Bank must do more with less

In May the African Development Bank (AfDB) board of governors will elect a new president to fill the big boots of the evangelical Akinwumi Adesina, whose second and final five-year term ends in September. Adesina leaves the Bank with much more firepower, but he also leaves at a time of great global political and economic upheaval. This new geopolitical reality dispenses with all the assumptions that attended the post-war settlement that has ordered global affairs for the last 80 years. This will undoubtedly have repercussions for Africa and its native institutions, including the AfDB.

Among the candidates to lead the Bank into this uncertain future is Amadou Hott, a former vice president of the Bank (for power, energy, green growth, and climate change) and minister of economy, planning, and international cooperation in his native Senegal, where he guided the country through the pandemic. Hott’s ambitions sit well within this context; he argues in a conversation with African Business that the continent needs to wake up to the fact that support from its international partners will be less forthcoming. “They have their troubles,” he notes, citing the United Kingdom’s recent decision to boost defence spending while cutting official development assistance (ODA).

“Whatever [money] remains for development needs to be amplified – to do more with less.”

Hott’s view is that this opens the door for a greater role for the private sector. “That means leveraging capital markets, mobilising private sector investment, and strengthening domestic resource mobilisation, whether through government channels or local private sector initiatives.”

And this, he says, is overdue. “This is something we should have done a long time ago, but it’s crucial now. Otherwise, our impact will shrink.”

Moving from billions to trillions

The key, he argues, lies in maximising the role of multilateral development banks (MDBs) such as the AfDB. “If institutions like the Bank are given equity or hybrid capital, they can take on more risk – whether with the private sector or governments – and significantly amplify investment, compared to bilateral funding approaches.”

Reaching back to justify a new approach, Hott recalls the ambitious demands from a decade ago to shift development finance from “billions to trillions”. Reality has fallen short. “Here we are, ten years later, moving from billions to just a few billions more – but nowhere near the trillions needed.”

That gap, he believes, brings into sharp focus the need for an even more agile and efficient Bank. “The Bank has been highly innovative over the past decade. It pioneered key initiatives like ‘Room to Run’ to optimise its balance sheet. But now, we must step up once again, lead the way, and push for greater impact.”

Not surprisingly, Hott is keen to stress that he is offering a fresh approach, albeit one that is rounded in experience and an understanding of these challenges. “It will not be business as usual,” he emphasises. “Having someone at the helm who has lived these issues first-hand will make the Bank more competitive and effective.” Leadership, he says, is about impact. “Any institution I have led, any position I have held, I fought hard to have the biggest impact. I worked to motivate teams and lead by example, which is crucial.”

According to Hott, his record shows him to be capable of leading the Bank through a period of disruption. In 2008, he recalls, he was brought in to restructure UBA Capital in Nigeria, transforming it into one of the country’s top investment banks within two years.

Later, he was tasked to establish the Fonds Souverains d’investissements stratégiques (FONSIS), Senegal’s sovereign wealth fund, which he says is now a model for others across Africa. “Today, FONSIS is a leading sovereign wealth fund, executing strategic transactions that not only support Senegal but also serve as a blueprint for other nations,” he says.

During his tenure as vice president for power, energy, green growth, and climate change at the Bank, he says, there was a 150% increase in private sector investment in just two years. “We moved quickly – hiring top talent, setting up new structures, and making the Bank a serious player in energy finance. The narrative changed. Clients who had never worked with the Bank before were now coming forward with major projects.”

Hott credits this success to a combination of bold leadership and strong teamwork. “We had a highly motivated team, and we had the full support of the Bank’s leadership, including the current president, who was instrumental in driving these initiatives forward.”

This is the approach that he says he’d bring to the job, were he to get the nod. “I’ve always worked hard, remained resilient, and strived for excellence. That’s the approach we need to take – now more than ever,” he stresses.

‘The private sector needs results’

Hott explains that his vision is to make the Bank a force multiplier for the private sector to enable it to play a greater role in financing the continent’s development. “What I want to do is to step the private sector up,” he declares.

Currently, only 20% of the Bank’s portfolio is in private sector investments. Hott wants to triple that within a decade. “But to take more risk, we need stronger capital. Hybrid capital, blended capital – we need to mobilise it all.”

Attracting top talent and streamlining processes will be essential to making the Bank a fast-moving, agile partner. “The private sector doesn’t like delays. Governments don’t either. They have five-year election cycles – they need results.”

Again and again, Hott returns to the theme of self-reliance. “Africa’s financial and natural capital must be mobilised effectively,” he insists. “We must take responsibility for our development. The partners are supporting, but the biggest responsibility is on us.”

