African Development Bank gives $3.3 billion for integration projects

The African Development Bank has approved the East Africa Regional Integration Strategy Paper (RISP) laying out the roadmap for accelerating regional integration in the region with regional infrastructure development among the main pillars of the plan.

The bank has earmarked $3.3b to finance the strategy according to a statement from the bank.

The strategy will guide the bank’s regional operations in 13 countries, namely Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania and Uganda.

The Regional Integration Strategy Paper 2018-2022 maps out the direction of the Bank’s regional
integration work in Eastern Africa over the next five years.

The key objectives are fast-tracking structural transformation, increasing trade and promoting financial sector integration and inclusion.

The strategy is focused on two mutually reinforcing pillars namely regional infrastructure development for competitiveness and transformation.

The other is strengthening of policy and institutional frameworks for market integration, growing investments and value chains development.

Eastern Africa is the fastest growing region in Africa, with real gross domestic product (GDP) growth rate of 5.9% in 2017 compared to the continental average of 3.6%.

But countries in the region grapple with poor infrastructure including power shortages, low electricity connection rates and high cost of electricity for manufacturing enterprises – about four times higher than the global average.

They are also characterised by low-level industrialisation, with manufacturing added value below 15% in all the region’s member countries.

“Most Eastern African countries depend on agricultural and mineral products for their exports,” said Nnenna Nwabufo, Deputy Director General, East Africa during her presentation to the board.

“But most of these products are of low-level sophistication and low value added. This is why this strategy paper is key to boosting industrialisation and intra-regional trade.”

Nwabufo added that approval of the strategy paper sets the framework for the bank to support key economic sectors like regional energy and transport, which will underpin Eastern Africa’s transformation.

The bank recently urged Government to improve its loan update from the bank where currently the disbursement rate stands at only 31.2%, quite far from 100%.

Kennedy Mbekeani, country manager African Development Bank warned that the low disbursement rate may cause a dwindling in providing future funds. “If you borrow money and keep it in your pocket, when you come to ask for more you may not get.

There are delays in implementation of projects in Uganda which affect the disbursement rate,” Mbekeani said.

Keith Muhakanizi, permanent secretary ministry of finance planning and economic developing said aid made staff in the ministry lazy in seeking new financial instruments.

Muhakanizi said for many years the bank has been a major financier of Uganda’s programmes in sectors like water, sanitation, agriculture, energy and transport.

“With the financial constrains we need to explore new instruments that are affordable and sustainable, not only rely on ADB loans.

Our private sector is dominated by micro, small and medium size enterprises. I hope ADF can support and complement Government to support the private sector,” Muhakanizi said.

Muhakanizi said there were critical developments needed and as the country grows, new financial mechanisms have to be explored. He said these new instruments need strong negotiating capacity.

“Politicians quickly approve loans to finance roads, water when they have limited time to the next election.

The lenders go to politicians to get the loans approved because they want to reduce the negotiating power at technical level.”

“So we technocrats need to go to politicians with courage and tell them the loan is outside our debt strategy, or we need to renegotiate it.

If we do not negotiate these instruments our countries will be doomed, we have to refuse the debt if it will become a problem. We have to take capacity building seriously, oil cannot develop a country, it is the capacity of people that develops a country,” Muhakanizi said.