African Reliance on Foreign Debt is 'Madness,' Says Credit Suisse's Thiam
October 06 2015 - 6:28AM
Dow Jones News
By Simon Clark
Credit Suisse Group AG Chief Executive Tidjane Thiam says it is
"madness" for African nations to rely on loans in foreign
currencies to fund vital infrastructure including roads, power and
clean water.
Lenders in African nations must instead find domestic savings to
invest in local projects, said the Ivory Coast-born banker who took
charge of Zurich-based Credit Suisse in June.
Mr. Thiam's warning comes after countries on the continent where
he was born sold $11 billion of foreign-currency bonds in 2013 and
a further $8 billion last year, raising concerns among some
analysts that a new debt crisis may be developing.
"I did a lot of infrastructure development in my life," Mr.
Thiam said in a dinner speech at Claridge's hotel in London on
Monday evening. "To fund them with foreign currency is madness. OK?
Madness."
"We are not going to reach the kind of growth trend that we need
if we are unable to do this successfully. You can't just borrow
internationally," he said at the dinner organized by the Financial
Times newspaper to conclude a conference on African business. "You
have to be ready to discriminate between those who have reasonable
funding strategies and those who have just borrowed in
dollars."
" Warren Buffett joked when the tide goes down you see who has
been swimming without trunks. Some of those economies will fall on
their face because of that, that currency mismatch," he said.
"You cannot control your economic destiny if you are not able to
mobilize savings and then turn them into productive investment,"
Mr. Thiam said. "If you can't develop infrastructure, if you can't
develop the energy, if you can't provide clean water, if you don't
have roads, there is absolutely no future possible."
Mr. Thiam made his argument as an appeal for well-functioning
financial institutions to assist the economic development of
African nations.
"My usual pitch is life insurance companies are very
important--but banks too," the former CEO of London-based insurer
Prudential PLC said, prompting laughter from the audience.
Write to Simon Clark at simon.clark@wsj.com
(END) Dow Jones Newswires
October 06, 2015 06:13 ET (10:13 GMT)
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