Africa must grow at double digit for 10 to 20 years before millions are taken out of poverty – Adesina

Last week the president of the African Development Bank (AfDB), Dr Akinwumi Adesina appeared on the BBC’s HardTalk with Stephen Sakur. They had as it is usual on that show a candid conversation about Africa’s future.

We bring you the full details of the interview below.

Describing Adesina as Africa’s optimist in chief. Sakur asked: “Is his positivity realistic or it is deluded.”

Stephen Sakur begun the hard hitting interview by asking: “You need the world to believe in a bright African future. How is that going now?”

“It’s going pretty well. If you look at the African Outlook that we had from the African Development Bank, the GDP growth rate for last year was 3.1.%, 3.7% this year and 4.3% next year. Now why that is important is because that is well above the global average. You still have 10 of the 20 fastest growing economies in the world being in Africa,” Adesina responded.

Doesn’t sound as good as it does, because you have fast rising populations across, Sakur said.

“Yes. But when you have a lot of global shocks like we have, increasing interest rates, and a lot of geopolitical risks as we have, a lot of inflation all around the world, Africa still has a scale above the world. Yes. I agree with you. In terms of the population growth, it is still high.

Real GDP is still not as high as we want. Africa still has to grow at double-digit though for probably another 10 to 20 years before you see millions of people taken out of poverty. But don’t forget Africa is still a pivotal continent and has a tremendous amount of opportunities to accelerate its development” Adesina said.

Sakur threw in another hard question: “But as the boss of the African Development Bank, you need to persuade investors, both state investors, multilateral institution investors, and private investors that Africa is a risk worth taking. And right now, we see political instability in many different parts of the continent. We see massive economic problems, perhaps highlighted most by youth unemployment across the continent of Africa. The risks still look enormous to the outsider.”

Adesina responded: “If you walk across the street, it’s a risk. You take a flight, it is a risk. The world is all about risk. The world is all about managing risks.

“But the investors don’t have any particular reason to want to invest in Africa,” Sakur interjected.

“Let me tell you why they should actually invest in Africa, even though we accept some of the risks. Take a look at what you were saying earlier on about population growth. A continent that is going to have a population of 2.5 billion by 2050. Especially young people. You have 477 million of them that are at the age of 35. That’s a workforce of the world,” Adesina responded.

Many unemployed people will be deeply discontented, Sakur followed up.

Adesina responded: “No. When you actually turn that demographic advantage into economic dividend that’s a different thing.

But take a look also at the agriculture potential. Africa has 65% of the uncultivated arable land left to feed the world’s 9.5 billion people by 2050. That’s not in Asia, that’s not in Latin America or Europe. It’s in Africa. So what Africa does with agriculture will determine the future of food in the world.”

Sakur then turned to Africa’s debt burden. “22 or 23 African countries are struggling with massive debt, and they are flirting with default. Some of them have defaulted – Zambia for instance defaulted in 2020. It was only just emerging from default now. (In fact, Ghana also defaulted). That represents for a lender a clear and obvious risk,” he said.

Adesina took his time to respond: “Let’s look at the risk. Perception is not reality. Data matters. Moody’s Analytics did an assessment. 14 years assessment of cumulative losses on infrastructure around the world. Guess what they found? They found that risk of loss in Africa was 1.9%. Latin America, 12%. North America was 10%. If you take a look at Western Asia, 4.5%. So that means that Africa is not as risky as people say. That said, you do have market risks, you do have political risks, you do have financial risks, and what we do as multilateral development banks is to de-risk those investments.  But if you look at it as risk return analysis, Africa is still the place to be,” he said.

But Sakur interprets de-risking lending to Africa as looking for special treatment from the International Monetary Fund (IMF) and World Bank.

“Hang on. Some of this is jargon, so let’s be simple about it. When you say we need to de-risk some of the lending to Africa, you basically mean you want special treatment, don’t you, from institutions like the IMF?” Sakur asked.

But Adesina shoots back and says, “No. Africa is not looking for special treatments. In fact, Africa wants no freebies at all.” He then explains what de-risking means by giving examples of how the AfDB helped Benin, Senegal and Egypt to raise capital at cheaper rates on the international market by providing financing.

“But I’ll tell you, you know, take a look at what we’re talking about here. If you take, for example, Benin. Benin needed to go to the capital markets to raise money from external investors, right? You still have a risk premium that African countries have because everybody keeps saying, just like you said. It costs us three to four times to raise money than any part of the world.

But we have partial credit guarantees that allow us to use $195 million to allow them to raise $400 million from institutional investors. We did the same also for Senegal. We did the same for Côte d’Ivoire with $400 million to raise $530 million.

