… Raises alarm over continent’s worsening debts challenge, effects of insecurity on development
By Johnbosco Agbakwuru
The African Development Bank (AfDB) has warned that the economies of countries in Africa will continue to remain in jeopardy until the continent finds an answer to the COVID-19 vaccination debacle.
President of the AfDB, Dr Akinwumi Adesina, stated this on Saturday while addressing the Economic Community of West African States’ (ECOWAS) Authority of Heads of State and Government in Accra, Ghana.
He harped on the need for the continent to take the challenge to start the production of its own vaccines, not just for COVID-19, but also to create a safeguard against future outbreaks.
The AfDB boss, however registered the continental financial institution’s bank to collaborate with countries in Africa to buoy up the health sector shopping for support to start the production of a vaccine in Africa, working with the African Union (AU), adding that the bank would commit $3 billion to the development of the pharmaceutical industry on the continent.
While giving perspective to the financial risk that the menace of unconquered COVID-19 pandemic poses to the continent, especially the West African subregion, he said emphasised the need for leaders of the continent to immediately commence strengthening the defenses of the health sector.
According to him, “The African Development Bank moved very quickly to launch a $10 billion facility to support countries. We also launched a $3,000,000,000 to fight COVID social bond on the global capital markets, which was the largest social bond ever in world history. Now things, are looking up again.
“The African Development Bank projects for Africa GDP growth will rebound to 3.4%. This year, and West Africa GDP growth is projected to recover from minus -1.5% in 2020, to 2.8% in 2021 and 3.9% in 2022. But the rebound will depend on access to vaccines, Africa should not be begging for vaccines, Africa should be producing vaccines.
“The African Development Bank will ramp up support for Africa to produce vaccines as part of the vaccines plan for the African Union. The bank will also commit $3 billion to develop the pharmaceutical industry in Africa.
“It is now time to rapidly build a healthcare defense system for Africa to tackle this and future pandemics. The African Development Bank plans to invest in building quality healthcare infrastructure in Africa.”
Adesina raised the alarm over the alarming debt challenge of the African continent, calling particular attention to the situation in the West African subregion.
He, however, proffered a solution to the crisis of debts, which he said low-income West African countries would need as much as $245 billion to fix, advising that there already appeared to be a relief presented through the Special Drawing Rights (SDR), offered by the G7 countries.
He said, “We must also now tackle the debt challenge facing the subregion and indeed the and indeed all of Africa. Africa will need significant financial support. Low-income Sub-Saharan African countries will need $245 billion by 2030 in additional gross financing, while the whole of sub-Saharan Africa will need $425 billion over the same period.
“We now have a real opportunity to tackle Africa’s debt challenges more decisively with the recent decision of the IMF to issue Special Drawing Rights, otherwise called SDRs. The G7 Global Leader Summit, which followed your call for this, or the Paris meeting on financing, gave the green light for allocating $100 billion of SDR to Africa. This will open the way for much bigger relief for Africa.
‘As agreed in Paris, during the Financing for Africa Economic Summit, the heads of state called for the African Development Bank to receive SDRs on behalf of African countries as well as to use them to own land to public development banks.
‘It will also be important that some of the SDRs in Africa be used to buy down some of the very expensive debt owed to private creditors. These will help to avoid a looming crisis or payments to private bondholders due in 2023/2024 which if not addressed could lead to massive credit downgrades across Africa.
“Your excellences we must now put in place an African Financial Stability Mechanism to protect the continent against external shocks. This mechanism is critical, it will require that we must realise our resources, avoid regional spillover effects, regionalize fiscal policy works, develop homegrown reforms and debt resolution approaches and provide a regional safety-net that will compliment the global safety-net of the International Monetary Fund.”
Adesina also hinted on the plan to relieve the West African subregion of the burden of violence and insecurity, factors which he observed had been taking serious tolls on the development drives by the most affected countries of the region, especially in the Sahel region and the Chad Basin area.
“Your excellences, when we resolve Africa’s debt challenges, I can rest just a little. One thing will still keep me awake at night; Africa’s rising insecurity. As you well know, the situation is most precarious in the Sahel and the Lake Chad Basin, but I’m sure Your Excellencies it keeps you also awake at night.
“The trend is disturbing as expenditures from defense are rising fast, displacing financing for development. Your Excellencies, the investable space in Africa is rapidly shrinking due to insecurity. Take the case of Mozambique, where the African Development Bank helped to structure a $24 billion deal for its liquefied natural gas project.
“This transaction won the global project deal of the year 2020 Award. This will have made Mozambique the third largest producer of liquefied natural gas in the world with projected revenues of $66 billion. Alas, terrorists have now invaded the location Total, the major project sponsor, has just declared force majeure and has pulled out.
“These insecurity situations and insurgencies now pose the biggest risks to Africa’s development, yet countries lack adequate resources to effectively tackle these challenges. If unaddressed quickly, insecurity will become a huge risk to our dream of an African Continental Free Trade dream.
“It is time to adapt our approach. Your Excellencies, we must now link security to investment, growth and development. That’s why the African Development Bank calls for the development of Security Indexed Investment Bonds, taking advantage of lower long-term interest rates.
“These security index investment bonds will allow Africa to leverage resources on the global capital markets to reinforce its security. The revenue streams from the Security Indexed Investment Bonds can be used to, one, reinforce the security architecture of African countries and support dual-purposed infrastructure to enhance national and regional peacekeeping and security capabilities.
“Two, build destroyed or damaged infrastructure in conflict-affected areas and finance new investment projects to relaunch economic activities and create jobs in areas prone to security challenges.
“Three, build social infrastructure for the populations, especially water, sanitation, schools, health, roads, ICT and agricultural infrastructure, to enable to access to basic services to support community livelihoods in fragile environments, and four, protect strategic investments within countries or regions.
“The Security Indexed Investment Bond can be delivered through special purpose vehicles established on behalf of a pool of regional member countries. The plans can be credit-enhanced by the African Development Bank or other donors. The administration of the bond process can be managed by the office under the auspices of the African Union’s Peace and Security Council, and regional economic communities, which includes ECOWAS Commission”, he said.