President Nana Addo Dankwa Akufo-Addo has said that
Africans must ensure that prioritized climate actions are consistent with the
current challenges and aspirations as a continent.
This, he said during the Annual General Meeting of the
African Development Bank (AfDB) in Accra last week, will be a demonstration of
the theme chosen for this Annual Meeting.
The theme for the 2022 meeting was “Achieving Climate
Resilience and a Just Energy Transition for Africa.”
President Akufo-Addo said “We must avoid our natural
resources being stranded in the upcoming negotiations in Egypt at COP 27.
He added “The stronger bonds between, ecology,
economy, and conflicts demand that a bold and holistic approach is taken. It is
in that light that I consider the theme of this Annual meeting both timely and
appropriate. At the end of these meetings, Africa expects a framework that
reconciles people and the planet for peace. We cannot fail the people and the
planet. Both must win. But for this to happen, Africa must win.
“The time has come to move towards an economic model
which serves our interests, not others. Profits from our resources have
benefitted foreign creditors for too long, while we suffer abusive borrowing
costs on the international capital markets.
There is no basis for our economies being saddled with
a so-called “African Risk Premium”, which translates into higher spreads than
for our European and American counterparts, particularly when our resources
were the catalysts for the economic advancement of Western nations. It is time
we worked to address the structural barriers to our development.
We must also deal with “tax-dodging” and illegitimate
commercial transactions by multinationals, which account for sixty percent
(60%) of the eighty-eight billion dollars (US$88 billion) of illicit financial
flows from the continent annually, and other relationships which inhibit our
development.
I am comforted by the array of expertise available to
us. Now more than ever, it has become urgent to take the necessary steps to
transition us towards becoming a resilient continent. Africa must exploit her
productive capabilities collectively, and build the capacity of her continental
development banks to realize Africa We Want and an Africa Beyond Aid.
Accordingly, ladies and gentlemen, it is my singular
honor to declare the Annual General Meetings of the African Development Bank
Group, duly open.”
Below is the full text of his address during the
event…
It is my great pleasure to welcome you all to Ghana,
and the 57th African Development Bank and 48th African Development Fund Annual
General Meetings.
As we say in Ghana, “Akwaaba!” You are amongst a people
who pride themselves on their sense of hospitality. I hope that, by the end of
your visit, you will agree with this claim.
I am particularly happy that I have been able to come
to the opening ceremony of these meetings with my good friend, the highly
respected, progressive President of the Republic of Mozambique, His Excellency
Filipe Jacinto Nyusi, whose State Visit to Ghana has coincided with these
meetings. It is good to see the first female President of the Republic of
Tanzania, Her Excellency Samia Suluhu Hassan, and other African leaders also
present to lend their support to the work of the Bank. They are all very
welcome to their second home in Ghana.
I believe that the choice of Ghana to host the
meetings has everything to do with the special place she holds as a beacon of
stable, democratic governance in Africa, as well as the proverbial warm
hospitality of the Ghanaian people. Indeed, these meetings, being held at a
critical period in history, when Africa, like the rest of the world, is dealing
with the twin effects of COVID-19 and the Russian invasion of Ukraine, could
not find a better venue than our vibrant capital city of Accra.
I congratulate the African Development Fund (ADF), the
concessional lending arm of the African Development Bank, on the celebration of
its golden jubilee. To invest some nine billion dollars ($9 billion) over the
last five (5) years, up from an initial three hundred and twenty-seven million
dollars (US$327 million) in 1976, is nothing short of exemplary. Congratulations
are very much in order!!
Permit me, also, to commend the President of the
African Development Bank Group, Dr. Akinwumi A. Adesina, for his extraordinary
vision, passion, and leadership. The African Development Bank is now globally
reputable, maintaining, even in difficult times, its stellar AAA ratings, the
only African financial institution with AAA-global credit ratings. The African
Development Bank was ranked by the prestigious Global Finance Magazine as the
Best Multilateral Financial Institution in the world in 2021. It is equally
impressive that the African Development Fund (ADF) was also ranked by the
Centre for Global Development in the US as the second-best in the world among
all concessional financing institutions, even ahead of the World Bank’s IDA and
all the developed countries twenty-eight (28) concessional financing
institutions of the OECD countries.
