AfDB official pledges more support to private investment in Rwanda

The African Development Bank’s (AfDB) Vice President for Infrastructure, Private Sector and Regional Integration, Bobby Pittman Jr, was recently on a five-day visit to the country and participated in the just-ended Government /Development Partners Meeting from 4-5 November, 2010. In an exclusive interview with The New Times’ Berna Namata Pittman gives an insight into cross-cutting issues concerning private sector development in Rwanda and the Continent in general. Below are the excerpts; The Business climate in Africa is improving but the private sector, not only in Rwanda, but the Continent in general, is yet to fully exploit this opportunity. What is your view and how is your institution supporting the private sector to take advantage of this opportunity? I think the private sector is starting to take advantage of the opportunity. Part of what we are doing at the AfDB - we did$ 2 billion of private sector deals last year; we are helping some of the local and international private sector players to take advantage of these opportunities. And we are going to continue to see it grow. Access to finance, in particular long term resources, continues to limit private sector growth. How is AfDB facilitating the growth of the private sector? It is a major issue. we are working with a number of countries and financial institutions to provide equity in banks, but also long term lines of credit for long-term financing to be made available . It is one of the things that AfDB is doing in Rwanda; providing lines of credit to some local players so that they can have some long term capital for small entrepreneurs. Rwandan entrepreneurs can expect to see more long-term credit from some of the banks within the next six months as we are keen to mediate using some of the local banks. It is a long process but we have some success and we will have to build on that success-there is no silver bullet, but the immediate thing is to provide the lines of credit. what kind of innovative financing mechanisms should be explored to facilitate private investment? The government has focused on boosting the presence of private equity players into the country. My view is that private equity is playing a real catalystical role on the Continent. That said I must point out that AfDB is one of the largest investors in private equity in Africa. Private equity is really what we see making these critical investments in businesses that are real job creators on the continent now. I think the steps that government is taking to attract private equity players is really positive; I discussed with the president and a number of senior development officials- how AfDB can help Rwanda in their efforts to attract more private equity funds. It is one of the things that I am certainly looking forward to collaborating with the government on - to bring more private equity funds into the Rwandan market. The other piece of innovative finance that AfDB is looking at is the creation of “Fund of Funds” to help bring more equity investment to Africa. These funds are playing a critical role but they still have some trouble sometimes raising capital internationally. Such a fund could help international investors more easily to invest in Africa by giving them a vehicle that is easier for them to put equity investment in Africa. Such a major fund would also make it easier for the other smaller private equity funds that are doing individual investments to easily raise capital. We think it is a vehicle that could solve a number of issues to bring capital into Africa. Africa has been described as staying open for business during financial crisis. Is that a view you would share? Yeah; I think the financial crisis has certainly made a lot of investors look at Africa very differently. The first way is that on the risk scale – a lot of Africa investments were relatively less risky than they did before the crisis, partly because of the thinking that some other markets were more risky than they did before the financial crisis. The other thing that you have a lot of investors talking about is the fact that the African markets were far less correlated with some of the developed and even emerging markets. A lot of investors found out that during the crisis their portfolios were not as diversified as they thought they were. However, African investment is part of the diversified portfolios that perform much better. Now you have got more investors knowing , within a diversified portfolio it is going to be important to have some of investment in Africa. This is one of the reasons why the AfDB is so focused on supporting creation of these instruments - to allow some of these investors who are eager to have a diversified portfolio that includes Africa. And, of course, make sure that those investments have a maximum impact on the ground – not only in terms of return, but also in terms of impacting on economic growth of the economy. To what extent is regional integration significant to supporting Africa’s development? Regional integration is absolutely key; you hear people talk about the comparative of the number of countries and scale of the market. If more African governments can integrate themselves, they can lower transaction costs between them and create more attractive markets for investors and for potential entrepreneurs. But, also, we have to be more focused on just expanding trade between African countries; not just about having a big African market for investors outside of Africa, but inside Africa as well. I was able to visit the One-Stop-Border post that AfDB helped to finance between Rwanda and Burundi - this is trade that is going to grow bothcountries’economies. There are a lot of opportunities for intra- Africa trade and it is one of the things that AfDB is focused on – as we are the biggest financier of regional integration. We are working hard to make sure that we have the impact of intra- Africa trade. In your opinion, what will it take to bridge Rwanda’s huge infrastructure gap that continues to limit private sector investment? I think a lot of the talk about the infrastructure gap has been said incorrectly. I recently visited Burkina Faso, Senegal,and now Rwanda, and one of the things you see is that the infrastructure gap is not as bad as they say. It is dynamic and it is being driven by the high growth rates- in Rwanda – you can certainly see an economic boom on the ground - this means more people are demanding more infrastructure services whether it is roads, power or water. There a lot of academic studies talking about the short fall in public financing and, therefore, the need for private sector. We, at AfDB, do not really see it that way; what we see is - huge opportunities for private sector to come in and make money. The infrastructure gap story I think has been portrayed in reverse - the reality is that we are seeing infrastructure gaps growing but also see high growth. We have more Africans demanding and willing to pay for infrastructure. AfDB certainly can help entrepreneurs that can take advantage of this demand and make financial returns out of this situation. During my trip, we had discussions about how we can help Rwanda package some of it’s large infrastructure deals to make them more attractive for private sector investors.I am very confident that the government can have a lot of success partnering with the private sector to deliver some of this infrastructure. What then remains as Rwanda’s key challenges in relation to private sector development? No matter where you go in the world, doing big deals that government is pushing for creates a challenge- it is a challenge for all governments. There will be several challenges but I am very confident that the government will be able to move forward on these projects and AfDB is very committed to working with them. We have to be honest; it is challenging to do PPPs; you hear people at conferences talk about doing PPPs(Public Private Partnerships) but the reality on the ground is that there can be challenges. But what we have seen happening, PPPs are again not something that are talked about at conferences, they are happening on the ground. A number of African countries have been able to have successful negotiations and deliver infrastructure to their people through private public partnerships and I am certainly looking forward to see the same thing in Rwanda. Ends

Q&A

AfDB official pledges more support to private investment in Rwanda