What that does is it allows you to go into the capital markets, allows you to raise money long-term and at a lower interest rate, and that is how we de-risk investment. That’s very, very important. We just did something for, by the way, for Egypt. We gave them a partial credit guarantee that allowed them to go issue a Panda Bond, $500 million on the capital markets for China,” Adesina said.

Sackur: Seems to me one of your themes over your quite long tenure now as president of the AfDB has been that the key multilateral financial institutions, the IMF, the World Bank, they are not sufficiently able or willing to understand Africa and they need more African involvement and input. Over your tenure, have you seen things change? For example, I’m looking at the fact that the IMF has created, or in the process of creating, a third seat for Africa on its board. South Africa, for example, is now included in the G20. Have you seen things change?

Adesina: Well, you know, there’s no doubt everything has to change even more, right? First and foremost, the global financial architecture is not serving the interest of Africa very well. Take a look at what happened during COVID. Well, the developed countries actually dispersed what? Fiscal stimulus, $19 trillion. 19% of the global GDP. Africa did what? $83 billion. That’s just a minuscule 4.5%. Take a look at climate change, right? Climate change is devastating in Africa more than any other part of the world. We didn’t cause climate change. Only 3% of accumulated emissions, but we suffer $7 to $15 billion of losses every single year. I just came from Nairobi, where we had our annual meetings. They’re devastated by floods. And you have Zimbabwe devastated by drought. And Malawi and Zambia with that. Now, what happens is Africa needs, you know, Stephen, $30 billion in terms of climate adaptation, but it needs $277 billion. Now, let’s go further in terms of what has happened also with the issue of debt that you were talking about.

Okay, we have the, you know, the situation for debt was not just because economies were being mismanaged. No, we still have, you know, people say you have long COVID. You have long fiscal COVID here in the sense that the economies are actually trying to recover from the effects of that COVID. But the two instruments that the global financial architecture put up, it’s not solving that problem. You have the debt service suspension initiative, which was just simply postponed the evil day. Then you have the G20 common framework.

Sackur: So your message is, you know, that thanks to COVID, thanks to climate change, Africa’s faced profound economic challenges and the international community hasn’t really stepped up and responded and understood.

Adesina: And if I may just say, because you mentioned the issue of the SDRs, if you know, I’ll talk about that special drawing rights. Special drawing rights, you know, that special drawing rights I have been a global champion for the need for us to take those special drawing rights of the IMF and use it better. When they were issued, that’s a contingent facility. $650 billion were issued. Africa, guess how much? $33 billion. 4.5%.

Sackur: So I get it, I get it. The message you’ve delivered over the years is that the international community needs to do more. But I need to switch the focus a little bit because you’re a former minister of agriculture in Nigeria, you’re an African politician. Surely it’s incumbent upon you to recognize that part of the problem here is desperately poor governance in far too many countries inside Africa.

Adesina: Well, you know, there’s no doubt about the need anywhere in the world to have improved governance, improved transparency, improved accountability.

Sackur: You know, one of the most famous African writers and sort of the conscience of Africa, Wole Soyinka, the Nigerian novelist, he said too many African states are run by his quote “sick old men,” dictators, authoritarians who’ve been around for decades and decades. Corruption is endemic in too many countries in Africa. Isn’t it incumbent upon you to focus some of your effort on getting African nations to change?

Adesina: We actually within the African Development Bank have a program called SEGA. You know, it is all about economic governance in Africa. It has to do with public financial management, it has to do with debt management, it has to do with reducing illicit capital flows. Now, I agree with you today we have illicit capital flows out of Africa about $89 billion a year. Sometimes it’s like pouring water into a basket, right? It needs to be able to hold it. But this much I would say even as I agree with all of that, corruption is not unique to Africa.

Sackur: Look, nobody’s saying that.

Adesina: I’m interested in your priorities.

Sackur: There was an extraordinary report in the Financial Times last year which revealed that your own African Development Bank anti-corruption fund, which was established at that point seven years earlier, had never been used. There was $55 million there to finance anti-corruption efforts which you simply hadn’t tapped into.

Adesina: No, that is absolutely not correct. You know, we actually have an independent anti-corruption unit that actually sanctions companies that have non-competitive behavior.

Sackur: You set up a fund and you didn’t spend the money.

Adesina: But will you let me make the point because you’re asking me the question, so let me answer it.

The point is we actually have the fund, but in implementing that fund, guess what we found? We found that there were conflicts of interest in the way the fund itself was set up. As president of the Bank, I’m not going to mingle that with the funds of the Bank. And we said no, we can’t do that. We need to find a way in which that is given to a third party. The money is there, the money is going to a third party, but look, we’re not going to mingle money we got for those that pay sanctions.

