By AGGREY MUTAMBO

More by this Author

Nnenna Lily Nwabufo, the African Development Bank Director-General for East Africa, spoke to Aggrey Mutambo about the multilateral lender’s activities in the region

What is the overview of East Africa by the bank?

We cover 13 countries and some of the countries are not typically considered East African — for example Comoros and Seychelles. Within these 13, Seychelles — for a very long time — was the only country with a high-income status in Africa. Mauritius has since joined them. We have slightly more progressive countries moving towards middle-income status, like Ethiopia, Kenya, Uganda, Rwanda and Tanzania.

But there are fragile countries, which we call transition countries, like the Comoros, Burundi, Djibouti, Eritrea, Somalia, South Sudan and Sudan. Six of these are coastal countries, five are landlocked and two are small island nations. The diversity in the geography and economy of these countries means we cannot use the same strategy to manage our development operations and engagements with them. Our engagements are based on strategies that define our interventions in each country.

Tanzania has asked AfDB to support its connectivity plans. Which other countries are linked to these projects?

We are working with Tanzania, DRC, Burundi and Rwanda. Most of these countries are landlocked so they are looking for openings to the seaport in Tanzania. They also have access to Kenya.

The Tanzanian government is seeking business opportunities, especially in DRC where it has a lot of mines, as well as Burundi and Rwanda.

Tanzania has existing railway lines, which it is trying to rehabilitate. Internally they have already developed a railway line to Mwanza, from money they borrowed in their name.

In a few years, they will start repaying those loans. They need to take advantage of the commercial value of their investments, which is essentially connecting the infrastructure projects to the neighbouring countries and offering freight services.

The governments of Tanzania, Burundi, DRC and Rwanda have agreed to come together to seek financing and have asked the bank to support them.

The capacity to borrow, for each country, is an investment. Secondly, each country needs to define its development strategy. We hope that within the next year or two, we will, internally, initiate funding for the start of these projects. This kind of investment requires a lot of innovation especially on how to raise financial resources. So we have 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 for each of our countries are huge. So it is not just about the railways.

Why isn’t the bank lending to the private sector as much as it is to governments?

The private sector is important, but when Covid-19 came we either did one or the other. The bank has high prudential risk standards so sometimes private firms may not meet them. And as liquidity and instability hit the financial markets, those standards get even tighter. The cost of preparing private sector lending is high and many companies in Africa are not that big, if you convert their cash pool into dollars. One of the things we try to do is see how we can go through commercial banks.

We lend in hard currency, and if I lend you dollars, I expect you to pay me in dollars. You have to be sure that whatever you are doing will generate enough revenue for you to pay back. We want to see how we can work with the government and the private sector to have some sort of guarantees.

Kenya is incurring heavy debt in infrastructure. What is the balance between responsible borrowing and big ticket projects?

It is true Kenya is running into a higher risk of debt distress. It is not so much about borrowing, but what you are doing with it, whether what you borrow is being put in the right places to drive the economy forward. For Kenya, and for most African countries, debt deficit is an issue. We continue to support countries like Kenya and Seychelles. This year we hope to support the Kenya government with about $100 million, which is also part of the limit by the IMF.

Some countries in the region are also in conflict. Does that affect lending?

We are lending to all governments that are recognised. In South Sudan, for instance, some of the areas are high risk. We may keep away from going to those areas. We work with the UN to implement the projects, and have a team on the ground.

It doesn’t stop the Bank from allocating funds to countries. They just have to use it in recommended way. We have supported South Sudan with electricity in Juba. We supported them with non-oil revenues to build the revenue agency building. We are doing a lot of capacity project and there is a road in plan to connect South Sudan to Kenya. The reason we are not doing much in South Sudan is: They prefer to use the Bank’s allocation on financial management projects and the World Bank is doing most of the part. We do not work alone in most cases.

***
BIO

Nnenna Lily Nwabufo has over 30 years’ experience in treasury and financial management, budget programming, planning and performance management, human resource and corporate services management, and country/regional operations.

She joined the AfDB's Treasury Department in 1991, serving in different roles. She holds a BSc in Economics from the University of Lagos, Nigeria and a Master of Business Administration from Henley Management College, Henley on Thames, UK.