Ladies and gentlemen, this is the second consecutive
year I am addressing the Bank’s Annual Meetings. I had the honor of doing so
last year, albeit virtually. Our meetings today, which are being held in person
here in Accra, represent a great relief, following two years of unprecedented
disruptions caused by COVID-19. In my address last year, I challenged us to
prioritize five (5) main issues:
-work towards a debt action plan;
-collaborate and work with the World Bank and the IMF
on the Debt Service Suspension Initiative and the G20 Common Framework;
-explore options for the strategic use of the Special
Drawing Rights (SDR) to support Africa through the AfDB;
-work with IFAD and other global institutions to
promote the establishment of a food security facility; and
-promote the African Financial Stability Mechanism for
greater financial market stability for Africa.
As we speak, the case for adhering immediately to
these suggestions is even more compelling. We are now confronted with the
consequences of the Russian invasion of Ukraine, which are compounding the
emerging socio-economic vulnerabilities, which have been heightened by
COVID-19. Since February, prices of staple food commodities have surged
drastically. Africa faces a fertilizer shortage of some 2 million metric tons
this year, estimated at 2 billion dollars, according to the International Fund
for Agricultural Development, potentially creating a productivity deficit of
twenty to fifty percent (20-50%) in agriculture. Rising food prices
disproportionately affect African families, as food consumes some forty percent
(40%) of household income, compared to less than twenty percent (20%) in
advanced economies.
Energy markets have been significantly volatile, with
dire consequences for households and public finances. According to the IMF, a
five dollar ($5) per barrel increase in oil prices reduces global output by
around 0.25 percent, but, for non-oil exporting economies in Africa, that
figure increases to 0.6 percent. As a result, the United Nations Conference on
Trade and Development has cut global growth prospects by 1 percent, and the
World Economic Outlook (April 2022) predicts global growth will slow from 6.1
percent in 2021 to 3.6 percent in 2022; 0.8 percentage points lower than
projected in January 2022. Amidst economic slow-down and the rising cost of
fuel and food, the cost of living is increasing.
The immediate economic consequences – whether in the
form of rising inflation, lower growth, increased inequality, and greater
financial instability – are likely to permeate deeper, as they coincide with
weakened economic positions due to the pandemic and preexisting and now
elevated debt challenges.
The debt challenges are compounding for us in Africa.
In pursuit of policy autonomy in the ‘Age of Choice’ for economic
transformation, our debt profile has changed markedly. According to UNECA, the
debt to GDP ratio rose from 60 percent to an estimated 71.1 percent between
2019 and 2020, largely because of the COVID-19 pandemic.
Eighteen (18) African economies have faced credit
downgrades, even when all economies were suffering fallouts from the pandemic
last year. Amidst these challenges, we must be aware of our vulnerability to
the monetary policy stance of the US Federal Reserve, and the risk of so-called
“taper-tantrums”, as investors may exit our markets further exacerbating the
increasing cost of borrowing.
At this moment, support for non-IMF program countries
to alleviate the debt burden is limited. The initial facility designed to offer
respite to economies with elevated debt challenges – the Debt Service
Suspension Initiative (DSSI) – has expired in December 2021. Beyond the DSSI,
the G20 Common Framework promised a comprehensive solution to the debt issue.
To date, the few countries that took on the associated risk, by applying, have
yet to receive the much-needed relief. We look forward to how the Resilience
and Sustainability Trust (RST), which requires that countries be in an IMF
Programme, will effectively serve the needs of our countries.
In these trying times, the IMF six hundred and fifty
billion (650 billion) Special Drawing Rights (SDR), approved in August 2021,
was meant to be of significant relief. However, based on the allocation
principles, economies on this continent got US$33 billion (about 5 percent).
Moreover, the promise to reallocate some US$100 billion of the SDR allocations
to our economies, which was agreed to at the Paris Summit in 2019, has so far
yielded about US$36 billion in pledges as of April 2022. The strategic decision
to make the AfDB the delivery vehicle for these SDRs must be pursued and
achieved. Leveraging the SDRs (four times as AfDB does) will significantly
boost resources for Africa’s transformation.
