Donald Kaberuka has an urgent assignment for the next six months: Draw up a new strategy for the African Development Bank (AfDB), which will guide the bank’s operations in the medium-term.

The world has changed dramatically since Kaberuka took over as president of the AfDB Group in September 2005.

At the time of Kaberuka’s appointment, the AfDB was still recovering from what had been described as the bank’s “mid-life crisis” in the 1990s.

Many of its African members had been experiencing severe economic and budgetary crises for years, the dual effect of ill-advised structural adjustment programmes and low commodity prices in world markets.

Despite many African countries becoming increasingly uncreditworthy, the AfDB continued to extend non-concessional loans to them; the result was a doubling of AfDB’s arrears to $700 million in just two years, from 1992 to 1994.

By 1995, the AfDB was teetering on the brink of collapse, gaining the dubious honour of becoming the first international finance institution to lose its AAA rating.

Kaberuka’s predecessor at the AfDB, Omar Kabbaj, is credited with restoring financial order in the institution.

Under Kabbaj’s leadership, the bank regained its AAA rating, shareholder confidence began rising, and the lending portfolio was growing again.

But political upheaval in Cote d’Ivoire disrupted the recovery effort, and in 2003 the bank had to relocate its headquarters from Abidjan to Tunis.

It was expected to be a temporary arrangement, but AfDB is still in Tunis today.

It was under this shaky situation that Kaberuka ascended to the top job at the AfDB.

Before joining the AfDB, Kaberuka, 60, had had a distinguished career in banking, international trade and government service.

A Rwandan national, he was the country’s minister of finance and economic planning between 1997 and 2005.

During this period, he oversaw Rwanda’s successful economic reconstruction after the end of the civil war.

The first order of business as president of AfDB was to assemble a team of advisors under the auspices of the Centre for Global Development (CGD).

Kaberuka was looking to crystallise the role of the AfDB in a crowded aid field populated by larger multilateral donors such as the World Bank and the United Nations.

“The AfDB had become a mini-World Bank; we were following the fashion in the development discourse and not taking advantage of our strategic position,” says Kaberuka.

“In the 1960s, everyone thought that the challenge of development was a resource gap — that money would solve all problems.

"In the ‘80s, it had changed to ‘free markets.’ In the ‘90s, the mantra was ‘capacity-building;’ and between 1998 and 2002, all that people wanted to hear was the social sector — HIV, maternal health, primary education. So if you wanted to finance infrastructure projects, you were told no, that’s a luxury. The bank was making the same mistakes.”

Under Kaberuka’s leadership, the bank has been restyling itself as Africa’s own voice in its development agenda.

“We’ve done what we can to provide that African perspective. I’m proud of the role the bank played in the global financial crisis, for example.

"People said that Africa would be hardest hit, but I didn’t agree, provided we put in place the right measures. We’ve minimised the damage of the crisis on the continent by putting in place countercyclical programmes like trade finance, liquidity support and budget support to governments.”

The CGD team also recommended that the AfDB needed to specialise in one area that supports economic growth, singling out infrastructure as the key sector that the bank should focus on.

Kaberuka immediately put infrastructure development at the heart of AfDB’s strategy.

“We redefined our focus to infrastructure, science and technology and wealth creation,” says the president. “I left issues like maternal health to others such as [US-financed] PEPFAR and the Global Fund; they were already focusing on it.”

Today, AfDB is one of the continent’s leading financiers of infrastructure projects, which at $4 billion, accounted for 71 per cent of all bank approvals by 2010.
Tanzania received $129.6 million from the bank in 2010, Kenya $116.7 million, Rwanda $41.1 million, and Burundi $34.1 million.

Leading the pack in the wider East African region was Ethiopia, which received $224.4 million. The majority of the funding went to energy and road construction projects.

“Not every country in Africa can attain energy security on its own; this is why we need to bring together markets and form power pools,” says Kaberuka.

“The highlands of Ethiopia have great energy potential that can supply the region with power. We have financed a $300 million project to connect Ethiopia to Djibouti; we’re doing a similar interconnection project between Ethiopia and Kenya.”

Other recent projects that AfDB has financed in the region are the Athi River-Arusha highway in Kenya and Tanzania, the Dodoma-Iringa highway and the Iringa-Shinyanga power transmission line both in Tanzania, as well as the Gitenga–Nyangungu–Ngozi road project in Burundi.

In August last year, the bank committed $40 million to support a five-year capital investment programme for Rift Valley Railways, a consortium established to manage the parastatal railways of Kenya and Uganda, as well as a $149.5 million loan and grant financing for the Menengai Geothermal Development Project in Kenya.

“Many people don’t know that the Thika Superhighway [in Kenya] was a joint AfDB and Government of Kenya project,” he says.

“The Chinese companies won the contracts in a competitive process. It’s a misunderstanding to think that the Chinese are financing these kinds of infrastructure projects; what they are bringing are skills and technology.”

So is Kaberuka worried that AfDB will get muscled out of infrastructure deals in Africa as China increases their presence in constructing the continent’s roads, railways and power plants?

“Not at all,” he says. “I’m glad Africa is focusing on infrastructure in partnership with the BRICS. There is no problem, I wish they could do more, provided we negotiate good contracts. In fact, I think it’s good that countries with large surpluses can invest in these kinds of high return projects.”

As he enters the final stretch of his second term as AfDB’s president, Kaberuka has a final, symbolic goal to accomplish—returning the bank to its headquarters in Abidjan.

“The AfDB is the only international financial institution of significance to abandon its headquarters for ten years. We cannot continue indefinitely in this state of suspended animation. The situation in Cote d’Ivoire is normalising, and the return to Abidjan will be discussed at our shareholders meeting in Arusha later this year.”

Kaberuka says there is no definitive date that has been set yet for the relocation, but there is “no question” that the bank will return to Abidjan. “I hope and expect it in my presidency.”