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A man on a mission to transform Africa

A man on a mission to transform Africa

Akinwuminew

Dr Akinwumi Adesina, Nigeria’s award-winning Minister of Agriculture and Rural Development, has an expanded view of his duties and responsibilities. He sees Africa as the natural boundary of his reform efforts to transform agriculture into a growth-driving enterprise, quite apart from the goal of enabling Africa to feed itself.

Small wonder then that Dr Akinwumi is being tipped in a widening circle of analysts as a fitting candidate for the leadership of Africa’s premier development institution, the African Development Bank.

The 2013 Forbes Africa Person of the Year has brought his considerable experience as a development expert to bear on his management of Nigeria’s vast but hitherto under-performing agricultural sector. He has unleashed a string of initiatives that is not only changing the face of agriculture but also gradually reforming it to its pride of place as the number one contributor to GDP and employer of labour. The articulate minister, in these excerpted pieces from a revealing interview, tells the story of Nigeria’s agricultural transformation in his own words.

African economies are at the cusp of a positive transformation. What, in your view, does Africa need to do to maintain this trajectory?
Indeed, Africa is experiencing a never-before-seen economic and political transformation that has created excitement among her citizens as they look ahead to new opportunities on the continent. There are high expectations of what this renaissance offers Africa’s nearly one billion people. Increased wealth, more jobs for the young labour force, vibrant consumer markets, a higher quality of life and an innovative business environment. Africa, without a doubt, is poised to be the next emerging economic powerhouse. Yet, there are a number of areas that I believe are critical to sustaining this trajectory, especially private sector growth, infrastructure development, youth economic engagement and food security. We must continue to build strong democratic institutions, foster continued economic growth, ensure peace and stability and entrench good governance in societies. Africa must build first-rate human capital to enhance its global competitiveness and spur innovation and entrepreneurship. Hard infrastructure is important, but development really happens when ‘brain power infrastructure’ is developed. There is nothing like investing in people.

Some argue that the focus on macroeconomics in Africa is overemphasized. Do you agree? How can Africa better manage its economies to sustain growth?
I believe we must have macroeconomic stability and fiscal consolidation. To sustain Africa’s growth, we must ensure low long-term interest rates and inflation to boost the real economy. We must reduce indebtedness, expand revenues and create fiscal buffers for the economies. We must ensure strong macroeconomic and fiscal management. Don’t forget Africa came out of decades of fiscal mismanagement that led to debt crisis. We must never repeat that mistake. Many countries have abundant natural resources, crude oil and minerals but as the Africa Progress Panel report of Kofi Annan showed, Africa losses billions of dollars to corruption and illegal resource flows from the extractive sectors. There is need for transparency and accountability in the management of Africa’s resources. We must focus on greater diversification of African economies, reduce exposure to volatilities from global commodity prices, focus on greater value-addition and move up global value chains in manufacturing, petrochemical, mining and food industries to cope with weakening global demand for crude oil as focus shifts to renewable energy sources. We must also expand the fiscal space with better revenue collection, thereby strengthening the taxable base for the economies, while removing constraints to productivity by fixing infrastructure constraints, building human capital, spurring innovation and removing labour market rigidities.

Africa is growing but many development analysts say development outcomes are still not good. What are your views on this? What role do you see for the African Development Bank (AfDB) on inclusive growth?
I highly commend the President of the African Development Bank, Donald Kaberuka, and the great team at the Bank for the way they managed the effects of the 2008 global economic downturn on Africa. The counter cyclical lending approach that the Bank adopted provided financial support to African countries to reduce the negative impacts of depressed global demand for commodities. Today, the continent is growing at over 5.7% and there is no doubt in my mind that the key for the sustained growth of African economies lies in economic growth. Remember though that Asia grew by 8.5% from 2002-2012, so there is still a lot of room for growth in Africa.

But we must face the fact that despite the gains we have made, Africa still has the largest share of its population locked up in poverty. You cannot redistribute poverty, you can only redistribute wealth. Poverty should not become Africa’s comparative advantage. We must grow, but as a development bank, AfDB will be judged not just by how its helped African countries grow but by its development outcomes, the extent to which it has lifted people out of poverty into wealth, the quality of investments in human capital and peoples lives, how it has helped to build solid institutions, deepen management of Africa’s resources through fostering transparency, accountability and good governance, and how it has fostered the creation of quality jobs for Africa’s rapidly growing youth population.

It does not matter how well we grow, if we don’t deal with gnawing inequalities we have, between and within countries, and rapidly close the income gap between rural and urban areas, African economies will be susceptible to social and political fragility. Terrorists will have dead economic zones in rural areas to serve as recruitment zones to fuel instability of the continent.

