Former African Development Bank president Donald Kaberuka has urged Sub-Saharan African countries to keep the pedal on infrastructure spending despite a slow down in economic growth.
Speaking at the ongoing annual Spring Meetings of the International Monetary Fund (IMF) and the World Bank Group in Washington, Kaberuka said that the current infrastructure investments will eventually reduce the cost of doing business, and crucially, expand and diversify the markets in Sub-Saharan Africa.
"In this period of slowdown, I urge governments to keep the pedal on, on infrastructure spending. Let us complete the railways like Djibouti and Ethiopia have done, like Kenya is doing, as they will be the basis for social transformation," Kaberuka told the session.
The Standard Gauge Railway (SGR) he mentions, is a Northern Corridor Integration Projects (NCIP) regional project that started in Kenya and will run through Uganda to Rwanda and South Sudan.
Kaberuka, also a senior advisor at the Boston Consulting Group and former Rwanda Finance minister, was speaking at the ongoing IMF Spring Meetings in Washington at a session whose theme was "Sub-Saharan Africa: How to Return to Vigorous Growth?"
"We don't simply have to return to vigorous growth, it has to be broad-based growth, it has to be inclusive growth," Kaberuka said. (see video from Minute 37)
"I want to urge NDBs and governments to be counter-cyclical on infrastructural spending. Because in the last 10 years it is true commodity prices have driven our economies, but domestic consumption and investment have been two other arms," he said.
The year 2016 was particularly difficult for sub-Saharan Africa, with growth estimated to have been negative in per capita terms and slowing in the majority of countries.
"There is growth, development and transformation, and our governments have to focus on all three simultaneously," he added.
Kaberuka, a senior advisor at the Boston Consulting Group, however argued that in his view, the slowdown in the economies in the Sub-Saharan Africa region cannot all be blamed on drop in commodity prices.
"I don't believe that the slow down in the African economies is to be explained solely by commodity prices. It is important for some countries, but many others it is something else we have to look at. To try and link the commodity price with the slowdown is only part of the story."
Returning to basics
"Colleagues have urged a return to basics to reverse the slowdown. Some of these basics we know very well. They include independence of the Central bank. The challenges the Central Banks are having have nothing to do with commodity prices. It is reversing policies of things we know have worked in the past."
"It is better to have sub-optimal policies that are predictable, than to have sound polices that change from time to time...from taxes, regulation, concessions, PDPs, trade. I have seen a number of countries whose policies on concessions changing from one year to the next. This has nothing to do with commodities.
"Commodities is only part of this story, but policies, in a domain where we know what to do, is the most important aspect of it."
Kaberuka said the regional economic engines like Angola, Nigeria have to get their act together to improve the outlook and side effects on their neighbours would be felt.
"We know that oil revenue are important as part of foreign exchange, but as part of GDP oil is no longer as important. Expand the tax base. What about foreign exchange flexibility supporting monetary policies."
"So, for the large countries, commodity prices are one story, but policy and its execution is another, and once that is done, the side effect on the neighborhood will be positive."
He also stressed the importance of investment in agriculture for quick growth.
Africa outlook solid : But the regional engines must perform.Policy predictability more crucial than commodity price. pic.twitter.com/HhYEsmOB3y— Donald Kaberuka (@DonaldKaberuka) April 22, 2017