ourselves the consequences of loss of markets in developed economies may be minimised.
The truth of the matter is, there are times when we worry about international markets for our commodities while there is a huge market in next door country. At times, also, we import goods from afar while a neighbouring country has them in abundance. This happens because our markets are not integrated. But, with regional integration and cooperation between different regional economic groupings trade can be facilitated and increased.
Ladies and Gentlemen;
May I use this opportunity to appeal to the AfDB to increase its support to regional integration endeavours on the continent. The Bank should continue and increase its support infrastructure development in Africa. I know you are doing a commendable job in this regard, but much more needs to be done. We need to increase connectivity in Africa to facilitate growth in intra-African trade. In this regard, we need more roads, railways, ports, airports and ICT to open up and increase market access in Africa. These are heavy capital investment undertaking which many of countries alone cannot afford.
Ladies and Gentlemen,
Besides regional integration there are opportunities for alternative markets and sources of investment from the emerging economies of China, India, Russia, Brazil and South Africa. These provide Africa with opportunities for increased trade and investment. In recent years, African countries have witnessed a significant increase in trade, foreign direct investment and development assistance from these countries.
These countries have greatly expanded their engagement with Africa, an engagement which is broadening the options for growth and presents real opportunities for the development of Africa. Such engagement has enabled Africa to increase its share of global trade, FDI inflows and aid. For example, trade with China alone rose more than ten times from USD 10.59 billion in 2000 to 126.9 billion in 2010.
Within Africa, trade between our countries has increased remarkably. For example total intra-EAC trade increased from USD 2.2 billion in 2005 to USD 4.1 billion in 2010, an increase of 86 percent; and foreign direct investment increased from USD 688 million in 2000 to USD 1.7 billion in 2010. These are but a few examples of the existing alternative opportunities which if well exploited could steer African development to greater heights.
Ladies and Gentlemen;
I have no doubt in my mind that Africa is poised to become the world’s new economic power house for the 21st century. With its endowment in both natural and human resources, the pursuit of sound economic policies, and with democracy, good governance, respect for rule of law and human rights being entrenched nothing will stop Africa from getting there.
Currently, 11 of world’s 20 fastest economies are in Africa. The IMF projects that over the next decade six of world’s fastest growing economies will be in Africa. Also eleven African countries, rank among the top ten sources for at least one major mineral in the world. Africa has 10 percent of the world’s reserves of oil, 50 percent of gold, 98 percent of chromium, 90 percent of the world’s cobalt and platinum group of metals, 70 percent of tantaline, 64 percent of manganese and one third of the world’s uranium.
Fortunately, this huge potential has not yet been fully harnessed and utilized. Even the little that has been extracted much of it is being exported raw. With the current awakening and the drive to stop being perpetual exporters of primary products and become exporters of processed or semi processed goods, things should work well for us. When that is done Africa’s contribution to the world economy will definitely be quite significant.
World’s Bread Basket
Ladies and Gentlemen;
Africa has 60 percent of the world’s uncultivated arable land. With relatively abundant water resources for irrigation and permissive climate for agriculture, Africa has the potential of becoming the granary of this planet. In this regard, what is required of us is to modernize our agriculture. Transform it from its current state of being predominantly peasant, traditional, backward, less productive and subsistent to a modern, highly productive and commercial agriculture.
This requires increased investments by our governments, development partners and private sector in mechanization, irrigation, availability and the use of high yielding seeds, fertilizers, herbicides and pesticides. There is also need to increase extension services so as to impart skills to the peasant farmers, provide them with financial services and improve crop market and rural infrastructure. If these things are done, Africa can feed itself and the world while at the same time lifting millions of people out of poverty through increased production and incomes. The African Development Bank has a very important role to play now and in future. I know you are doing it but I would like to implore you to increase more funding for the development of agriculture in Africa.
Ladies and Gentlemen;
As you all know, the biggest obstacle to effective utilisation of Africa’s potential and overall growth is poor infrastructure. Today, Africa’s physical infrastructure remains highly under developed in the 50 years of its Independence. For Africa to be able to fully exploit its potential and promote intra-regional trade, it has to develop efficient connectivity in terms of roads, railways, ports, air transport and waterways. Africa also has to ensure reliable availability of electricity. Fortunately, there are plenty of energy resources including hydro, natural gas, coal, oil, uranium, solar and wind. Unfortunately, all these require heavy capital investments, which African governments alone cannot provide. Financial institutions like AfDB and others have an important role to play to fill the gap.
Ladies and Gentlemen;
As alluded to earlier, African countries cannot continue to depend on export of raw material whose prices are volatile. This price volatility leads to low and unstable export earnings. Hence, value addition through industrial processing is a key strategy that Africa must implement. Many African countries are endowed with natural resources and agricultural products that can be used as raw materials in domestic manufacturing and processing industries. Africa can also take advantage of its low labour costs to attract industries that are relocating from high production cost countries. Development of SME which are generally low capital enterprises holds key potential for Africa.
Human resource development is another important factor for sustaining economic growth, human development and empowerment of people. I know there has been notable progress made particularly with regard to education and training. But, compared to progress made in other continents Africa lags too far behind. We have to catch up with the others. Therefore, we need to invest more especially in science education at all levels so that our countries leverage science and technology for Africa’s development. But we also need to increase investment in vocational training and skills enhancement.
