Exploit Continent’s $500bn Pension, Wealth Funds, AfDB Boss Urges African Nations | Independent Newspapers Limited
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Exploit Continent’s $500bn Pension, Wealth Funds, AfDB Boss Urges African Nations

Akinwumi Adesina
Posted: Sep 20, 2016 at 1:08 pm   /   by   /   comments (0)

Rather than rushing to obtain Eurobonds for infrastructure and other needs, Dr. Akinwumi Adesina, President of the African Development Bank (AfDB) wants African governments to further exploit the continent’s vast $498 billion capital outlay in the form of pension assets and sovereign wealth funds.

Adesina told Reuters that Africa’s $334 billion in pension funds and sovereign wealth funds worth $164 billion can finance vital economic development on the continent to check the rising borrowing costs on international debt markets.

The advice is coming against the backdrop of Ghana’s issuance of a $750 million bond early this month and Nigeria hopes to issue a $1 billion bond come December, among others.

“There’s nothing wrong with taking debt. It really depends on how you raise it and what you raise it for. But if you are raising money simply to be able to pay back old debt, that may be an issue,” he stressed.

Adesina, Nigeria’s immediate past Minister of Agriculture, had last month told Financial Times of London of the need for the continent’s governments to boost tax revenue and steer clear of international borrowing amidst its worst economic slump in over a decade, listed Ethiopia, Kenya, Rwanda and Ivory Coast among nations adeptly navigating Africa’s current economic headwinds.

For him, “they may raise Eurobonds but it’s not just that. All these countries are investing very well in infrastructure, which is very important for boosting growth. Many of them have a very stable macroeconomic environment. Many of them are encouraging private sector investment.”

But the key to steady, long-term development lies not in how countries weather the bad times but rather how they prepare when business is good, he said.

Referring to Senegal and Mauritania, two small economies that may be on the cusp of an oil and gas boom following recent offshore discoveries, Adesina said their governments needed to avoid the mistakes of other African producers.

He urged them to negotiate advantageous royalty arrangements and tax regimes before the first barrel of oil is pumped and to then ensure the money is spent the right way.

“They should invest a lot of that money in human capital development, in infrastructure that’s going to enable growth.

“It’s not always going to be rosy … So save for a rainy day. Setting up a sovereign wealth fund is a great way … And use the resources to further diversify the economy.”

Over 20 African nations have now sold at least one Eurobond, Akinwumi Adesina told Reuters, roughly double the number back in 2004.

“It’s all well and good when the interest rate environment is quite accommodating,” he said. “But as the Federal Reserve rates go up and you begin to see a lot more movement of money out of emerging markets, you’ll have a tightening of that capital market.”