Ladies and Gentlemen, the combined effects of the debt
situation, rising interest rates, and rising cost of living are resulting in
severe macroeconomic and financial instability. What is clear is that the
resulting damage cannot be cured so easily with the limited fiscal tools at our
disposal and national policy adjustments.
Therefore, I reiterate my call for an elevated role
for Africa’s Premier Bank, the AfDB, only that, this time, I, respectfully, ask
for a sense of urgency due to our mutual enlightened awareness. As a Triple
A-rated financial institution with an active portfolio of some $61 billion in
more than one hundred and forty-two thousand (142,000) locations, the AfDB is
in a position to drive sustained transformation in Africa.
It is in this spirit that I am happy to learn that the
AfDB Board has approved funding for the $1.5 billion Africa Emergency Food
Production Plan to support countries to produce food rapidly while delivering
climate-resilient agricultural technologies to 20 million farmers and thus
leveraging this facility over eight (8) times.
I am also encouraged to hear that the ‘right noises’
are being made towards establishing an African Financial Stability Mechanism to
protect our economies from future shocks. The irony that we have a history
riddled with economic shocks, but are the only continent in the world without
financial buffers, has to be urgently remedied. I am persuaded that the African
Financial Stability Mechanism will provide such protective cover for our
economies, thus enabling us to counter the effects of future pandemics amongst others.
The confluence of rising challenges and expectations
requires that, together, we act with sustained conviction. Our support will be
critical to building Africa We Want, as espoused by Agenda 2063, from today. In
addition to the pressing food, fuel, and fiscal challenges, we still have to
ensure that:
-the remaining eighty-five percent (85%) of the
continent’s population are vaccinated against COVID-19;
-the remaining sixty percent (60%) of health
facilities on the continent are connected to a reliable source of electricity;
-the teeming youth, who are over sixty percent (60%)
of our population, are better educated and equipped for the job market, i.e. to
become a digitally enabled entrepreneurial generation;
-the Africa Continental Free Trade Area (AfCFTA)
transforms Africa with a combined GDP of $3.3 trillion;
-the physical and digital infrastructural deficits are
addressed; and
-the unrelenting insecurity and violence, creating
about 2.5 million internally displaced people in the Sahel and elsewhere, are
permanently addressed.
The stakes could not be higher and clearer. To move
towards resolving these, we must support the Bank to do what a Bank does – to
mobilize and invest funds. We must activate a process that moves this Bank from
the corridors of ‘Billions to Trillions’, given the scale of the challenges on
this continent.
Ultimately, the AfDB must become the dominant
financing institution for African transformation in the medium term. This means
we must bridge and overhaul the financing gap that exists with other complementary
institutions. For instance, the financing gap between the IDA, the
concessionary arm of the World Bank in Africa, and ADF now stands at almost
five-fold, that is $15 billion compared to the ADF’s $3 billion per year. It is
now time to:
-ease the regulations that shackle the Bank from
optimizing its resources. Amending the articles that preclude the ADF from
entering the market to leverage its resource must be a first-order priority. In
July last year, the IDA of World Bank (the equivalent of ADF) priced a 10-year
Sustainable Development Bond that raised two billion euros (€2 billion).
Subsequently, IDA’s funding program expanded from US$ 5 billion in 2020 to US$
10 billion in 2021. Such is the demonstrated power of the market beckoning the
ADF. With an ADF equity of US$ 26 billion, the prospects could be an additional
US$ 8-10 billion which could drive sustained transformation, especially for
both fragile and states in transition on this continent;
-consider carefully consolidating the balance sheets
of both the ADB and ADF to enable them to raise more resources. There are
financial efficiency, policy, and administrative gains inherent to having a
single entity with a consolidated balance sheet and harmonized fundraising and
governance processes. Overlapping clients and the majority of our countries
requiring concessional access would enable this consolidation to be beneficial;
-sustain efforts to leverage private investments into
Africa. The OECD suggests that the $2.5 trillion financing gap for the SDG
could balloon to $4.2 trillion. It points out that this gap could be filled by
re-aligning just 1.1% of the $379 trillion in global financial assets under
management. AfDB must lead in crowding in these resources; and
-demonstrate a foremost interest in the proposal by
the AU to explore the issuance of Security-Indexed Investment Bonds to raise
funds to address the root causes of increasing insecurity and poverty.