Sackur: Extraordinary that for seven years you had an anti-corruption fund, a so-called integrity fund, which you didn’t spend a single dollar from.

Adesina: Well, $54 million. We are a $318 million bank. And just so that you know, the African Development Bank was ranked just last year as the most transparent institution in the world.

Sackur: Let’s get back to the strategic vision you’ve outlined to a certain extent with me over the last few minutes. It is undoubtedly true that climate change and energy transition is one of the key pillars of what you want to achieve with this investment in Africa. How’s it going?

Adesina: It’s going pretty well. You know, we now devote 55% of our overall financing in the Bank to climate. When I was elected in 2015, we had only 9% going to climate, but climate is the biggest issue. Climate adaptation is the biggest issue. Now, we have three ways in which we’re supporting African countries on that.

First is we made a commitment to double our climate finance to $25 billion by 2030. Second, we have a programme that is called the African Adaptation Acceleration Programme, which is to deploy $25 billion for climate adaptation. By the way, it is the largest climate adaptation programme in the world together with the Global Center on Adaptation. And thirdly, nine out of 10 countries that are most vulnerable to climate change in the world are in Africa. 100% of them are in the low-income countries that we serve with the African Development Fund. So what we did was we created a climate action window with $429 million that will rise to about $13 billion to deploy capital to support those countries. To be able to, you know, for example, let me get practical here, provide crop insurance for 20 million farmers and also have a million hectares of land that’s been degraded to be improved, and also 20 million people to have climate information. And so that’s what we do.

Adesina: Now, interestingly, we have one programme that’s working very well. It’s called the Africa Disaster Risk Insurance Facility. What it does essentially is it pays premiums for countries when they face exogenous shocks. Like this one, we’ve been able to do it for 15 countries. We’re scaling that now to a billion dollars to be able to insure countries against catastrophic risk. So, but it’s still not enough.

Sakur: Lots of different mitigation and adaptation efforts that are being financed partly at least by the AfDB. I’m just interested to know whether you are still willing to finance investment in fossil fuel production, exploration, and production in Africa. There are countries from Mozambique to Angola to Zimbabwe, which are still major players and to a certain extent rely on fossil fuel energy. Are you prepared to put money in those projects?

Adesina: We are not doing upstream work on oil or gas, no. And we don’t fund coal either. However, I would say this, we fund natural gas because natural gas is a very important transition fuel for Africa, just like it is in Europe where you are, right? You turn on your cooker and you cook, guess what, with gas. Why should it be different from African countries where we lose… today we have 1.2 billion people that don’t have access to clean cooking energy. You know, we lose 300,000 women every year. All they’re trying to do is just cook a decent meal. It doesn’t make any sense.

Secondly, we need gas also for fertilizers. The same way in which the West has fertilizers, Africa has a right to be able to do that. But this much I would say about gas, so that we don’t confuse ourselves. You know, gas reduces the amount of emissions you actually get from relying probably on just simply other fossil fuels. And secondly, when you use that for clean cooking, it actually saves hundreds of millions of hectares of land.

Sackur: Thus far, all the promises made by the rich world, the industrialized developed world, to pour billions of dollars into developing economies, particularly in Africa, to help them cope with the potentially devastating impacts of climate change, that money hasn’t yet been delivered in any serious amount. Is it your message that countries in Africa need now to be given massive sort of financial recompense for not, for example, deforesting their extraordinary natural assets? I’m thinking of a country like the Democratic Republic of Congo, which has vast forests.

Adesina: You know, in fact, if you take a look at Africa today, that Congo Basin that you’re talking about just now is the second only to the Amazon in terms of the carbon lungs for the world. And so Africa is providing the global public goods for which it’s not paid for. You know, basically, you have vast carbon sinks, you have vast forests, you have biodiversity. So Africa is nature-rich but cash-poor.

Sackur: But how do you get people to listen to this message?

Adesina: Well, let me tell you what we’re doing about it. What we’re saying, we’re not going to be doing that anymore. If you take what got us to all the mess that we’re all dealing with globally today, it’s because of the way we measure wealth by saying gross domestic product, value of goods and services that an economy produces. But who really cares? Because that doesn’t tell you anything about the technology used to do it, the externalities for it, and who internalizes the externalities. In the case of Africa, we have all these forests, and we said we’re going to have to revalue and rebase the GDP of Africa based on its natural capital stock. And why is that important?

Sackur: So you basically take these parts and say, this is real wealth, it has to be recognized, and therefore you have to give us the credit that comes with having that asset.

Adesina: Yes. And the thing is, if you take a look at the debt-to-GDP ratio, which is the measure that we use to determine whether your debt is sustainable or not, if you rebase your GDP based on your natural capital stock, your debt-to-GDP falls.

