|
|
|
|
African Development Bank
|
| |
|
| |
The African Development Bank Group (ADB) is a development bank established in 1964 with the intention of promoting economic and social development in Africa. The Group comprises the African Development Bank (ADB), the African Development Fund (ADF), and the Nigeria Trust Fund (NTF). Forty years to date, the ADB Group has financed 2,885 operations, for a total of $47.5 billion.
Discussion
Ask a question about 'African Development Bank' Start a new discussion about 'African Development Bank' Answer questions from other users |
Encyclopedia
The African Development Bank Group (ADB) is a development bank established in 1964 with the intention of promoting economic and social development in Africa. The Group comprises the African Development Bank (ADB), the African Development Fund (ADF), and the Nigeria Trust Fund (NTF). Forty years to date, the ADB Group has financed 2,885 operations, for a total of $47.5 billion. It concluded 2003 with a AAA rating from major financial agencies and with a capital of $32.043 billion. Moreover, it has placed an emphasis over the years on the role of women, education and structural reforms, and lent its support to key initiatives such as debt alleviation for Heavily Indebted Poor Countries (HIPC's) and the New Partnership for Africa's Development (NEPAD). It currently has 78 members: 53 countries in Africa and 25 American, European, and Asian countries.
Although established officially in 1964 under the auspices of the Economic Commission for Africa, the ADB began operation in 1966 with its headquarters in Abidjan, Côte d'Ivoire. With the statute of a regional multilateral development bank, the African Development Bank engaged in promoting the economic development and social progress of its Regional Member Countries (RMCs) in Africa. The Bank is currently based in Tunis, Tunisia after relocating from its headquarters in Abidjan, Ivory Coast because of instability there. It employs approximately 1,020 employees as of 2007.
In 2005, the amount of approved loans by ADB totalled 2.29 billions of UA - note indeed that ADB financial statements are expressed in UA, or Units of Account, whose value is defined as about 0.8887 grams of fine gold. As of 2001, 1 UA equals approximately US$ 1.28.
History
Africa was taking its destiny in hand during this first half of the 1960s. From the very early stages, and often with reference to the major market networks of pre-colonial Africa, its leaders and heads had drawn up this project of an African development bank that would be one hundred percent African; an africaness that would only be natural: Africa was taking charge of itself, but, also in order to stand distant from the ideological and linguistic divides of the time, that were reflected, notably as the three emergent groups dominating the continental geopolitical scene of the time: The Brazzaville Group comprised twelve countries - Cameroon, Congo-Brazzaville, Ivory Coast, Dahomey (Benin), Gabon, Upper Volta (Burkina Faso), Madagascar, Mauritania, Niger, the Central African Republic, Senegal and Chad - that had founded the African and Malagasy Union in 1960 at Brazzaville. The Casablanca group emerged in 1961, made up of seven countries: Algeria, Egypt, Ghana, Guinea, Libya, Mali, and Morocco. The Monrovia Group comprised the twelve countries of the Brazzaville Group as well as Ethiopia, Liberia, Nigeria, Sierra Leone, Somalia, Togo, Tunisia and Congo (Kinshasa). Though the history of these groupings may be more intimately linked with the genesis of the Organization for African Unity (the OAU, now the African Union) than with African growth financing issues, all these aspects together pointed to the need to establish a regional development bank. The road to the establishment of what has become the premier finance development institution in Africa is marked by several events, multiple initiatives, and countless contributions. It is not possible to mention all of them in this summary, but amongst the "founding acts", will be recalled the Tubman-Nkrumah-Toure conference of 1958, the year of the establishment of OAU. The Heads of State of Liberia, Ghana and Guinea, three advocates of pan-Africanism, spent four days in a conclave in the village of Sanikoli, in Liberia. Their final communique put forward their determination to commit all their resources to bringing all African countries to independence and to succeed in developing the continent in solidarity, recalls one of the "go betweens" of the meeting, the Liberian, Romeo Horton. Future President of his country's Central Bank, Doctor (in economics) Horton, who, also in 1958, spearheaded moves for a pan-african conference of business-men, was to be one of those at the origin of ADB.
