AFRICAN DEVELOPMENT BANK GROUP

Africa’s Economic
Transformation
in a Multipolar WorldDr. Donald Kaberuka
President

Event: Speech at the University of TokyoTokyo, Japan
5 June 2013

It is an honour to speak about Africa and its transformation, at this world famous
institution, described by the experts as Asia’s premier university. Your
distinguished alumni, Prime Minister, Nobel Laureates, personalities in business,science, politics, diplomacy, arts and culture speak volumes for yourachievements.
I want to thank Professor Takeuchi and also the Vice Rector of the UN University
for the invitation, and for the work which the UNU is doing with the Bank tostrengthen higher level education in Africa. Indeed I am happy to report the signingof our joint memorandum this morning.
I also record my deep appreciation to the faculty, staff and guests who have foundtime to be with us here today.
The past 30 years
I have been requested to share with you the story of Africa’s transformation, at atime of seismic changes in the global economy, or what is sometimes described as
the multipolar economic world. The past 30 years have been exceptional in humanhistory. Not only has the world economic center of gravity shifted, but the impact on
the human condition has been truly remarkable.
In the 1990s, the world had two billion people living in absolute poverty. Ten years
later, mainly as a result of economic transformation in Asia, the number had been
cut by half. Building on the momentum of the earlier Tigers – such as South Korea,Singapore, Thailand and Malaysia – through trade and investment, the fightagainst poverty was taken to another level in China, India and Indonesia.
In the same vein, the Latin American economies had picked up speed. Gone were
the days of hyperinflation, unmanageable debt and brutal military dictatorships.
Africa convergence
For a time, the continent of Africa seemed to be the outlier, bypassed by thefundamental realignment in the global economy, mired in poverty and stagnation.
Today, I am here to share with you a story of a resurgent Africa, a story which saysthat despite the typical images of a subdued continent, Africa is on the way toconvergence – firmly and irreversibly so. The process is not always direct oruniform. It may look messy and chaotic at times, but the direction seems to be wellentrenched.
I am here to share with you that story: the story of Africa’s journey – her newdynamic, her new energy and confidence.

2I am here to reflect with you on what, together, we can do to deepen thecollaboration in the interest of Asia and Africa and the overall global good.
I am here to suggest that, at this time, when the global economy is going throughthe doldrums of recession and high unemployment, it is the emerging and thefrontier markets, such as those on my continent, that have the highest potential forthe necessary recharge.
I will, nonetheless, be suggesting that this is not automatic or pre-ordained. Thereare prerequisites. Africa’s journey remains long and arduous. There is work to bedone. There is plenty in Africa that her partners and friends can do together for thecommon good and for a prosperous global economy.
TICAD
That is the spirit of TICAD, the Tokyo International Conference on Africa’sDevelopment. Last weekend Japan hosted the fifth in the series, which I had theprivilege to attend. I even chaired one of the sessions. It was, in a way, acelebration of a 20-year effort, since the TICAD initiative was launched in the early
1990s. Prime Minister Shinzo Abe’s historic statement at the opening session, hismeetings with African leaders (including your humble servant) and thecommitments in the Yokohama Declaration all signify a desire to continue todeepen the dynamic which TICAD has created over the past two decades.
The 1990s
When TICAD was inaugurated in the 1990s, it was a statement of faith by theinitiators. The objective and intention was to constitute an advocacy coalition for
Africa’s development at a time when interest in development issues and Africa inparticular was waning. TICAD, it was said, "aimed at raising and maintaining global
awareness of Africa’s development challenges and opportunities". That was not, as
one might think, an obvious undertaking.
TICAD came into being in the aftermath of the fall of the Berlin Wall, at a time when
the global landscape was shifting. Indeed for a time it seemed as though Africa andthe low income countries had fallen off the radar. The interest then had shifted tothe East European economies transiting to free markets and the Tiger economies
of South East Asia, whose dynamic economies were powering on through various
versions of state capitalism.

