African countries with access to capital markets should tap them for the development of infrastructure, the head of the African Development Bank (AfDB) says.
However, they had to ensure they had good debt management to avoid problems, said Donald Kaberuka, president of the AfDB.
“It is highly recommended that our countries…do so,” Kaberuka told Reuters. “What is important is to ensure that these resources are invested in projects with high returns to be able to pay back the loans.”
Many countries in the region have relied on foreign aid for a long time, with some having aid levels of around 16% of gross domestic product, or 50% of their budgets, he said.
Their ability to raise resources globally, to develop domestic markets or mobilise savings was therefore curtailed, he said, on the sidelines of the World Economic Forum on Africa.
“As you can see from the case of Greece, if the national savings rate is low and you are to borrow from abroad it has to be done carefully … so we will work with governments who want … to go back to the markets to ensure that they work within a framework of sustainability.”
Ghana and Gabon were already ahead of the curve with debut Eurobonds before the global financial crisis hit and countries such as Kenya, Zambia and Senegal have postponed similar plans awaiting global markets to improve.
The AfDB would finance regional power generation initiatives across Africa, Kaberuka said, citing Ethiopia’s Gibe III dam which he said would provide enough electricity for the country and the region when complete.
He said electricity consumption per person in Africa, where some people have no access at all, is about 400 kWh compared with 14 000 kWh in developed countries.
“We are running behind with energy shortages of enormous proportions,” he said.
“We are keen to develop the potential that exists, do renewables especially those which we can afford so that we can put enough power into the pools and sell energy,” Kaberuka said.
AfDB was involved with coal projects in Senegal and with South Africa’s Eskom. It was also looking at wind projects in Kenya and Cape Verde.
He said the bank was not looking at nuclear power yet, only at traditional energy forms and renewables such as solar.
AfDB is trippling its capital base to $100 billion and most of the extra funds would be for infrastructure: energy, broadband internet, bridges, roads and airports.
The bank forecasts growth 5.4% in 2010 and 6.4% in 2011, underpinned by a rebound in commodity prices.