Three years later, in 1961, the Liberian capital hosted the Monrovia Conference. It assembled a pleiad of Heads of state and Government and Monrovia Group was formed. At the center of this meeting and that which followed in Lagos, were two draft charters; one for the OAU, and one for an African Development Bank. The latter proposal rapidly landed in the offices of the Economic Commission for Africa, on the desks of Micky Abass and Robert Gardiner. Then Executive Secretary and Vice Secretary of this organization, both these men were also to get fully involved in the establishment of he Bank. Soon, a Committee of Nine was set up, a sort of think tank and an organizational nucleus of this project, for financial experts and economists from nine countries representing Africa's diversity. (Cameroon, Ethiopia, Guinea, Liberia, Nigeria, Sudan, and Tanganyika and Zanzibar - which formed Tanzania in 1964). Chaired by Mr. Horton, this committee of Nine visited practically all the African Heads of State as well as western leaders, to present their idea of an African development bank. It was at this stage that the primacy of the pan-african character was affirmed, "to avoid importing the cold war" into this institution, stated Mr. Horton, who chaired the Committee of Nine. Behind this body loomed another key personality of ADB's history, Mamoun Beheiry, the recently deceased former Governor of the Central Bank of Sudan and first President of the African Development Bank, remembered for his unfailing devotion.
So much apprehension, so many obstacles, so many doubts had to be removed before ADB could be founded. However enthusiasm carried matters through. As one witness bearing an illustrious name, Theodore Roosevelt IV, remembers, "I lived in Ouagadougou, where I held a position in the State Department Cooperation units. I was always impressed by the enthusiasm of the African leaders, who supported the African Development Bank"; this coming from the present Managing Director of Lehman Brothers, one of the investment banks, which has lead managed many of the Bank's bond issues. Following the tours of the Committee of Nine, a draft accord was prepared. This document was submitted to top African officials, then to African Ministers, that year, before being cosigned by twenty-three African Governments on August 4 1963, in the form of an agreement establishing the African Development Bank. It is the entry into force of this agreement on 10 September 1964 that is commemorated by this contribution. There was further debate and discussion ahead of to the inaugural assembly in November 1964 in Lagos, especially with regard to the location of the Bank's Headquarters, and Abidjan was chosen to host the Bank. And this is how, in March 1965, after a few months in the offices made available to ADB in the premises of the Economic Commission for Africa, in Addis-Ababa, an initial team of no more than ten persons arrived on the shores of the Ebrie Lagoon. George Wood, then President of the World Bank offered the assistance of his organization's regional office in the Ivorian capital - from the outset, the principle of cooperation with other development finance institutions prevailed - and this was whole heartedly welcomed for the mounting of the first projects.
Forty years on, the African Development Bank Group has financed 2 885 operations, for a total of 47.5 billion dollars, and it wound up 2003 with the best results in its history, with an AAA rating from the major financial rating agencies and with a capital of 32.043 billion dollars. ADB has preserved its fully African character, even following the entry of the non-regional countries in 1982. It has kept Africa's pace, surviving each crisis, amplifying and diversifying its resources and action from year to year. It has supported the process that history will perhaps remember as the completion of the de-colonization, political democratization and the economic liberalization of the 1990s. It participated in the efforts at resolving conflicts, restoring civil liberties and economic structures and professionalizing the continent's financial and political institutions. It has coordinated its activities with those of its partners in poverty reduction efforts, the inter-national financial institutions, governments and official development aid agencies and non-governmental organizations, and increasingly conceived its action in consultation with the representatives of local societies, so that they might be the actors of their own development. It has further laid emphasis on the role of women, on education and structural reforms, and lent its support to key initiatives: debt alleviation for highly indebted poor countries (HIPC), regional integration, right up to the New Partnership for Africa's Development, NEPAD, of which the Group is one of the orchestrators. It was obliged to impose on itself a transformation, in order to evolve and advance, as seen in the re-casting and renewal of the Group, its structures, approval methods and control mechanisms, etc, in the second half of the 1990s.
Functions
The ADB is a public bank that provides loans and grants to African governments and private companies investing in Africa. It is “public” because it is owned and funded by member governments, and because it has a public-interest mandate to reduce poverty and promote sustainable development.
