AfDB sounds alarm over terror impact

The growth of terrorist activities has harmed Africa’s risk profile, the president of the African Development Bank (AfDB) told Emerging Markets on Friday.

Donald Kaberuka said the spread of activities of international terrorist groups in several parts of Africa was a matter of “huge concern”. But he insisted it had not derailed its immediate growth prospects, which remained encouraging.

“International terrorism is now exploiting local grievances, local social and economic issues, to introduce a new agenda, which is very damaging for the continent’s risk profile,” Kaberuka told Emerging Markets.

Kaberuka said the succession of recent deadly attacks in Kenya, Somalia and Nigeria had raised alarm bells. “Foreign groups come in to Somalia or in the Sahel [Sahara region],” he said.

“This is an international problem, not an African problem. So the international community has to figure out how to address these issues. What happened in Kenya [late last month] is an illustration of the damage of what they can do.”

The bank is committed to put aside some $1.5 billion to help such countries, with a special focus on the Horn of Africa, Sahelian region and the Mano river area – Guinea, Guinea Bissau, Sierra Leone and Liberia—as part of its $7.3 billion replenishment of the African development fund.

“We have completed the [2014-2016] replenishment in Paris last September. Frankly, I was pleasantly surprised in the current atmosphere. It is even a slight improvement compared to the previous replenishment.”

Kaberuka said he was very concerned about the Central African Republic, which was destabilized by a coup last March. The AfDB has singled out eight African countries that do not benefit from the supportive growth atmosphere in the region, which has now extended for several years in the region, and amounts to more than 5%.

“It looks like the growth in low income countries in Africa is very resilient to all the negative downturns you have seen around the world and that is a positive thing,” said Mtuli Ncube, chief economist of the AfDB.

“We have got this very interesting but desirable paradox. Low income countries are growing faster than high income countries,” he said. African countries are generally growing faster when they are less integrated to the global economy, while the larger and more open economies suffer more.

Ncube said the correlation between a decline in global growth and Africa’s own growth was not very high. He calculated that a 1% growth slowdown in OECD countries would only cut Africa’s growth by half a percentage point at the most.

A 1% drop in the BRICS countries would translate into a reduction of as much as 0.23% in Africa, he added. “The BRICS are affecting Africa even less [than the OECDs], even taking China into account,” he said.

He pointed to a series of challenges to change the structure of the economies of the region and to diversify them. “One of the challenges is to build cluster industries around natural resources, like services around the mining sector,” he said.

“The opportunity for Africa is to maximize the revenues around natural resources. It is the whole idea of sovereign wealth funds, of a more transparent and efficient management, but also investment in infrastructure,” Ncube said.