Sackur: No, I understand that.

Adesina: It’s easier for you to borrow money, which is where…

Sackur: I get all that. But isn’t there an element of blackmail to this? Because the underlying message seems to be, yes, we are custodians of this vast natural asset, call it a carbon sink. And the message is, if you don’t recognize that and recognize it as part of our asset base, our wealth, and loan to us accordingly, we will exploit it. We’ll mine it, we’ll deforest it.

Adesina: No, no, no, no, no. You see, …..it’s not anything about exploitation. It’s about being wise and valuing yourself properly. Just like if you and I go to a commercial bank and you’re trying to value your assets. All we’re saying is we want African economies to develop growing green. But in growing green, the proper valuation of the natural capital of Africa is very, very important. So Africa stops being nature-rich and cash-poor.

Sackur: Okay, we need to move on because we don’t have that much time. I just want to ask you a little bit more about demographics. You earlier were telling me what a great asset it is for Africa to have these hundreds of millions of young people. I at the beginning talked about Africa becoming home to four in ten of all humanity potentially by 2100. Isn’t the truth of this that there is no way Africa can support the levels of population growth that we currently see?

Adesina: Well, I think Africa is doing well with regard to that. Three things I want to say. First is education. You know, with 477 million people under the age of 35, and you and the kind of things sometimes I see, you know, migration to the Mediterranean and all of that, that breaks my heart, of course. But here is…

Sackur: It’s actually increasing.

Adesina: But the future of Africa’s youth is not here in London, it’s not in Europe, it’s not in Latin America. It must be in an Africa growing very well, equitably, and able to create jobs.

Sackur: But, okay, I see the potential, but I also see the downsides. Not so very long ago, a few years ago, in this studio, Nigeria’s former president Obasanjo told me that the levels of population growth in Africa that he saw at that particular time, I think it was 2017, represented a ticking time bomb. Would you use that language today?

Adesina: I wouldn’t use that term. You know, I don’t disagree with him. I just think we need to grow much faster to be able to turn that demographic dividend into an economic dividend. And if you allow me just to make that point, that is why, for example, isn’t it odd, Stephen, that we have a continent with that amount of people, we don’t have financial institutions for young people. And that’s why the African Development Bank is rolling out what we call youth entrepreneurship investment banks. They are new financial institutions that will give debt and equity for the businesses of young people. Because I firmly believe that we must create youth-based wealth in Africa. We have to improve their skills, their entrepreneurship, their access to financing, and for them to be able to play a bigger role in our economy. Look, the future of the world is going to depend on what happens to the youth of Africa. And so we are putting our financing at risk on their behalf. Otherwise, that’s going to be our biggest risk is not taking care of our youth.

Sackur: That’s a very powerful statement you just made about how crucially important Africa is to the future of the world. You need outside help to ensure that Africa’s 21st century is a positive story, not a negative one. Where do you think most of that help’s going to come from in the future? The Economist magazine says that America has essentially lost interest in Africa. It’s so preoccupied with problems in other parts of the world. Does that mean that China, maybe Russia as well, are going to be where you at the AfDB perhaps, but certainly African nation states look for economic support and cooperation in the future?

Adesina: I just came back from Nairobi where we had the annual meetings of the African Development Bank. The African Development Bank, which has 81 shareholders, which includes 54 African countries, includes the US and UK, by the way, great support of us. You know, but my point is…

Sackur: Geopolitical rising, does Africa need to make a choice about who it partners with?

Adesina: Yeah, but what I want to say is that we got an increase in capital of the bank from all our shareholders, $117 billion. That puts our capital at $308 billion. And that came from all of it. It came from the United States, it came from the UK, it came from Italy, it came from everybody else. But when it comes to investments, we need to be able to have investors in Africa. Yes, you and I talk about the issue of risk and how we manage those risks. And those investors can come from any part of the world.

The fact of the matter is Africa doesn’t have to really choose. Africa has to decide what is in its own interest and be able to attract the kind of investments it needs. Take a look at the transformative power of working together. You know, we have, for example, the Lobito Corridor, which is linking Angola to Zambia, which we’re doing with the United States. We also have other corridors we are working with multiple partners for. We also have, by the way, Stephen, I hope I can invite you there, what is called the Africa Investment Forum, which we’ve been running for the last five years. And we’ve been able to mobilize well over $180 billion of investment interest to Africa. Same Africa that you were saying has risk. It’s exactly where people are coming to put their money. If you’re not in Africa, I wonder what else you’ll be putting your money in. That’s where the frontier is.

Sackur: Clearly, this is a hugely important story. But for now, Akinwumi Adesina, thank you very much for joining me on Hard Talk.

Adesina: Thank you. Very good to see you