3Africa was not seen as a significant player. In fact, that is when that ubiquitous
expression ‘Afro-pessimism’ was born. For those of you born 30 years ago, theimages of Africa you would be familiar with are those emanating from that era: theimages of disease, civil war, famine, corruption, and dependency. For years manyof us struggled to understand this sweeping narrative which was, to say the least, agross oversimplification of a much more complex African reality.
For some it had to do with the end of the Cold War. Now that, the global power
struggle was over, Africa and the low income countries were no longer a relevant
part of the chessboard. For others, it was said, disappointing development
outcomes had led to fatigue.
Such was the complicated the terrain – remember those were the most bloody
periods: Somalia, Sierra Leone, Liberia, the crisis in the Great Lakes, the genocidein Rwanda. It was even said that those outside the continent who had poured what
they said were, ‘vast sums of money’ into Africa were now suffering fatigue.
Donors claimed there was little to show for their efforts, such were thedisappointing development outcomes. At least that was the narrative at the time.
The world was walking off. Africa was on her own. Indeed this is what happened in
my country! The world walked off as millions of my countrymen were beingslaughtered, in spite of the presence of UN peacekeepers.
That was the paradigm, the narrative in the 1990s. Indeed the only significantinitiative of the time, I can recall, was that of debt cancellation – the HIPC initiative.
When it became obvious that the debt could not be recovered. I was Finance
Minister, in my country, Rwanda, for quite some time in those years. So I could becalled as a witness!
The lost decade and ‘Afro-pessimism’
In short, if the 1980s had been labeled, the lost decade then the 1990s were, tosay the least, bleak years, the years of ‘Afro-pessimism’, or so they called it. Thefocus of the world was on Eastern Europe, now transiting to free markets. And on
South East Asia, that emerging part of the world which seemed so dynamic that
not even the financial crisis of 1997 could deter it. Africa was described by a world
famous publication as a lost cause, a hopeless continent.
Fast forward
As we entered the new millennium, no one could have given Africa a chance. Andyet, that is when the corner may have turned. Rather like India in 1990 or China in1980. Surprisingly, steadily, growth began to outpace population increase.

4Economies began to expand rapidly, experiencing, a dynamic unseen since fiftyyears. Human development indicators such as infant mortality began to improvedramatically. Even the 2008 global financial crisis was not able to dent that new,quickened economic pulse.
As I speak with you today, Africa continues to defy the pessimists. Economic
output is strong, and the mood among businesses is extraordinarily positive. Amobile phone revolution is under way, powering communication, business andservice delivery and even entrenching democracy. Sub-Saharan Africa will report agrowth in GDP of 6.6%. Export demand is buoyant, foreign direct investment is on
the increase, and our cities are booming behind strong retail demand, driven by thegrowing middle classes.
One figure alone would probably summarise this story: in 2000, Africa’s GDP stoodat US$600 billion. A decade later, it had tripled to US$2.2 trillion, or a doubling inreal terms. Doubling the GDP in a decade has happened in recent years in China,
in India, and it is now happening in Africa. That might look like a statistic, butremember that it took the UK 150 years to do the same thing during its IndustrialRevolution.
Some would ask: is this for real? That would be to some degree understandable.
After all, Africa is not one country. It is 54 countries, and over time nation states
have formed, and borders have become entrenched. The continent still harbours
fragmentation, massive poverty, and skills and infrastructure gaps. These preclude
sustained progress unless those gaps were closed.
Only 40% of the people have access to electricity, very much less in rural areas. In
addition, large pockets of violent war and instability persist. 20% of Africans live insuch countries – that is, one in five. But those crises do not remain contained intheir borders. They impose large economic and social costs on theneighbourhoods. These are the kind of things you will often see on television.
Those situations are real, as in the Sahel, the Horn of Africa, the piracy off theSomali coast.
To sum it up, Africa is now very much a continent in transition. The continent iswitnessing extraordinary progress. Nonetheless huge problems still have to beovercome. Inequalities have increased. Jobs are not being created fast enough. Inshort, the continent now faces the challenges of turning growth into transformation.
These are challenges I would like to return to. In order to better appreciate theobstacles Africa has to overcome one has to look into the dynamics behind the5new and ongoing momentum on the continent. So what were the factors behind
this dramatic turnaround?
Like blind men touching an elephant, there will be so many explanations, and as
you know, we economists are particularly gifted at explaining events post factum.
The reality is, like India in 1990, like China in 1980, that there is not a singleexplanation. There is not a single factor, but a combination. Nonetheless, fourelements stand out.
First, it turns out that the 1980s – the years of economic adjustment and painfulreforms – had laid a basis for macroeconomic stability and greater room for theprivate sector. This so-called ‘lost decade’ may actually have been the one inwhich the seeds were planted.
Second, like Asia in the 1970s, the demographic dynamics were, and remain,
much at play. A growing population; not only growing fast, but younger. Not onlyyounger, but urbanized. Not only urbanized, but highly IT connected. This is fuelingdomestic demand and investments, literally, across all sectors. From retail, toconstruction, to financial services, and so on.
Third, the robust export performance buoyed by demand from the emerging
markets and intra-African trade.
Fourth, the boom in natural resources. Over the past decade, vast amounts ofnatural resources have been discovered and exploited. From oil and gas, toprecious and base metals.
On top of all the above elements, it is also fair to point out that the continent has
become more stable and better governed, with more economically predictablepolicies than at any time in the past.
Challenge of growth quality, sustainability
Having reversed decades of decline, African countries must now confront theissues around the quality and sustainability of growth. I suppose that is a challenge
everywhere, but it is definitely more acute in Africa.
The first challenge we must address is one of economic sustainability. At themoment the drivers of growth are fairly narrow and the structure of economies is
not changing fast enough. Some countries are still too dependent on a limited
range of commodities. This has two implications.

