African Development Bank Not Masters of One's Fate

The African Development Bank faces many challenges to improve life for residents of the world's poorest continent. One big one is competing with China, which outspends Africa 5 to 1 in its own backyard.
An irrigation project funded by the African Development Bank.

Africa is the world's poorest continent, and the African Development Bank, a quasi-governmental lender that finances infrastructure projects on the continent, is the most tangible agent of change for many countries.

But because of its relative poverty, Africa is often not in the driver's seat when it comes to determining which telecommunications networks, water supply and treatment systems or roads get built on the continent.

Increasingly, those decisions are taken by the Chinese, one of the biggest investors in the vast, minerals-rich continent of 54 countries that has become one of China's biggest sources of raw materials.

The People's Bank of China, China's EXIM Bank and China's Development Bank are big sources of Chinese direct investment into Africa, which currently outstrips African investment by a factor of five.

Akinwumi Adesina, the agriculture minister of Nigeria, who is one of eight candidates for the presidency of the African Development Bank, which is based in Abidjan in Ivory Coast, said he wants to expand the African bank's influence on the continent.

But that process is tricky and politically sensitive, because Africans are wary of alienating China, their biggest foreign benefactor. The election for the African development bank's presidency will be held on May 28.

In an interview with Handelsblatt Global Edition, Mr. Adesina described the relationship between Africa and the Chinese as a kind of tango dance, where each partner needs the other and must coordinate their actions.

“China invests $14 billion annually on infrastructure in Africa and is an important trading partner,” Mr. Adesina said.

He described the relationship with China as an "ongoing dance" but he acknowledged that Africa needs all the help it can get to modernize and build infrastructure on a continent where the average sub-Saharan African earns just $315 (€284) per year.

“The World Bank estimates that Africa needs $93 billion to help get its infrastructure into shape. That is way beyond what African governments can do on their own,” Mr. Adesina said.

Founded by 23 African States in 1964, the African Development Bank, or AfDB, has played a largely secondary role compared with big global development spenders such as the World Bank, the International Monetary Fund or, more recently, China.

The African bank lags behind the Asian superpower in infrastructural investment on the continent. The AfDB spends only about 20 percent of what the Chinese are spending on the continent, based on a comparison of the African bank's annual budget and Chinese government figures.

The relationship between Africa and China is complex, a mix of co-dependency and mutual interest. China needs resources, and Africa needs investment capital.

While Africa is not in a position to turn away Chinese investors, the Asian superpower's infrastructure activities in Africa are often criticized for failing to uphold environmental and human rights standards, as for failing to make the effort to better understand the cultures of Africa.

To improve cross-cultural relations, a group of young Chinese set up a non-governmental organization called China House in Kenya to help integrate Chinese businesses into African communities.

"The challenges facing the Chinese in Africa stem from their lack of respect for local employees," said Huang Hongxiang, one of the group's founders. "Chinese firms try to operate in Africa the same way they do in China, but that doesn't work."

China has also been criticized for taking advantage of their poorer African counterparts in business dealings. The Chinese often dangle cheap government loans to Africans in exchange for mining rights or construction contracts.

Perhaps to fight against this perception, the state-owned People's Bank of China recently created a co-financed fund with the African Development Bank that will steer $2 billion in Chinese investment to Africa over 10 years.

Africans are aware that their continent has enormous untapped resources - oil, gas, minerals, diamonds and gold - but they need to exert more control over how these strategic assets are exploited.

"Africans have to say what their priorities will be, and Africans will need the capacity to negotiate the terms of engagement," Mr. Adesina said.

Africans have to say what their priorities will be, and Africans will need the capacity to negotiate the terms of engagement. Akinwumi Adesina, Nigerian Minister for Agriculture

The African bank is financed by the contributions of its member countries. The bank recently relocated its headquarters to Abidjan after it had been in Tunis, the capital of Tunisia, for almost 11 years.

The bank’s targets most of its efforts to the continent's three most-populous countries where projects will reach the greatest number of people -- Nigeria, Ethiopia and South Africa.

Mr. Adesina would focus on expanding the bank's activities to other countries such as Burundi, Central African Republic, Comoros, Democratic Republic of Congo, Côte d’Ivoire, Guinea Bissau, Liberia, Sierra Leone and Togo.

Chinese engineers work with their Kenyan colleagues at a construction site on a Kenyan Railway project.

 

"53% of African states are fragile and I want to make sure that these fragile countries have access to capital," he said in the interview.

Fighting corruption is a major concern, he said.

"There is an issue of corruption which is linked to the extractive industries such as oil and gas," he said. Smaller countries in particular depend on mining, he said. "We have to end the illicit capital flows."

Joblessness, which hits one in four South Africans, for example, is also a major issue,  he said.

"We have a lot of young people who are disenfranchised," he said, adding that many could start careers in agriculture.

"I wear a bow tie as an agriculture minister… Now why is that? Because I want to change the perception of agriculture. Agriculture is a business," he said.

Akinwumi Adesina is ready to work with China for the benefit of Africa.

 

Forbes magazine named Mr. Adesina, a development economist, as its Africa Person of the Year in 2013. As Nigeria's agriculture minister, he developed an electronic wallet system that provided 14.5 million farmers with subsidized fertilizer and other farm supplies.

Africa's complicated, diplomatically sensitive dance with China won't end anytime soon, but maybe perceptions will change, said one banker.

“Africa needs to be seen as a continent of opportunities rather than a country of risks, “ said Bruno Wenn, the chairman of DEG, a subsidiary of Germany’s state-owned development bank KfW.

Sarah Mewes is an editor at Handelsblatt Global Edition who spent ten years of her life in West Africa. To contact the author: [email protected]