Africa's chief development banker urges regional cooperation

“We are 53 diverse countries differently affected by the crisis, 1 billion people that cannot be ignored”. That was the stark message to Members of Parliament's Development Committee from Donald Kaberuka, the head of Africa's Development Bank at a hearing on 3 September in Brussels. The economic crisis has hit the continent hard with falling commodity prices leading to reduced incomes.

A European Parliament Resolution on the effects of the global financial and economic crisis on developing countries is likely to be on the agenda of the upcoming Strasbourg session. Ahead of that meeting, we spoke to Mr Kaberuka, a former Rwandan Minister of Finance who helped rebuild his country after the genocide.

What should be done inside and outside Africa to repair the damage to the Millennium Development goals on poverty reduction caused by the downturn?

It was more than unfortunate in the timing and in the way it affected even the countries that have done everything right. If you look at the history of Africa over the last 4 decades, many of the problems we faced on the economic front were internally generated. This crisis is of a completely external origin.

So, the solution has to be in large part external as well. Internally we agreed to stick to the cause of reform, look at domestic resource mobilisation, capital market developments and, above all, regional integration.

What is the African Development Bank doing to help the African people during this crisis?

We have put a billion dollars on the table to keep trade finance going, which is quite some money for the Bank. We have given large amount of additional budget support.

We have picked up many projects which had been abandoned because of lack of finance in Europe and US with a value of close to $3.1 billion, which could have been stopped or delayed, mostly infrastructure projects.

Finally, we are working with IMF and World Bank to provide technical support to countries that did not have the capacity to put in place policies to better withstand the crisis on issues like bank regulation.

As commodities are often a curse rather than a blessing, what other sectors could help African economies move forward?

I agree that diversification of African economies has been slow. That is why, for example, a large facility that we have given to Botswana is a diversification loan to reduce its dependency on diamonds, to help Zambia be less dependent on copper.

We cannot be a continent dependant on raw material forever. Therefore we must invest into infrastructure, skills, and support private sector, and that is at the centre of our strategy.

I want to come back to the issue of regional integration. Two thirds of Africans live in eight countries. Populations of many other countries are less that 20, 10, 1, or even half a million people. You cannot have a diversified market with this kind of small size markets, therefore regional integration is extremely critical.

As a former Rwandan Minister of Finance, what financial tools can help counties dealing both with present conflicts and those emerging form conflicts?

Africa has come a long way on the issue of conflicts. Today, outside Somalia and Sudan, many other areas of the continent are at peace. Now we need to create confidence. We think as a bank that the best way to do it is to encourage countries to cooperate in the economic area.

Look at Europe during the last 100 years - there have been bloody conflicts. At the beginning the search for the solution was based on cooperation in coal and iron as well as agriculture.

It is about regional integration and sharing common activities so that you create regional stakeholder economies. And we are doing that in the Great Lakes region, because when people share, be it railways, coal or iron, as we see in Europe, the potential of conflicts is reduced.

Oxford Professor Ngaire Woods was also at the hearing to present her study commission by the European Parliament: “The international response to the global crisis and the reform of the international financial and aid architecture”.