Kampala, Uganda — African Development Bank (AfDB) President Dr. Donald Kaberuka has pledged support in the implementation of the physical infrastructure needed for the establishment of the Continental Free Trade Area by 2017.
Addressing the NEPAD Heads of State and other government officials during the African Union summit held recently in Ethiopian capital Addis Ababa, Kaberuka re-echoed the call of the African countries for the development of trade-related infrastructure and productive capacity building programmes. The call includes support for putting in place an enabling policy and legal framework so as to contribute specifically to the boosting of intra-African trade."
Kaberuka said he was confident that intra-African trade and Africa exports to the rest of the world could grow very fast if existing efforts were scaled up to improve the continent's physical infrastructure which continues to undermine competitiveness and trade growth.
"Efforts to address physical infrastructure should also consider soft infrastructure constraints such as regulatory barriers, restrictive regulations on movement of goods and people, poor logistics services and of late, challenges in accessing trade finance, he said in a statement sent to East African Business Week.
Kaberuka noted that soft infrastructure constraints can be as pervasive as tariffs at the border, and can easily nullify the competitiveness and efficiency gains derived from investments in physical infrastructure.
He however decried the financial crisis that led to businesses in at least a third of African countries paying a premium of about 10% on trade loans on top of cash collateral requirements. "These developments threaten to undermine trade at a time when African exports are fueling growth across the continent," he said.
He noted that the bank had responded to the trade finance crunch by establishing a $1bn temporary trade finance initiative (TFI) in 2009.
"The initiative has thrown a lifeline to hundreds of businesses across Africa, saving thousands of jobs and generating millions of dollars in revenue for firms and their governments, the bank has gone a step further and is establishing a full-fledged in-house Trade Finance Program, and is collaborating with other development partners on ways to counter the on-going turbulence in the financial markets, and to minimize damage to Africa's trading capabilities", said Kaberuka. He called for innovative ways to finance Africa's growing infrastructure requirements.
Citing the low returns of about 1.4% on instruments such as US Treasury bills, he said that investors and sovereign wealth funds would be looking for more appealing investments such as infrastructure in Africa, provided security and good returns are assured.
Kaberuka noted sovereign wealth funds are forecast to hold $10 trillion by 2015 and could be a key source of investment to finance some of Africa's infrastructure.
via East African Business Week (Kampala)