Investing Today in Africas Future: The Role of African Development Bank

Good Afternoon Ladies and Gentleman:

I want to thank Tosha Wilkes of the Business Council for International Understanding for inviting me to be with you today. I'd also like to welcome our business community, Ambassador Cynthia Perry and our honored guests from the African Development Bank to New York City.

I'm always excited when I have the opportunity to talk about America's economic, trade and investment relations with African nations. I hope you will allow me to indulge myself a little and perhaps be a little controversial about some of the issues I am following as a member of the House Africa Sub-Committee and the Banking and Financial Services Committee.

From the outset I want say that I am willing to work with those who are interested in expanding our economic ties with Africa, in ways which also support infrastructure development, institutional and structural change, and strengthens the technical capacity of Africa's workers and businesses to compete in today's global economy.

Unless US-Africa economic relations help improve the quality of life in African societies, support small business development, and generate broad based wealth creating opportunities for Africans to be both producers and consumers, then we are likely to have this same kind of discussion 20 years from now.

For me personally and for many of my fellow members of the Congressional Black Caucus, we don't know which African nation is the home of our ancestors. So we have "adopted" the entire continent and we try to make all of the issues facing African peoples a part of our own work here in America.

The CBC is not simply interested in Africa because of cultural and historical ties. We also recognize similarities in the issues facing Afican-Americans and Africans. Hence sustainable solutions to the global economic issues affecting people of African descent everywhere require us to think globally and act locally.

Today's program and the US tour by African Development Bank officials is a great way for all Americans to recognize and acknowledge the excellent work the African Development Bank has been doing in supporting economic growth and development in Africa.

I am very proud that the two previous US Directors at the Bank have been African American women bankers (Alice Dear and Willene Johnson) from New York. I also think that it is important to acknowledge the recent history of the successful reforms and improvements which the Bank has made under the leadership of President Kabbaj.

While I recognize the value of the African principle of Sankofa which means (in order to move forward you must understand the past) the past is not what excites me. I believe there are tremendous opportunities in the future of US-Africa commercial relations.

My district in Queens is home to JFK airport a global transport gateway. It is home to several communities of people of African descent. We have people that do business in and work in Africa. I have led trade missions to Africa and we are going to hold on Town Hall Meeting on Africa next month. Trust me, my district will be a part of the future of US-Africa relations!

Two African initiatives that I am bullish about are: 1. The formation of the African Union. And 2. The New Economic Partnership for African Development (NEPAD).

I am confident that the Bank will be engaged in the various economic, trade and financial market integration processes that will be build upon Africa's existing regional economic blocks to form the African Union.

I am also confident that the Bank will be engaged in supporting the trade and investment components of the continent wide NEPAD plan. I'm glad that the Bank is hosting a Summit in Ethiopia on NEPAD for African Heads of State in May and a West Africa region stakeholders meetings in Abidjan this month.

While these two initiatives represent challenges for Africa, I'm excited about the potential impact of these two African led plans on Africa's growth in the 21st century.

I also urge our business community to explore the kinds of new commercial opportunities that these efforts will stimulate. At the recent NEPAD Summit in Nigeria, African Presidents stated that they hope to generate $60 billion in new investment opportunities. What excites me most about the African Union effort is that I am optimistic that it will play a catalyst role in building robust and dynamic markets in Africa for African producers and consumers of goods and services.

One of the worst economic legacies of colonialism was the many ways in which the growth of African economies and markets were stunted and distorted.

After decades of foreign aid, foreign investment, poor government policies and leadership by Africans and centuries of trading with the world, many of Africa's national economies remain structurally dysfunctional (unable to sustain their societies) and biased towards the export of raw materials. As the saying goes:

"African economies and resources produce what their societies do not consume and they consume what they do not produce."

Trust me, I am not against exports, but the fact that exports of primary products still make up the majority share of revenues and incomes in many African nations concerns me. Why?

No society can sustain itself in today's knowledge driven global economy by relying on the production and export of raw materials.

Also, a recent World Bank study on the economics of conflict concluded that primary commodity dependence is the single greatest risk factor associated with civil wars and conflicts. If 26 % of a nation's GDP comes from commodity exports, it is 23 times more likely to have a civil war.

This is why I stress the link between building markets for African producers and consumers with stability in African. Developing efficient markets which foster competition among businesses and serve the interests of African consumers requires more then simply privatizing assets, liberalizing imports or downsizing governments.

Building markets also requires functioning tax and regulatory bodies, the provision of infrastructure for business (water, sewers, roads and energy), and clear rules of the game (labor and environmental codes) enforced by fair and impartial institutions. This is an area where the bank can make a huge impact on many levels.

Another example of the role of the Bank in relation to the African Union process was demonstrated by Ambassador Perry's participation in the recent AFRICANDO Summit in Nigeria. The Summit focused on the role of Africa women including African women in trade, in the African Union formation process.

