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'Africa will take possession of its own development': ADB Group President, Omar Kabbaj. (Interview).

The African Development Bank Group's next annual meeting, on 28-30 of May at the Addis Ababa UN Conference Centre, is expected to be a watershed in the economic history of Africa. Some 1,500 private and public sector managers, including Finance Ministers of the Bank Group's 77 member countries will attend.

In addition, African Heads of State will attend the ABD's yearly symposium on the New Partnership for Africa's Development (Nepad) on 27 May. On the eve of this historic meeting, African Business editor Anver Versi interviews the ADB Group's President, Omar Kabbaj (right).

African Business: The latest buzz word among African governments is Nepad. Is this yet another 'talking-shop' action plan or can we expect concrete results and if so, what sort of results?

Omar Kabbaj: As you are aware, Nepad is a home-grown African initiative that was inspired by the UN Millennium Declaration approved by 149 world leaders in September 2000. It called for a new partnership and a pledge to assist African countries in their struggle for lasting peace, poverty reduction, and sustainable development.

As stated by the five African founding fathers, the primary goal of Nepad is to eradicate poverty in Africa, and to place African countries, individually and collectively, on a path of sustainable growth and development and thus halt the marginalisation of Africa in the globalisation process.

It is a shift of development paradigm from passive development assistance to active development assistance through a partnership framework in which both the donor community as well as the African countries are called upon to take on their respective roles and responsibilities of the development agenda.

Thus, Nepad is consistent with the generally accepted development paradigm as it calls on African leaders to accelerate economic growth and reduce poverty by strengthening governance, implementing sound macro-economic policies, and boosting domestic savings mobilisation. It is also an expression of the determination of African leaders to assume the ownership of the development process.

AB: What is the organisational structure of Nepad?

OK: At the 37th OAU summit in Lusaka, Zambia, where Nepad was adopted by the African Heads of State in July 2001, a fourtier governing structure was created.

It was decided that the OAU/AU Summit of Heads of State and Government shall be the decision-making body. The day-to-day management and implementation of the initiative was delegated to the 15-member Heads of State Implementation Committee (HSIC).

Next, the Steering Committee, which is made up of the personal representatives of the five initiating states (Algeria, Egypt, Nigeria, Senegal and South Africa) was given the responsibility for developing terms of reference for identified programs and projects and also overseeing the activities of the Nepad Secretariat.

The Nepad Secretariat, which is made up of a small full-time core staff based in Midrand, South Africa, was charged with functions of liaison, co-ordination, administration and logistics in support of the Initiative.

The Steering Committee is liaising closely with selected development partners as lead agencies to secure their advice in their respective areas of technical expertise to formulate concrete regional projects and programs in the targeted areas of intervention.

AB: Can you outline Nepad's priorities?

OK: The priority areas and lead agencies providing technical support are summarised as follows:

* Peace, Security, Democracy and Political Governance (OAU);

* Economic and Corporate Governance (UNECA);

* Regional Co-operation and Integration (OAU);

* Infrastructure, including: Information and Communications Technology (ICT); Energy, Transport, Water and Sanitation (ADB);

* Human Development: Education and Health (ADB);

* Agriculture and Environment (FAO); and

* Market Access and Export Diversification (OAU).

Short and medium term action plans are being developed along with estimates of costs and potential sources of finance. The required resources for financing the priority programs and projects would be mobilised from increasing domestic savings and capital inflows via enhanced debt relief, increased official development assistance (ODA) flows, and private capital - as well as better management of public revenue and expenditure.

AB: What is ADB's role in Nepad?

OK: The goal of Nepad is to infuse new energy, establish solid partnerships, and create a stronger basis for the development of the continent. The priority areas include: bridging the infrastructure gap in such areas as transport, power supply and telecommunications; developing Africa's human capital base; attracting larger capital flows - both public and private - to Africa through improvements in both political and economic governance systems; and expanding market access for African exports to developed countries.

African Heads of State have requested that the Bank Group, together with other continental organisations such as the AU and the United Nations Economic Commission for Africa (ECA) play a major role in the implementation of Nepad.

The role of the lead agencies in support of Nepad initiative is limited to providing technical assistance and advisory services in program formulation and implementation.

Designing an action plan

The specific roles assigned to the Bank are in Infrastructure Development and in Banking and Financial Sector Standards.

In the area of Infrastructure Development, the Bank, in close consultation with regional economic groupings and key development partners (in particular, the EU and the World Bank), will provide technical advice and support to Nepad in preparing development programs and associated action plans.

In Banking and Financial Sector Standards, the Bank Group, in close consultation with the IMF and Central Banks of member countries, will assist African countries and regional economic groupings to identify the standards and codes that are relevant to Africa and help design an action plan for their dissemination. In addition, the Bank will work closely with the ECA to design a mechanism for assessment of the observance of these codes and standards.

Apart from these two specific areas, Bank Group overall assistance to the Nepad will be guided by its strategic Vision which, like Nepad, is focused on the sustained reduction of poverty and the promotion of accelerated broad-based economic growth in African countries. In this regard, it is important to note that the Bank is already addressing many of the priority activities outlined by Nepad.

In infrastructure development, for example, the Bank has provided financial support amounting to over $13bn for various infrastructure projects in African countries, including power supply, transport, communication, water supply and sanitation projects. In the domain of human resource development, the sectors of education, health, agriculture and rural development constitute the priority areas of Bank engagements due to their significant impact on reducing poverty.

Mobilising resources

In the area of resource mobilisation, the Bank uses its investment-grade credit rating to mobilise capital resources from international capital markets for on-lending to creditworthy African countries. And for the low-income countries that are unable to sustain non-concessional borrowing, the Bank mobilises concessional resources through its African Development Fund window.

