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Donald Kaberuka: 'Africa can now be proud of AFDB'

From David McKenzie, CNN
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Building today, a better Africa tomorrow
  • Donald Kaberuka is the president of the African Development Bank
  • Despite its troubled past, the bank now is stronger than ever, according to Kaberuka
  • The Rwandan economist says "the world understands you can't export development to Africa"

Dar Es Salaam, Tanzania (CNN) -- The African Development Bank (AFDB) has put its troubled past behind it and is now stronger than ever, according to president Donald Kaberuka.

In the mid-1990s, the leading African institution was beset by bureaucracy and management problems and was facing insolvency.

But a long period of financial restructuring and a change of focus in its operations has now turned AFDB into "a world-class institution," Kaberuka told CNN.

He stressed the bank is now poised to give its member countries further financial support and social resources.

"We are a bank for which Africa can be proud of and evidence is there on the ground in everything we do," Kaberuka said.

Marketplace Africa met the Rwandan economist in Dar Es Salaam, Tanzania, to discuss about the institution's challenges and progress.

CNN: In the mid-1990s, the African Development Bank was considered a bit of a basket case as a lending group and was slammed by international groups. How far has it come since then?

Donald Kaberuka: Today the African Development Bank is a world-class institution. It has undergone 10 years of financial restructuring and is now undergoing a completely different direction in terms of operations.

So, today we are a bank for which Africa can be proud and evidence is there on the ground, in everything we do, in the advocacy by the Bank, in its operations. Yes, there's a history behind, but I think today it's a different bank.

CNN: What was the single-biggest thing that needed to be done to resurrect the African Development Bank? To get it where it is today?

DK: The mid-1990s were the years of "Afro-pessimism." Many African countries were having serious debt problems. They were unable to pay their debts. The bank was undercapitalized so, like any bank, it had difficulties. It went through a period, of about five years, of resolving those financial issues, and by 2003, it had got back its AAA rating, the highest rating in the markets -- which we still have.

CNN: As a lender, you deal with governments all the time, both in middle-income countries and in so-called "fragile states" with your development fund. How do you deal with the issue of corruption in Africa from a business standpoint?

DK: Corruption is a signal of weak institution. It's a disincentive for business and it degrades the distortions of enormous proportions. And therefore, to say that it has been a heavy tax on the continent's potential -- it would be an understatement.

Today the African Development Bank is a world class institution.
--Donald Kaberuka

But what's changing is now African people are demanding accountability. African governments are accepting to give that accountability. And we, as a bank, what we are doing, is to try to help governments build institutions where there is political will to fight corruption.

CNN: The financial crisis was terrible for many countries, including African countries. But it seemed almost an opportunity for the African Development Bank and other lenders.

DK: I think the African Development Bank has played a major role during this crisis. The first thing we did was advocacy for the continent. We brought together Africa's economic managers and we said, 'What does this crisis mean for us?' And we arrived at several conclusions, including don't jettison the funds. [We attempted to] stay on the reform path -- don't go for the easy options because that would be too tempting.

We found sponsors unable to provide financing for those projects. And so we came in and filled that gap. And we increased our lending from $5.8 billion a year to almost double the amount during the crisis. Our action together as partners has helped to absorb some of the shocks and has helped Africa to minimize the damage. I feel that we played our role as we were supposed to as an African institution.

CNN: But you're still seeing things like the Millennium Development Goals (MDG) way behind and unlikely to be achieved. And that's one of your bank's core objectives -- to help alleviate poverty. Why are we so far from achieving these goals for the average African when certain businesses are still thriving?

DK: I know that not all African countries will achieve all the millennium development goals at the same time. There are some challenges of demographics, organization, initial conditions, external conditions and so on.

The way we can accelerate the achievement of the MDGs is through economic growth, which is strong, sustained and shared. And that means increasing investment, reducing the cost and the risk of doing business and that is the kind of thing that the African Development Bank is doing.

CNN: Why do you think it is that the African Development Bank is being taken so much more seriously than it was 15 years ago?

DK: Look, I think the bank has always been taken seriously, first of all. But I put it to you again that the 1990s were very difficult years for Africa -- "Afro-pessimism," the end of the Cold War, varietal interest in Africa and African institutions.

But now the world understands you can't export development to Africa, you have to work with Africa's own institutions if you want to support the continent in a positive way.