He is not alone. While leaders have put some plans together to procure debt relief for the continent, a growing consensus is that these efforts may not yield the desired effect, as the changing political realities in donor countries preclude more generosity towards external partners.

A more practical approach could be to focus on reducing the cost of capital for the continent, which continues to face disproportionately high rates compared to its counterparts. Additionally, prioritising longer-term financing options, especially for infrastructure projects, is crucial. In line with Hott’s perspective, this also calls for a greater role for MDBs and regional development banks, with a more effective use of existing financial systems to maximise their impact.

Processes should take weeks, not months

Executing at speed, he says, is central to his strategy. “Without roads, railways, energy, and digital connectivity, intra-African trade cannot flourish,” he declares. “The Bank has the expertise, but we need to be faster. Six-month processes should be cut down to two or three months, if not weeks.”

The final piece of the puzzle is institutional efficiency. “Any process that is not necessary must go,” he says. “We must leverage technology to streamline operations and make the Bank more responsive. We cannot afford to wait.”

While Hott is sanguine about the continent’s prospects, he points out that energy and infrastructure are essential to its success. “Without resolving those, Africa’s economic potential remains locked,” he asserts. That’s why initiatives like Mission 300, a joint effort with the World Bank to bring electricity to 300m people, are top priorities. “Taking people out of darkness – this is number one.” Digital transformation is also critical.

“We cannot afford to be left behind,” he stresses. As the world races ahead with investments in AI and digital technologies, Africa must seize the opportunity.

“Each country may not have the same level of investment, but if we work together – with the support of the Bank – we can establish innovation hubs across the continent.”

Whether he wins the presidency or not, Hott foresees an expanding role for the Bank and other MDBs as African nations face mounting debt pressures and declining concessional financing. “I think the role of the African Development Bank will become even more important. That’s why we should be ready for that importance. I think the countries will want to rely more on us instead of going to the capital markets,” he suggests.

In such an environment, he says, the Bank’s concessional and semi-concessional instruments will become even more vital tools for countries seeking sustainable financing solutions.

Time for taxes

Nonetheless, African countries must also strengthen domestic resource mobilisation by widening the tax net, instead of merely increasing the rates of tax or introducing new ones.

“You cannot introduce new taxes, but you’ve got to make sure that your tax system is simple, accessible, and digitalised, so that everybody wants to pay something. If everybody in the country pays something, then you don’t have to charge a few people much more,” he explains.

A stronger tax base not only provides immediate fiscal relief but also enhances a country’s creditworthiness. Higher revenue generation translates into improved credit ratings, which in turn lowers borrowing costs in international markets, Hott points out.

What can also be expected, should Hott win, is continuing action against a persistent bugbear for African leaders and policymakers – overly harsh credit ratings which restrict investors’ risk appetite for the continent.

“For a $1bn loan over 20 years, African countries can end up paying an extra billion in interest alone compared to peers with the same rating elsewhere,” Hott points out.

“That is a staggering cost that directly hampers development.”

Beyond financing, “we need to communicate more with investors so that they know our plans ahead. If they believe in the vision and the ability to generate revenue, they will charge lower risk premiums. That’s very important,” he adds.

Hott is up against a field that includes some of the continent’s elite players in finance and development. Among them are Samuel Munzele Maimbo, a Zambian development finance expert and World Bank vice preseident; Sidi Ould Tah, head of the Arab Bank for Economic Development in Africa (BADEA) and former Mauritanian minister; Chad’s Abbas Mahamat Tolli, ex-governor of the Banque des États de l’Afrique centrale (BEAC); and South Africa’s Bajabulile Swazi Tshabalala, the African Development Bank’s former senior vice president.

Hott is convinced, however, that as a fully bilingual investment banker with a track record of mobilising capital and as a development banker with deep insight into policy impact and government partnerships, he has what the Bank needs for this moment.

“Among the candidates, I’m the only one that has that double hat – being both an investment banker with real abilities to mobilise resources quickly and a development banker focused on impact,” he asserts.

“Africa today has to get the best perople to lead our institutions,” he adds. “The Bank needs to show more leadership in mobilising private capital, both domestically and internationally, and in driving reforms with speed and transparency. Speed is not against transparency and good governance – you can achieve both, and it is a must for us.”

Another imperative would be self-reliance. “African wealth must transform Africa,” he says firmly. “Whatever our partners bring should be catalytic money to enable us to achieve that goal – it should be the cherry on the cake, not the cake itself.”