Nnenna Lily Nwabufo, the African Development Bank’s Managing Director for Eastern Africa, spoke with Aggrey Mutambo about the multilateral lender’s activities in the region
What is the bank’s overall vision of East Africa?
We cover 13 countries and some of these countries are not usually considered to be East African, for example Comoros and Seychelles. Of these 13, Seychelles was – for a very long time – the only country with high-income status in Africa. Maurice has since joined them. We have slightly more progressive countries moving towards middle income status, such as Ethiopia, Kenya, Uganda, Rwanda and Tanzania.
But there are fragile countries, which we call countries in transition, like Comoros, Burundi, Djibouti, Eritrea, Somalia, South Sudan and Sudan. Six of them are coastal countries, five are landlocked and two are small island nations. The diversity of the geography and economy of these countries does not allow us to use the same strategy to manage our development operations and our engagements with them. Our commitments are based on strategies that define our interventions in each country.
Tanzania has requested the AfDB to support its connectivity plans. Which other countries are linked to these projects?
We work with Tanzania, DRC, Burundi and Rwanda. Most of these countries are landlocked and therefore are looking for openings to the seaport of Tanzania. They also have access to Kenya.
The Tanzanian government is looking for business opportunities, particularly in the DRC where it has many mines, as well as in Burundi and Rwanda.
Tanzania has existing railway lines, which it is trying to rehabilitate. Internally, they have already developed a railway line to Mwanza, using the money they borrowed on their behalf.
In a few years, they will start repaying these loans. They need to leverage the commercial value of their investments, which is essentially connecting infrastructure projects to neighboring countries and offering freight services.
The governments of Tanzania, Burundi, DRC and Rwanda agreed to seek financing and asked the bank to support them.
Borrowing capacity, for each country, is an investment. Second, each country must define its development strategy. We hope that in the next year or two, we will initiate, internally, funding for the start-up of these projects. This type of investment requires a lot of innovation, especially on how to raise financial resources. So we set up a small technical team to discuss with their joint technical team. The team will find out if they have the right strategies and what their priorities are. The development priorities and demands of each of our countries are enormous. So it’s not just about the railways.
Why doesn’t the bank lend as much to the private sector as it does to governments?
The private sector is important, but when Covid-19 came, we did one or the other. The bank has high prudential risk standards, so sometimes private companies may not meet them. And as liquidity and instability hit financial markets, these standards become even stricter. The cost of preparing loans to the private sector is high and many businesses in Africa are not that big if you convert their cash to dollars. One of the things we’re trying to do is see how we can go through the commercial banks.
We lend in hard currency, and if I lend you dollars, I expect you to pay me in dollars. You need to be sure that whatever you do will generate enough income for you to pay back. We want to see how we can work with the government and the private sector to have guarantees.
Kenya is taking on heavy infrastructure debt. What is the balance between responsible borrowing and big projects?
It is true that Kenya runs a higher risk of debt distress. It’s not so much about borrowing, it’s about what you do with it, whether what you borrow is in the right place to drive the economy forward. For Kenya, and for most African countries, the debt deficit is a problem. We continue to support countries like Kenya and Seychelles. This year, we hope to support the Kenyan government with around $100 million, which is also part of the limit set by the IMF.
Some countries in the region are also in conflict. Does this affect loans?
We lend to all governments that are recognized. In South Sudan, for example, certain areas are at high risk. We can refrain from going to these regions. We work with the UN to implement the projects and have a team on the ground.
This does not prevent the Bank from allocating funds to countries. They just have to use it as recommended. We helped South Sudan provide electricity to Juba. We supported them with non-oil revenue to build the revenue agency building. We are doing a lot of capacity projects and there is a road planned to link South Sudan to Kenya. The reason we don’t do much in South Sudan is because they prefer to use the Bank’s allocation for financial management projects and the World Bank does most of it. We do not work alone in most cases.
Nnenna Lily Nwabufo has over 30 years of experience in cash and finance management, budget programming, planning and performance management, human resources and general services management, and country/regional operations.
She joined the AfDB Treasury Department in 1991, holding various positions. She holds a BA in Economics from the University of Lagos, Nigeria and an MBA from Henley Management College, Henley on Thames, UK.