FINANCING: Big changes in bid for credibility

FINANCING: Big changes in bid for credibility
Published: November 20 2006 15:40 | Last updated: November 20 2006 15:40

By David White

Africa had its own multilateral financing institution before Asia did. But one of its handicaps in comparison with other developing regions is never having had a regional funding agency with as much clout or resources as the Asian Development Bank in Asia and the Pacific, or the older and larger Inter-American Development Bank in Latin America and the Caribbean.

The African Development Bank, with 53 African and 24 non-African countries as members, has had a reputation for being sluggish and unresponsive, complex in its processes, slow in disbursing funds, and discreet in its public profile. Founded in 1964 and headquartered in Abidjan, it moved in a hurry to escape Ivory Coast’s political turmoil four years ago, to offices in Tunis. Staff say the previous management ran it like Fort Knox, the US bullion depository. Modern histories of Africa mostly ignore its existence altogether.

Since Donald Kaberuka, former Rwandan finance minister, took over as president last September, backed by donors, he has set about overhauling the bank for a much bigger and more central role in development financing on the continent.

This has involved radical changes, replacing four out of five vice-presidents and the secretary-general, reorganising departments, moving more staff into operational posts, opening field offices and powering up the bank’s economics department. In its bid for new credibility, the bank aims to brand itself as “the first port of call for knowledge on the African continent”.

The bank’s focus has shifted since the New Partnership for Africa’s Development (Nepad) – the home-grown economic initiative – was launched in 2001, and now part of the revamped African Union assigned to the AfDB the lead role in promoting regional infrastructure programmes. One of the specific recommendations of the British-appointed Commission for Africa, in its report in March last year, was “to make the AfDB the pre-eminent financing institution in Africa within 10 years”.

The Centre for Global Development, an independent Washington-based think tank, recently called for the AfDB to concentrate its lending exclusively on infrastructure. “The bank has tried to be all things to all shareholders and is spread too thinly,” it said.

One option put forward by the Commission for Africa, calling for an extra $10bn of donor money a year for infrastructure, would have been a single infrastructure fund, housed at the AfDB. But its report also said that continuing to spread funding between the AfDB, the World Bank, the European Investment Bank, as well as bilateral and other sources – “within a framework of enhanced co-ordination” – would probably allow for a faster aid build-up.

Instead of a single fund, the UK has funded the setting-up of a networking body, the Infrastructure Consortium for Africa, based at the AfDB.

This is not a funding agency, but is described by Alex Rugamba, its co-ordinator, as a platform for brokering more donor finance. It has a small secretariat with four experts, including one seconded from Britain and another from Japan, traditionally a strong backer of infrastructure projects in Africa.

Grouping G8 nations, multinational and African institutions and regional organisations, it aims also to reach out to emerging donors such as China and India. Mr Rugamba says that, while it has no enforcing powers, it will monitor commitments.

As an overall vehicle of development assistance to Africa, the AfDB, with total loans and grants of about $3.4bn in 2005, stands behind the World Bank, with lending of $4.8bn to sub-Saharan countries in the last fiscal year to June.

The European Union has meanwhile set up an EU-Africa Partnership on Infrastructure, backed by an EIB trust fund, which is open to contributions from member states’ bilateral aid programmes.

The US is ploughing a separate furrow through its Millennium Challenge Account programme for approved recipient countries, much of which goes into infrastructure such as revamping Cotonou port in Benin.

Another British-inspired initiative, the Emerging Africa Infrastructure Fund, was set up in 2002 as a new approach to combine public and private funding.

Standing at $305m, with equity from UK, Swiss, Swedish and Dutch agencies and debt provided by Dutch, South African and German financing institutions agencies alongside Standard Bank of South Africa and Barclays, it was designed to mobilise commercial lending.

But with $134m committed so far and decisions awaited on further projects worth $100m, it has been slower to take off than expected. Nick Rouse, managing director of Emerging Africa Advisers, which manages the fund, admits: “Getting projects off the ground in Africa has been very difficult.”