A new AfDB financing window could provide a timely conduit for more foreign investment and there are hopeful signs that western creditors may soften their stance towards middle-income African debtors, says Ndiaye.
The 1980s was not a good decade for African economies. Per capita growth in gross national product (GNP) was negative for most of the decade. Are you more optimistic about the 1990s?
It is true that the 1980s were not very positive. It was not a successful decade for developing countries in general and Africa in particular. What should we do for the last decade of this century? We have drawn lessons from what has happened since independence and particularly in the 1980s. Thirty of the 50 African countries are now implementing structural adjustment programmes. But we have not yet found the optimum mix for macro-economic policy reforms. This is due to several factors – external and internal. Internally, because more than mere economic change, we need a change of mentality. Externally, there is an adjustment required by the developed countries too. When fiscal measures, exchange rates, interest rates and trade balances are co-ordinated at the Group of Seven (G7) level, the developed countries don't take into account the impact of their co-ordination on the economic programmes of the developing countries.
In the last 12 months the African Development Bank (AfDB) has strongly emphasised the role of the private sector and the importance of a free-market economy. Do you already see signs of private enterprise playing a more important part?
That is a pertinent point to demonstrate the change of mentality. It is true that today all over the continent there is a strong will from government to see the private sector play a major role in development activities. Governments have changed their investment codes to make them more attractive. They know there are problems with [inefficient] bureaucracies but here again many countries are trying to correct the situation.
Privatisation programmes have been launched too. There is a privatisation programme in Nigeria for some 90 parastatals worth about $3 billion, and privatisation programmes in Ghana, Togo, Ivory Coast and Morocco, where about 500 state enterprises (almost a quarter of the country's parastatals) were sold. Governments are changing. They are trying to have less government in business.
But the response of investors, particularly foreign investors, has not been very enthusiastic. To bring the attention of international investors to Africa as an opportunity for investment, it is not enough for these countries to sit at home, declare what they want to do, but not publicise this outside. They must do some marketing [to tell investors] about the new business climate and about the measures they are taking to improve the situation.
In the past, the domestic private sector was not encouraged. It was even the case that, in the minds of many people, the very fact that a businessman was successful implied that he was corrupt. If that mentality is reinforced, business cannot prosper. So it is very important to work to improve the image of business people, the majority of whom do business openly.
A strong and sound private sector also benefits the government because the taxes it pays help the government improve the social infrastructure. Through the Association of African Businessmen we have been organising meetings around the continent – in Morocco, Zaire, Zambia, Egypt – to persuade the authorities of these countries and the population that good indigenous business is job-creating and wealth-creating.
The AIDB has talked about the possibility of a new financing window for the private sector. Is a company's inability to get the funds that it needs for investment a factor in the slow growth of private enterprise?
Absolutely. Small entrepreneurs do not have access to normal credit from commercial banks. The banking systems in most of our countries today are almost non-operational. We need new sources of financing. A special window of the AfDB [for the private sector] could encourage foreign investors to come and do joint ventures with African partners. What is important for this window is not a large quantity [of funds] but that it will serve as a catalyst for joint ventures and cofinancing.
Barber Conable, president of the World Bank, in a speech on April 25 at the Bretton Woods conference, said he thought that the lack of democracy in many African countries was a more important reason than financial factors for the slowness of Africa's economic growth. Do you agree with that view?
I can't disagree with him. But I'm not so sure that we should, as financiers, be focusing too much on things of a philosophical nature. It is definitely important that the economic objectives of a country be shared by its people and that the people support the economic programme. If that is not the case, all will fail. I don't see sustainable development without the participation of the population.
But in a number of countries there has been considerable popular opposition to the sort of structural adjustment programmes that the IMF and yourselves have proposed...
But can we do without structural adjustment programmes? Each programme has costs and the costs appear in the short term, the benefits only in the medium or longer term. What is really involved is a transformation of your production structure. This cannot be done overnight. Structural adjustment means adjusting your standard of living to your means – that also has a social impact.
Where the debate is today is who should put up the programme, how the programme should be implemented and how to present it to the population. We have a problem with financing the short-term impact of the programme because there are few resources for that. Some people will say that the rich part of the population should pay for the programme. But who are the rich? The top 10%. And in the social structure of Africa, that 10% supports the other nine-tenths of the population. So the impact is felt immediately [right through society]. Another problem is knowing how to finance the short-term negative effects, which have an immediate consequence on health, on schools, on food. We have not found an optimum combination to implement a programme smoothly and ease the short-term hardships.
What initiative would you like to see now from western creditors to try to reduce the debt burden on Africa?
A great deal has been done since the initiative to refinance African debt announced at the Toronto summit and the Brady plan. What else could be done? The Toronto initiative was seen as solving the low-income countries' problems once and for all. But that initiative did not write off all their debts. We now need a formula – a Toronto-plus – that would go beyond this and address real debt reduction. Some countries – France, the US, UK, Canada – have done this. It is our belief also that the formula is better fitted to the middle-income countries of Africa than to the low-income countries. It is more applicable to countries which have commercial debt like Gabon, for which we have almost no solution, Congo, Ivory Coast and Nigeria.
Do you see western creditors softening their stance towards middle-income African debtors?
Yes. I was very encouraged at the Bretton Woods conference that Herman Cohen [the US assistant secretary of state for African affairs] mentioned that the US position is that the Toronto formula could be applied to the middle-income countries.
Are debt/equity swaps important in reducing debt in Africa?
They could have only a marginal impact. But what is interesting in debt/equity swaps is that they bring investors into a country. We also have some debt-for-nature swaps.
You have taken a number of initiatives to develop capital markets in Africa. You have a plan for an Afro bond market. You have encouraged mutual funds. You have set up your own trading room in Abijian. Will capital markets take off in the 1990s? Will we see an Afrobond market, for example?
We are working at it. I don't see it coming for maybe two or three years. It's too early yet. But it could be a way to repatriate flight capital.
At your board meeting in February, you discussed a capital increase for the bank. Is that still a possibility?
No. We were discussing what lending capacity we have on our current capital, how far we can go without jeopardising our credit rating. Current indications are that we can go on until 1994 or 1995. Around that time we should launch a new capital increase. If we implement our [lending] programme fully, at the end of 1991 we should be left with about $7 billion-$8 billion. If we lend $1.5 billion-$2 billion a year that should take us without any difficulty to [the mid-1990s]. We are also now starting negotiations for the sixth replenishment of the African Development Fund for 1991-93. During that period we will have two replenishments, which, if I am optimistic, should also contribute $7 billion-$8 billion. So we should be able to inject $14 billion-$16 billion over the next five years.
You recently set up the African Businessmen's Round-table, which visited the US in early April and held a conference in Paris in March. Was there a positive response? Are you optimistic about the chances of getting more foreign investment?
It's too early to say. But what we noticed was that the business community and the political leaders [in Europe and the US] were eager to help Africa promote the private sector. While all attention is focused on eastern Europe and the image of Africa is only negative, we wanted to present another image of Africa – an Africa of business opportunities. We are looking not for assistance, but for partners in developing business.
Many deterrents put western companies off investing in Africa – regulations, the bureaucracy, foreign exchange controls. Do African governments now realise they have to remove these obstacles to attract foreign investment?
We mention to our African member countries [the importance of] investment codes, softening the bureaucracy and administrative formalities, and improving the legislative environment. This is not only the desire of most of our member countries, they are doing it. The problem is that there is a psychological barrier for investors, who consider Africa too risky. They don't make the effort to come and see. We understand that – it is for us to go and tell them.