Ideas & Debate

Bridging the digital divide will help shield Africa from external shocks

Fibre-Optic

Workers lay fibre optic cables in Nairobi. Information technologies will enable Africa reduce business costs, enhance integration, and access to the world of knowledge and information. Photo/FILE

Twelve months ago, the economic clouds were dark and prospects gloomy.

As a result of the crisis at the epicentres of the global economy, demand for and prices of our exports, especially mineral products, were falling.

Investment flows including the IT industry were retrenching.

There is no doubt this has caused some damage and interrupted the economic momentum we had built since the turn of this decade.

Nonetheless, Africa has shown a remarkable resilience; our banking systems have remained robust and the worst effects into the real economy have, with some exceptions, especially mineral producing countries, been generally contained.

Today, while the situation varies from country to country–– information available imprecise, and the data inadequate––much of Africa has avoided the worst of a major recession.

Not only have we avoided that major recession, the prospect for 2010 are extremely encouraging.

Assessments converge that in 2010 Africa will probably resume its pre-crisis growth path- and indeed is likely to be the second fastest growing continent after Asia.

Our projections for 2010 are converging around average real growth of 5 per cent in 2010 and 6 per cent in 2011.

There remains serious risks and uncertainties which have potential to unravel this renewed performance.

Naturally it will take time for all the economies to resume strong growth at the same time, but momentum is building in most regions of Africa.

Some residual problems remain and will take time.

Demand for our commodities and exports may not return to recent peaks but has nonetheless strengthened.

Investment flows are slowly resuming and both the budget positions and the current accounts are steadily improving.

We are not yet completely out of the woods- but there is now reason to look ahead with confidence.

Governments have taken measures to counter and to stay the course of sound financial and macroeconomic policies which have buttressed our resilience to this crisis.

Together with sister financial institutions, we did our best to respond as appropriate in a customised way to requests for support to overcome the crisis.

For some countries it was the need for quick disbursing or front-loaded budget support, for others it was problems of liquidity or trade finance- and in many cases - filling the gap of retrenchment in investment flows to ensure key projects stay afloat.

In the past twelve months, to support Governments weather the storms, AfDB has more than doubled lending and grants from $5.6 billion dollars a year before the crisis, to just over $11 billion dollars by December of 2009. We improved significantly on our flexibilities and innovation.

As the global economy recovers, AfDB is committed to help African countries resume the pre-crisis growth trajectory.

But this requires boosting the callable capital base of the bank which were stretched to the limits by the demands on us during the crisis.

For that purpose, AfDB is working with shareholders for a General Capital Increase for the bank to get additional firepower to enable it provide greater support both in normal and crisis times.

While we have reasons to be proud of the manner in which we are gradually overcoming the worst of this crisis, we have also to learn the lessons necessary.

These include the risk of continued dependence on primary commodities, the need for a faster pace in economic interaction and reducing further the cost of doing business and a reassessment in relation to the role of the State in supporting economic development.

Booms and busts of this type and the commodities cycles will inevitably recur- perhaps not in the same scale or frequency, but occur they will- and hence the need for greater diversification, efforts to move up the value chain, and progressively tap into technology and the knowledge economy.

During this crisis, many Governments took measures to stay the course in improving the investment climate and enable the banking sector and the business community weather the worst of the storm––whether via fiscal policy, direct support or other counter-cyclical measures.

One of the observations we made over the last twelve months is the strong correlation between regional integration and the ability to withstand external shocks.

The faster the pace of economic integration, the greater the resilience to such external shocks.

Information Technologies at national, regional and continental levels will enable us reduce business costs, enhance integration, and access to the world of knowledge and information.

The Kigali Connect Africa Summit in October 2007 set three goals and assigned to us key implementation responsibilities: to connect all capitals and major cities by 2012, enhance human resource capacity and the requisite environment for investment in the IT industry.

Two years on, while much is yet to be done, there is good progress, the rate of penetration has doubled from about 20 per cent to over 40 per cent with the unprecedented growth in mobile telecommunication over the last decade and a half, a silent revolution is under way.

There is similar progress with regard to broadband networks and the deployment of the national backbone including the cross-border links.

Two new submarine cable systems: SEACOM and TEAMs have landed on the East coast of Africa, with three more expected to be completed within the coming two years in different parts of Africa.

With the advent of these cables, user prices should start decreasing by up 10 times from July 2010. In terms of applications, ICTs have not only continued to improve the business environment, market development, as well as reducing business costs.

Alongside has come innovation combining state of the art technology with local customs; increased use of mobile banking in many countries, bringing together farmers and buyers, education access and modernisation of Government.

Dr Kaberuka is the president, African Development Bank Group.