Ultimately, we must create hope for our people and combine strong macroeconomic policies with sound microeconomic policies that touch the lives of people. There is need for inclusive growth. Growth is important, but nobody eats GDP. The AfDB must build on the remarkable legacy of President Kaberuka by focusing on inclusive growth and shared prosperity for a more stable continent.

Much of your career has been devoted to agriculture and your achievements have gained you global acclaim and recognition, but the AfDB presidency encompasses other issues of development. How do you intend to manage this transition?
I am an economist and hold a PhD is in agricultural economics, which is an applied economics program, with strong graduate training in macroeconomics. When I lived and worked in Côte d’Ivoire in the 1990s, I supervised 10 doctoral students in applied economics at the University of Abidjan over a period of five years and today some of them are in senior positions at the African Development Bank and other financial institutions. I am a development economist with my feet, mind and hands firmly on the ground. Over the past three years, I have been a member of Nigeria’s Economic Management Team, working on cross-cutting economic issues that affect the lives of millions of Nigerians, over and above those in agriculture. I have worked with ministers of finance, central bank governors, private sector companies and the banking sector in many African countries. My breadth of experience cuts across economics, agriculture, finance, development and public policy. I consider myself a visionary and have demonstrated experience in turning around large institutions. Within three years, we turned around Nigeria’s agriculture to become a central part of the economy, unlocking wealth and economic prosperity for millions of people, driving well over $5 billion in private sector investments, and a major shift of financial institutions into agriculture. I am a Nigerian with a vision for Africa. I have lived and worked in 15 countries in sub-Saharan Africa and so I have a solid, first-hand knowledge of most of the continent, having experienced the challenges, hopes and aspirations of the citizens in all these countries. If given the opportunity to lead Africa’s premier development institution, the AfDB, I will bring their voices, longings and their dreams for a better future for their children to bear on the work of the Bank.

You are respected globally as a leader in the development sphere. The UN Secretary General Ban ki Moon nominated you as one of the 17 global leaders to help achieve the Millennium Development Goals. Why are you so passionate about agriculture as a key agenda for Africa?
Agriculture is critical for Africa’s future. The size of the agriculture and agribusiness sector in Africa is expected to grow to $1 trillion by 2030. Foreign Direct Investment in agriculture in Africa will increase from $10 billion in 2005 to $45 billion by 2020. This is because the continent has 65% of the world’s arable land, and as we think about feeding the nearly 9 billion citizens of the world by 2030, Africa is where the answer is. Agriculture must be turned into a wealth-creating sector, and not one that perpetuates poverty.

My extensive background and knowledge in turning around agriculture in Africa, and particularly in its largest economy Nigeria, is a major strength. I have worked all my life to expand economic opportunities for the poor. Don’t forget that a greater percentage of our population live in the rural areas and depend on agriculture for their livelihoods. Without turning agriculture around and treating it as a business, we will not be able to lift our teeming population out of poverty, for inclusive growth and shared prosperity. We must end prodigal economics, where Africa imports food it can produce spending $35 billion per year doing so. We instead need vibrant Agro-industrial developments to lift Africa to top ends of global value chains. 65% of arable land to feed the world’s population is in Africa. Without a doubt, this is Africa’s dynamic comparative advantage and unlocking it will unleash massive growth multiplier effects in rural economies. For inclusive growth, the future is in reviving our rural economies, by expanding this economic space for prosperity. Poor people can’t save, and yet we must be able to boost the taxable base. So we can’t have poor people in rural areas, 75% of the population, that can’t pay taxes.

You can’t do that if you don’t turn around what are basically dead economic spaces in Africa’s rural areas.

By boosting agriculture all across the continent, it will have strong macroeconomic and fiscal benefits, through reduction in food import bill, driving down inflation, reducing direct price transmission of price volatility into our economies, saving foreign exchange, and ensuring currency stability. I strongly believe Africa can become a global powerhouse in food. From the economies of Ivory Coast with cocoa, cotton and cashew, to opportunities in rural Burkina Faso with cotton for textiles, horticulture and floriculture in Kenya, Ethiopia and Tanzania, vast potential rice belts of Ghana, Gambia, Sierra Leone, Nigeria and Uganda, to coffee in Rwanda, and enormous savanna lands for Zimbabwe, South Africa, Mozambique, and the huge vast lands of Egypt, Morocco and Algeria, Africa can feed the world.

Inadequate finance remains a major challenge to Africa’s development. How can finance be made to work for Africa?
I am a strong proponent of private sector financing to complement the age-old government funding and official development assistance (ODA) from donors. There is so much money out in the world that is looking for well-structured projects and initiatives and so we must move away from depending heavily on public sector resources. We must begin to utilize these resources in a smart and innovative ways. Huge amounts of pension funds, sovereign wealth funds, and rapidly growing capital markets and venture capital offer pools of funds that must be leveraged for Africa’s development.

