Africa needs to make sure it gets “the best deal possible” for its natural resource exports, particularly with its largest trading partner China, to protect itself from global market turbulence, according to the new president of the African Development Bank.
Akinwumi Adesina, who takes over on Tuesday as the head of the AfDB, told the Financial Times in an interview that China’s “market asset price correction” is hitting African economies hard, particularly those with “very high exposure” such as the continent’s top crude oil, iron ore and aluminium producers.
For the past decade, Africa has been home to some of the world’s fastest growing economies, some of which will struggle to navigate global market turmoil. “There’s no doubt that most of Africa’s economic growth has been tied to that commodities super cycle” that saw China’s economy grow significantly over the past decade, said Mr Adesina. “China is Africa’s largest trading partner [and] we just have to make sure that we manage the current volatilities and make sure that Africa is getting the best deal possible,” he said.
For now, “because of the terms of trade a number of [African] countries will witness current account deficits and the fact that revenue streams have gone down will mean many will face domestic fiscal deficits,” he said, adding that depreciating currencies could also drive up inflation.
One potential “bright side”, he said, was “the rise of industrial wages in China opening a huge opportunity for Chinese companies to actually move out of China and set up industries in Africa because of low wages”.
A technocrat who most recently served as Nigeria’s agriculture minister and won praise for his commercially minded reforms, Mr Adesina — elected by the board in May — is the first Nigerian to lead the bank.
He takes over from Donald Kaberuka, who led the bank for 10 years. Mr Kaberuka, a former finance minister in Rwanda, presided over a dramatic expansion of the bank’s influence and capital, helped in part by high commodity prices. The new president said he aimed to lead a bank that was “more nimble and therefore responsive to the needs of its clients”. He said he wanted “Africans to say, this is Africa’s development bank, not just in terms of the amount of money we dispose but [the] impact on people”.
Easing the impact of external volatilities will be one of the bank’s priorities, Mr Adesina said. Greater industrialisation and diversification was critical to this effort, he said. “Africa today is at the bottom of the value chain in many of the commodities it exports”, including agricultural products, he said. “ He said the continent had no choice “but to diversify its economies very fast”.
To that end, he said the bank “will make a significant effort to work with others” such as fellow multilateral development banks, African governments, international financial institutions, and the private sector to solve Africa’s energy crisis.
A recent study commissioned by a panel chaired by former UN secretary-general Kofi Annan found that about 600m sub-Saharan Africans lack access to electricity.
Picking up on a theme emphasised by his predecessor, Mr Adesina said “inclusive growth” would be a core theme of his work. He said it was critical to address “rapidly growing inequalities” in Africa.