I salute you Ambassador, because I'm sure we agree that Africa's growth will be highly linked to the growth in educational and economic opportunities for African women!

One of the points I'd like to emphasize about NEPAD is that it clearly states that there is a fundamental role for African and foreign private sectors in making it a success.

This dimension of NEPAD will be critical, because I am concerned that some may seek to link our support for NEPAD with the imposition of a wide range of non-economic and politically motivated conditionalities.

For example, the Chairman of the Africa Sub-Committee recently stated that a political dispute involving an individual African nation could be used as a kind of "litmus test" for US support for NEPAD.

I reject such thinking. It does not serve the interests of Africa or America. It is not the way a nation should act if they truly want to build mutually beneficial "partnerships" with a continent of nations .

Let me turn briefly to a couple of issues I am working on.

1. Under our AGOA law, I'm working to ensure that the new
$200 million lending facility for Africa will be implemented in a way to maximize the opportunities to increase liquidity for African businesses. Specifically, I'd like to see OPIC use the same model of its on-lending facility in Africa, which they currently used in Central America involving CitiGroup.

2. I think we have to do to more in the area of creating financial products and resources for housing development in Africa. Again OPIC has talked about creating a new vehicle to mobilize financial resources for housing development in Africa. I'm going to lend my support for such an effort, because housing construction could be a growth engine.

3. I am in the process of drafting a comprehensive piece of legislation on the Democratic Republic of Congo. I truly believe that a economically stable DRC in the heart of Africa, will be good for all of Africa.

My Bill will focus on reconstruction of infrastructure. By infrastructure I don't just mean dams or power plants, but also clinics, feeder roads, schools and industry platforms targeting rural areas.

4. Lastly, as a supplement to the market access opportunities created by AGOA, I am developing legislation to provide additional resources for technical assistance to African public and private sector entities to expand trade.

My bill seeks to give African private entities the business to business technical support to move up the export value chain from producing goods to areas such as; Marketing, R & D, distribution, finance, and insurance.

My bill will also expand USTR's scholarship program for Southern African trade officials to include all AGOA eligible countries and help strengthen African institutions to train their own trade officials in Africa.

AGOA in its present form is more symbolic at this stage. Unfortunately, AGOA 2 (which may pass the Senate soon) only makes some technical corrections and improvements. AGOA 2 does not address many of the concerns raised by African Trade officials regarding products and eligibility.

The bottom line is, more must be done if the export opportunities created by AGOA are going to produce sustainable development results. After all, our goal should not be to simply have higher trade and investment statistics. Those stats must lead to improved standards of living, which will only happen if AGOA helps change the structure and nature of US-Africa commercial relations.

To conclude, I'd like to make few final points:

1. I'd like to see the Bank initiate a new dialog regarding the creation of a new paradigm for public-private sector partnerships in Africa for the 21st century. Africa's development has not only been constrained by poor government policy in the past.

In far too many African nations, business itself in terms of how things are produced, what is traded and what resources are invested in and consumed, have not changed very much from the 19th and 20th century models of comparative advantage which date back to colonialism.

2. Another issue which I feel deserves greater attention is how can we do a better job of bringing the millions of African producers and consumers which make up the "informal economies" that sustain Africa's domestic markets, into more formal economic institutional arrangements and relationships?

We face similar challenges here in America with minority businesses. I believe this should be part of our approach to fighting poverty, via expanding wealth creation opportunities.

3. While much attention is often given to attracting foreign direct investment, I thing greater attention needs to also be given to gross domestic capital formation in Africa. I am not convinced that all African societies have financial resource deficits due to net savings gaps, which can only be financed by foreign capital inflows.

As I followed the Monterrey Finance for Development Conference I was glad to see pledges of additional resources being made by developed nations.

However, I had hoped that a more holistic view of the finance for development issue, would have included an examination of some of the sources of Africa's financial resource outflows, (from terms of trade losses, natural resource asset depreciation, debt service payments, loss of capital through corruption and transfer pricing practices).

Addressing these issues would also help keep more money in Africa that could be used for investing in the development of Africa's productive capabilities.

4. For the African Union and NEPAD efforts to produce the desired growth and development benefits, the processes must incorporate the perspectives of all segments of African civil societies from the bottom up. Far too often, exporters, foreign donors, investors and creditors are the dominant voices over domestic policy directions.

Sustainable development and better policy making requires that policy formulation be democratized so that the interests of African citizens, women, small businesses, producers for domestic markets and labor also are included.

I hope the Bank will play a strong role in ensuring that broad sections of African societies are empowered to shape their socioeconomic environments and to take responsibility for their future.

Africa's future is bright. I see other emerging markets of the world like Asia, learning lessons from the past and coming together to assume their place in the world economy. Adopting domestic policy approaches which prioritize growth and equity. Policy approaches which recognize that how your economy is liberalized to global forces, is just as important as opening your economy.

Africa can do the same and it must so that Africa can assume their rightful place in the global economy.

Thank you.