I have done this for much of my career and seen it work. When I was Vice President, Alliance for a Green Revolution in Africa (AGRA), I designed and spearheaded the roll-out of innovative financing instruments that unlocked over $150 million in new lending to the agriculture sectors of Kenya, Ghana, Nigeria, Uganda, Tanzania, and Mozambique. I worked extensively with commercial bank CEOs at private sector institutions such as Standard Bank in South Africa, Mozambique, Uganda, Ghana and Mozambique, Equity Bank of Kenya and National Microfinance Bank of Tanzania to encourage them to adopt creative financing approaches that leveraged ODA funds to agriculture lending. In Nigeria, I helped the Central Bank of Nigeria to design a $350 million risk sharing facility that is helping to unlock $3.5 billion in financing from commercial banks. This success in innovative financing for the agriculture sector, the most challenging of all sectors to get private sector to finance, can be replicated to leverage large private sector financing into other sectors such as energy, infrastructure, ICT, manufacturing, mining and others.

Despite so much talk-shops and seemingly big efforts being made, Africa’s share of world trade is still very small, even intra-African trade is also limited. How can this be remedied?
The founding fathers of the AfDB combined political and economic visions for a continent that will grow together as an integrated economic block. Africa’s economic growth and Africa’s unity are inseparable. Africa must trade better with itself. Today only 10% of trade is within the region. That is very low, compared to 65% for the European Union. Greater intra regional trade will boost the regions economy by expanding markets and economic opportunities. This must be supported by heavy investments in regional infrastructure, especially transnational highways, better functioning and efficient ports and safe, efficient and liberalized airways. We must boost intra regional trade through lowering tariff and non-tariff barriers, harmonizing customs and improved border administration. We must encourage free movement of people, goods and services. We must encourage and deepen regional financial markets and support financial market regulatory frameworks that will spur mobility of capital and investments across African countries. Improved integrated regional financial markets will boost trade, investments and drive industrialization of the continent. There is no reason for Africans to be strangers in each other’s countries. When an African invests in another African country, it should not be seen as foreign direct investment, but as ‘home direct investment’ because Africa is our home, nations are where we live. But we also need to improve our performance in global trade.

Africa’s share of global trade is very low at 2.1%. We have made a lot of progress and 7 of the 10 fastest growing economies in the world are in Africa. But we must also recognize that 14 of the 20 least competitive countries in terms of business and investment climate are in Africa. Greater efforts will be needed to improve the overall business and investment climate on the continent.

Africa faces huge infrastructure challenges. How do you see these challenges and what can be done to address them?
Infrastructure is crucial for the growth and development of African economies. For example, the continent needs well interconnected roads, ports, railways to boost intra regional trade and ease movement of people, goods and services. The AfDB has done very well on this and this should be deepened. But we also must urgently address Africa’s energy deficit. While on average, only 50% of Africans have access to energy, the situation is worse in rural areas, where only 5% of Africans have access to energy. Yet, Africa has abundant renewable energy sources, some of the largest in the world, including hydropower, wind, geothermal and solar. Greater focus should be placed on expanding power generation, transmission and distribution. We must broaden the energy mix, including grid, mini-grid and off-grid systems, while improving energy efficiency. Regional energy infrastructure will expand energy security for multiple countries. Regional power pools will help lower cost of energy and improve rates of returns on energy projects. Innovative finance instruments such as PPPs in project finance, credit risk guarantees, risk insurance and well-structured power purchase agreements are critical to unlock much needed financing. The Power Africa Initiative of President Obama, the Africa Union/NEPAD Program for the Development of Infrastructure in Africa and the growing wave of private sector investments in Africa are crucial for closing the $547 billion Africa needs to ensure universal energy security by 2030. Greater priority is also needed to expand ICT bandwidth to lower the cost of communications. Again, this needs a regional approach to build the landing cable stations needed to develop undersea fibre optic cables for regional connectivity. Poor transport infrastructure costs Africa over 40% increase in costs. It is estimated that removing infrastructure constraints and trade barriers will boost Africa’s economies by at least $35 billion annually. The Africa 50 Fund of the AfDB is a good development and should help in leveraging greater domestic financing for infrastructure.

You were the Forbes Africa Person of the Year 2013? As a Government Official, how did it feel to be given such an honour?
It was such a great honor and I felt humbled by the recognition. Growing up as a child with humble beginnings, I have seen the benefits of what a good education and access to opportunities can do. I grew out of poverty so poverty for me is not theory. And so I dedicated the award to the young people of Africa. They are the future! We must continue to work hard to expand opportunities for them and unleash their entrepreneurship and spark hope. What we do with our youth will determine the future of Africa. We must capitalize on this demographic of being the continent with the largest number of young people and turn this into and advantage for Africa. We will be able to create millions of ‘Persons of the Year’ when the continent is full of hope and prosperity.

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