6As the sectors are generally capital intensive, they create very limited jobs andoften do lead to the so-called ‘Dutch disease’. The issues that link to economic
sustainability are those of infrastructure and the limited skills base. As Africancountries expand, they are everywhere confronted with the limited availability ofenergy, high transport costs and limited connectivity.
In the Asian region, during the early years of take-off, the process was much driven
by sound infrastructure which reduced the cost of doing business and enabledmarkets to function. That is why the African Development Bank puts muchemphasis on infrastructure. I very much welcome the same emphasis that Japan,
through JICA and JBIC, has put on infrastructure. This is further reaffirmed in theYokohama Declaration.
This particular problem is even more acute when it comes to cross-borderinfrastructure. As a continent of 54 countries, internal continental trade is a priority.
Hence the need for transport corridors, maritime ports that are efficient, railways,airports and broadband connectivity. I take the opportunity here to salute once
again the collaboration with JICA on the issue of economic integration, including
the ‘single border posts’. We look forward to continuing to work together.
While we have made a lot of progress on developing skills and expanding
education opportunities, the sustainability of our economic progress is limited by
the whole range of skills needed to power a modern economy. This is felt mostacutely in the areas of science and technology. We look forward therefore toexpanding cooperation in this domain, taking advantage of new technologies toleapfrog in certain areas.
The second challenge is social sustainability. The Arab Spring was in part afrustration generated by lack of inclusion. Economic growth that does not open up
broad opportunities – or leaves out large sections of the populace, either becauseof the nature of the sources of growth or a failure of governance – is not only awaste of an opportunity, but it is something which cannot be sustained.
In a young continent like Africa, social sustainability is central to economic growth.
The sense of fairness, and of a just and equitable society, generates a basis forpolitical stability and what one can call a ‘stakeholder economy’. That is whyinclusive growth is central to the Bank’s new 10-year strategy.
The third aspect of sustainability relates to natural capital. As a continent whose
livelihood is very closely linked to nature, the sustainability of our economies isvery much linked to what happens to our agriculture, and our land and marine

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resources. In a population where 60% of the people derive their energy frombiomass, the preservation of our natural capital is key.
As a result of climate change, parts of Africa are suffering increased desertification,
while others suffer flooding and unpredictable seasons. New diseases areappearing, and livelihoods are becoming more and more fragile. That is why an
ecologically sustainable path of development is the natural path, taking advantage
of Africa’s vast green resources to achieve low fossil fuel growth and the optimaluse of our natural capital. I very much welcome the emphasis which the Yokohama
Declaration puts on this matter, and the opportunity for cooperation with the UNU.
ConclusionFor a long time, Africa was viewed from the prism of an outlier. Now the narrative is
one of a young, dynamic continent open for business and investment. At this timeof anaemic global growth, it is the emerging markets that have provided muchneeded economic energy. The multipolar world has proved to be a multipolar
source of strength and diversity.
Africa – with her one billion people, her young and growing population, herexpanding middle class – can only be a force for good. There are obstacles toovercome along the way, some of which – like infrastructure – provide an
opportunity for investment. The world at this time needs new, diversified sources ofgrowth. A resurgent Africa offers that opportunity for all. The Yokohama TICAD
Declaration goes in that direction of how Japan and Africa can work together formutual benefit and global recovery. The African Development Bank will play its partas a privileged vehicle for that endeavor.
Thank you.

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