With increased financial resources, the Bank could
recapitalize key African financial institutions, such as the Regional
Development Banks, Afreximbank, Africa Guarantee Fund, Africa-Reinsurance
Company, and Africa50.
This will harness the collective institutional
strengths of Africa for sustained transformation, and will, thus, avoid the
situation whereby, for example, the IMF, by the end of 2021, was able to lend
forty-one billion dollars ($41 billion) to Argentina, with a population of
forty-five million people, compared to thirty-four billion dollars ($34
billion) for the whole of sub-Saharan Africa, with a population of 1.14 billion
people.
Empowering these African institutions and engaging
communities will be vital to addressing the socio-ecological challenge of our
time – Climate Change.
Beyond pursuing ecological restoration, the AfDB
should foster a culture of proactive and risk-based approaches; away from
current reactive and crisis-based practices. This should involve effective
coordination, communication, and cooperation, driven by adequate finance and
political will. As the AU Champion of Financial Institutions in Africa, I
pledge my support in this regard.
Given our peculiar energy challenges, the Bank should
engage actively in the discourse on shifting to a more sustainable economic
model without making African communities and nations worse off. The cost of
climate to our common humanity keeps increasing, with our continent bearing a
disproportionate burden, though we have caused the least emissions of 3.8%,
with the Western nations being responsible for seventy-six percent (76%).
Yet, only $6 billion out of the worldwide total of $30
billion of climate adaptation finance flows to Africa, even though the United
Nations Environment Program has projected that between 75 million and 250
million people would be affected by climate-induced water stress. Not to
mention, financing COP26 compliance could potentially strand Africa’s natural
resources, including natural gas. How do we develop under such unfair
circumstances?
The Bank must empower Africa to seek justice in the
journey to clean energy in a manner that optimizes the exploitation of our
abundant natural resources. The design and focus of a Just Energy Transition
Facility are timely, as they offer material support for powering and lighting
up Africa and still meet the targets of climate. We must light up and power
Africa to enable her to feed herself, integrate and industrialize.
We must ensure that our prioritized climate actions
are consistent with our current challenges and aspirations as a continent. This
will be a demonstration of the theme chosen for this Annual Meeting. We must
avoid our natural resources being stranded in the upcoming negotiations in
Egypt at COP 27.
The stronger bonds between, ecology, economy, and
conflicts demand that a bold and holistic approach is taken. It is in that
light that I consider the theme of this Annual meeting both timely and
appropriate. At the end of these meetings, Africa expects a framework that
reconciles people and the planet for peace. We cannot fail the people and the
planet. Both must win. But for this to happen, Africa must win.
Ladies and gentlemen, the time has come to move
towards an economic model which serves our interests, not others. Profits from
our resources have benefitted foreign creditors for too long, while we suffer
abusive borrowing costs on the international capital markets.
There is no basis for our economies being saddled with
a so-called “African Risk Premium”, which translates into higher spreads than
for our European and American counterparts, particularly when our resources
were the catalysts for the economic advancement of Western nations. It is time
we worked to address the structural barriers to our development.
We must also deal with “tax-dodging” and illegitimate
commercial transactions by multinationals, which account for sixty percent
(60%) of the eighty-eight billion dollars (US$88 billion) of illicit financial
flows from the continent annually, and other relationships which inhibit our
development.
I am comforted by the array of expertise available to
us. Now more than ever, it has become urgent to take the necessary steps to transition
us towards becoming a resilient continent. Africa must exploit her productive
capabilities collectively, and build the capacity of her continental
development banks to realize Africa We Want and an Africa Beyond Aid.
Accordingly, ladies and gentlemen, it is my singular
honor to declare the Annual General Meetings of the African Development Bank
Group, duly open.
I wish you a very fruitful meeting.
May God bless the African Development Bank Group,
Mother Africa, and us all.
I thank you for your attention.
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