The African Development Bank’s Relocation Rub

The African Development Bank formally re-established its headquarters in Abidjan after a dozen years in Tunis as civil strife switched bases ahead of the annual meeting in Rwanda accompanied by a breakthrough local currency bond and upbeat 6 percent sub-Saharan GDP growth forecast. The IFC placed the first of a Rwandan franc series up to $300 million equivalent at a 12 percent yield with mainly domestic banks and institutional investors, under an East Africa-wide program. The exchange lists just one government bond and equities are geared to cross-trading with neighbors. The effort followed international commemoration of the genocide 20^th anniversary and praise for President Kagame’s tribal reconciliation and economic modernization push despite the lack of political challenge. Output there should expand 7 percent as the continent’s medium-term projection is for levels preceding the 2009 crisis, according to the latest update authored with the OECD and UN. The agencies also expect lower inflation with reduced energy and food prices and “prudent” fiscal policy allowing scope for interest rate cuts. They warn however of precarious security in places like the Central African Republic and Mali, adverse weather conditions, infrastructure project delays, and lingering poverty and social tensions as pervasive risks. External financial flows have quadrupled the past 15 years to $200 billion with foreign direct and portfolio investment at $80 billion, above both remittances and official aid. Private capital is increasingly diversified from raw materials into manufacturing and services, as African export growth outpaces other regions although it represents less than 5 percent of the global total. Value chain integration rivals other geographies, but quality and costs remain obstacles and “social upgrading through greater jobs and skills has been limited, according to the analysis. Host countries often impose onerous local content requirements or lose revenue through too generous tax incentives, and lack the organized business associations to engage with multinational executives. By sub-region Central Africa will see 2 percent contraction in oil-producer Equatorial Guinea, while Chad will grow over 10 percent at the opposite extreme. The former will also have the biggest budget deficit, while Congo expects a 10 percent surplus.

In the East, Ethiopia, which just received a sovereign rating in preparation for a maiden bond, is on track for 7.5 percent growth as textile manufacturers pool efforts for foreign partnership, as Somalia and South Sudan are unpredictable amid repeated conflict. In the South Angola will expand at triple South Africa’s 2.5 percent “depressing” clip, the AfDB comments. Labor unrest and global slowdown have contributed to the “modest” outlook as President Zuma’s convincing 60 percent-plus re-election could herald another area departure with more business-friendly policies according to meeting participants with miners also ready to settle. The currency, bond and stock markets reflected cautious optimism that his second term would aim to overshadow personal scandal with professional competence in the shadow of post-apartheid’s 20^th anniversary and President Mandela’s posthumous legacy.