The Bank also seeks to leverage its limited resources by mobilising additional resources through project co-financing with other multilateral and bilateral partners as well as with private institutions.

Promotion of good governance practices in Africa is another area of focus for the Bank Group. It has provided financial and technical assistance to help African countries improve their systems of governance.

In addition, the Bank provides support for activities that foster regional cooperation and integration in Africa. These include financing of multinational and regional integration studies, multinational projects, and lines of credit to regional financial institutions.

Private sector development is also viewed as critical for economic development in Africa. The Bank provides support to the private sector through its public and private sector windows.

Public sector loans and grants are provided to help countries reform their governance structures, including regulatory, legal and judicial systems. Support to the private sector includes: term loans to private enterprises; equity participation; guarantees; syndication and underwriting. The Bank also extends lines of credit to private financial institutions for on-lending to small and medium size enterprises.

The Bank's total cumulative portfolio of private sector approvals currently stands at over $600m.

AB: Turning to another aspect of the Bank. Many people are confused about the ADB's functions. Would you please briefly explain what the ADB is all about and how people can access its facilities?

OK: The African Development Bank is a development finance institution engaged in the task of mobilising resources towards the economic and social progress of its Regional Member Countries (RMCs).

The African Development Bank Group is also the largest multilateral development financial institution on the African continent and comprises the ADB itself and its two affiliates, the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). The ADB was established in Khartoum, Sudan in August 1963 while the ADF and the NTF were formed in 1972 and 1976 respectively.

The agreement establishing the Bank came into force in September 1964 when 20 out of the 23 independent African countries subscribed 65% of the initial capital stock of the Bank which stood at $250m. The inaugural meeting of the Board of Governors was held in November 1964 in Lagos, Nigeria and the Bank started its operations in July 1966 from its Headquarters in Abidjan, Cote d'Ivoire in March 1965.

Thus from very modest beginnings, the Bank has become a key player in promoting integration and self-reliance through co-operation among African states.

The Bank's principal functions can be summarised as follows: to promote public and private sector development programmes; to provide institution-building, training and policy advice to regional member countries; to provide technical assistance for feasibility studies; to make loans and equity investments available for economic and social development of African countries; to promote co-financing with bilateral and multilateral development agencies.

Today all 53 African states are members of the Bank. In addition, 24 non-African countries from Asia,' Europe, North and South America comprising the world's most industrialised countries are also members.

Non-regional states joined the Bank in December 1982. The fifth general capital increase concluded in May 1998 increased the authorised capital by 35 % to about $29.5bn of which 60% is subscribed by regional and 40% by non-regional members.

The African Development Fund (ADF) started its operations in 1974. Its current membership comprises 25 non-African countries (known as state Participants) and since 1998, the Republic of South Africa.

Besides capital subscriptions, the Bank raises its funds by borrowing on the international money and capital markets, as well as from repayments on and incomes from loans.

The Fund is normally replenished every three years through contributions from its members. It is the Group's concessionary window for 39 African countries which, since 1995, are ineligible to borrow from the ADB window. Its cumulative subscriptions amount to $14.2bn at December 2000. ADF loans are without interest and repayable over 50 years with a 10-year grace period.

The Nigeria Trust Fund (NTF) was established by the Federal Government of Nigeria to assist in the development efforts of the poorer regional member countries. Managed by the ADB from a combined initial capital of $151m, it has a total resource base of about $514m to date. NTF provides loans bearing a 4% interest rate and a repayment period of 25 years including a grace period of five years.

AB: Please outline the Bank Group's structure

OK: The Bank Group's structure is as follows: the Board of Governors is the Bank's highest policy making body. It consists of one Governor for each member country and issues general directives concerning the operational policies of the Bank.

Then comes the Board of Directors which is responsible for the conduct of the general operations of the Bank. It is composed of 18 Executive Directors, elected for three years renewable once. Twelve represent regional member countries and six the non-regional members.

The Board of Directors approves all loans, guarantees, equity investments and borrowings and it also sets policy guidelines for the Bank's operations and financial activities.

The President is the Bank's Chief Executive. He is elected by the Board of governors for a term of five years. He may be re-elected once and must be a national of an African member country. He is the Chairman of the Board of Directors and responsible for the daily conduct of business. He is assisted by five vice-presidents, about 600 professional and 425 General Services staff.

The Bank has initiated or participated in the creation of several continental and international institutions to cater for development projects co-ordination and financing. These include Afrexim-bank, the Joint Institute for Africa, Shelter Afrique, Africa reinsurance Corporation, African Capacity Building Initiative, Africa Project Development Facility (APDF) and African Management Services Company (AMSCO).

By the end of December 2000, the Bank Group had concluded co-operation arrangements with over 25 non-African countries and more than 30 multilateral institutions. With these institutions, it has co-financed a total of 687 operations amounting to about $83.5bn with the Bank contributing $14.8bn or 17.7%.

At the end of 2000, the Bank Group had effectively disbursed about $25.4bn representing about 70% of cumulative commitments.

The Bank Group's own vision statement focuses at country level on agriculture, rural development and the private sector, while generally stressing the centrality of good governance, gender equality and environmental considerations in the development process.

In sum, it can be said here and now that the major achievement of the ADB Group in over three decades of activities is its continued growth by all standards of quantitative and qualitative analysis in an economically difficult and deprived region.

This robust and cautious growth has no doubt contributed to Africa's economic well being and continued importance in the developed world's considerations.
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Article Details
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Author:Versi, Anver
Publication:African Business
Article Type:Interview
Geographic Code:60AFR
Date:May 1, 2002
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