Since ICT is a critical element that can help to enhance production and service delivery in various sectors, Africa must properly anchor ICT in its development strategy. AFDB’s support in promoting science education in Africa is highly appreciated. However, we beseech you to continue supporting Africa and increase resources for that purpose for development of ICT infrastructure.
Ladies and Gentlemen;
Africa has great potential in the field of tourism. Indeed, tourism is already one of the leading foreign exchange earners and job creators. This is one sector which presents a huge potential for growth in future. Currently, Africa’s share of world tourism is marginal. Statistics show that in 2010, out of 940 million tourists in the world only 49 million came to Africa. Reasons are not far to find. Africa is least served with air flights of all continents. Again air fares to Africa are much higher than for similar distance in Europe, America, and Asia.
In our countries the tourist infrastructure such as hotels, transport, airlines, airports, sea vessels, tourist trains etc are less developed. We need to invest more in the development of this sector because its potential is huge. Africa has unique tourist attractions. If our countries can be assisted in the development of the requisite infrastructure this potential can readily be harnessed. With its high multiplier effect in the economy this sector deserves special attention by government and financial institutions like the AfDB.
Potential Future Role of the AfDB
AfDB has been Africa’s dependable partner in development since its establishment in 1964. We can attest with confidence that the Bank has played a dynamic role in promoting Africa’s development agenda. The Bank has a deep knowledge of the continent and necessary passion for Africa’s development. The Bank has made tremendous contribution towards promoting Africa’s growth in this regard. I still believe the Bank can do more, and has to do more, now and in future to advance Africa’s development agenda. My expectation is not farfetched; it is based on the AfDB track record over the many years.
I am glad that this meeting coincides with the formulation of the AfDB new ten years Long Term Strategy 2013-2022 that will replace its current Medium Term Strategy for 2008-2012. I find it befitting to seize this opportunity to put forward three proposals for consideration:
a. The financing gap to upgrade and advance Africa’s infrastructure has to be addressed. Inadequate and poor infrastructure is a major constraint to Africa’s development. If successfully addressed, Africa’s pace of growth and development will be enhanced tremendously. Failure to do so will make our economies to remain weak and vulnerable. I am pitching for infrastructure because the quality of infrastructure is a major factor in determining an economy’s competitiveness and prospects for growth. Unfortunately the situation in Africa is not that good.
Let me share with you some of the statistics which speak volumes about the situation. These are statistics for the last three years which up to now shows no significant change has happened. In electricity, Africa’s average access to electricity is only 25 percent and the World Bank estimates that by 2020 about 60 percent of our continent will still be without power. Per capita consumption of electricity is 62 kilowatts while that of the United States is 12,343 kilowatts. Africa’s road density is 7 km per 100sq.km and only 12 – 17 percent is paved. About 80 percent of the unpaved roads are accessible seasonally.
Africa needs financial and technical support to upgrade and advance its infrastructure. I know, as mentioned earlier, the AfDB is doing a lot in this regard, and I can personally attest with regard to the support extended to our country. However, a lot more needs to be done in view of the prevailing situation in Africa. We welcome more support from bilateral and multilateral donors as well as private sector partners.
b. Regarding agriculture, I believe the Bank can play an important role in helping African countries to transform their agriculture. Many African countries have prepared their national agriculture investment plans which are in line with AU’s CAADP. What is needed in this regard is additional financial resources to enable them implement these plans. I am confident that the Bank will stand ready to continue to assist African governments and the private sector engaged in agriculture.
c. The AFDB can also play a key role in industrialization in Africa, through supporting growth of manufacturing and Small and Medium Enterprises (SMEs) and the private sector. Africa has a huge potential of developing a vibrant industrial sector, because of its huge raw material base and improved investment environment. SMEs, if developed can play an important role in this endeavour. These will ease unemployment problem by creating jobs for the youth and fastest growing segments of the poor and unemployed in urban areas. What is required is financial, technical and technological support mechanisms to governments and entrepreneurs in Africa to invest in manufacturing.
Ladies and Gentlemen;
The AfDB under the able and exemplary leadership of President Kaberuka, with the guidance of the Board of Governors has been doing a wonderful job. The Bank has made a huge difference in promoting Africa’s development. I am sure the Bank will do much more to meet our expectations and effectively rise to the many challenges. But to do so the Bank needs the continued support of all of us. At this juncture, I would like to thank the Bank Shareholders for supporting the Bank through the many years. Let us continue to do so now and in future. Let us continue to facilitate the Bank so as to enable to fulfil its vision and mission of supporting of Africa’s development endeavour. Tanzania promises to play its part.
Before I conclude, let me add a word of appreciation to the Bank and the Government of Denmark for the establishment of African Guarantee Fund to support young people in business. I welcome the initiative because unemployment is a growing challenge in all our countries. I hope many more donors will join hands with AfDB and government of Denmark to increase resources to this Fund. In the same vein, I welcome the establishment of the Aquans Fun of Funds for agriculture value addition. Its important cannot be overemphasized.
I wish you fruitful deliberations and we look forward with great anticipation to the outcome of your meeting. After those many words, I hereby declare open the 47th Annual Meeting of the Boards of Governors of the African Development Bank and the 38th Meeting of the African Development Fund.
Thank you for your kind attention.