The ADB has four principal functions. The first is to make loans and equity investments for the economic and social advancement of the RMCs. Second, it is to provide technical assistance for the preparation and execution of development projects and programs. Third, the ADB is to promote investment of public and private capital for development purposes. Lastly, the ADB is to assist in coordinating development policies and plans of RMCs. The ADB is also required to give special attention to national and multinational projects and programs which promote regional integration.
Today, the ADB commits approximately US$3 billion annually to African countries, equivalent to only about 6% of development aid to the continent. Its relatively small lending portfolio and its tendency to follow in the footsteps of larger, more prominent public institutions like the World Bank, has meant that the AfDB has received little attention from civil society organizations as well as academia.
The largest share of AfDB lending goes to infrastructure projects, followed by “multisector operations,” which are usually loans for various policy reforms or general budget support for a government. ADB support for infrastructure, private sector development, and the extractive industries (particularly mining) is expected to increase over the coming years.
Group Entities
The African Development Bank Group has two other entities: the African Development Fund (ADF) and the Nigeria Trust Fund (NTF).
Established in 1972, the African Development Fund started operations in 1974. It provides development finance on concessional terms to low-income RMCs which are unable to borrow on the non-concessional terms of the ADB. In harmony with its lending strategy, poverty reduction is the main aim of ADF activities. Twenty-four non-African countries along with the ADB constitute its current membership. The ADF’s general operations are decided by a Board of Directors, six of which are appointed by the non-African member states and six designated by the ADB from among the bank's regional Executive Directors.
The ADF’s sources are mainly contributions and periodic replacements by non-African member states. The fund is usually replenished every three years, unless member states decide otherwise. The total donations, at the end of 1996, amounted to $12.58 billion. The ADF lends at no interest rate, with a service charge of 0.75% per annum, a commitment fee of 0.5%, and a 50-year repayment period including a 10-year grace period. The Tenth United Kingdom replenishment of the ADF was in 2006.
The Nigeria Trust Fund (NTF) was established in 1976 by the Nigerian Government with an initial capital of $80 million. The NTF is aimed at assisting in the development efforts of the poorest ADB members.
The NTF uses its resources to provide financing for projects of national or regional importance which further the economic and social development of the low-income RMCs whose economic and social conditions require financing on non-conventional terms. In 1996, the NTF had a total resource base of $432 million. It lends at a 4% interest rate with a 25-year repayment period, including a five year grace period.[African Development Bank Group,(2005), about us, Group entities Retrieved on 2005 from http://www.afdb.org/portal/page_pageid=313,165673&_dad=portal&_schema=PORTAL]
Management and Control
The ADB is controlled by a Board of Executive Directors, made up of representatives of its member countries. The voting power on the Board is split 60%-40% between African (or "regional") countries and “non-regional” member countries (“donors”).
Mr. Donald Kaberuka is the 7th elected , having taken the oath of office on September 1, 2005. He chairs the Boards of both the African Development Bank and the African Development Fund. Mr. Kaberuka is a former finance minister of Rwanda.
Member governments are officially represented at the ADB by their Minister of Finance, Planning or Cooperation who sits on the ADB Board of Governors. The ADB Governors meet once a year (at the Annual Meetings of the ADB each May) to take major decisions about the institution’s leadership, strategic directions and governing bodies. The Governors typically appoint a representative from their country to serve in the offices of the ADB’s Board of Executive Directors.
Day-to-day decisions about which loans and grants should be approved and what policies should guide the ADB’s work are taken by the Board of Executive Directors. Each member country is represented on the Board, but their voting power and influence differs depending on the amount of money they contribute to the ADB.
Member contributions to the ADB and the ADF determine the number of “shares” that each country holds. The number of shares determines each country’s voting power on the ADB’s Board of Executive Directors. There are essentially two Boards of Executive Directors at the ADB – one for the ADB window and one for the ADF window. There are 18 and 12 members of the ADB and ADF Boards respectively. The same six non-African Executive Directors (EDs) representing donor countries sit on both the ADB and the ADF Boards. The remaining 12 seats on the ADB Board are filled by African EDs. Six of these African EDs are appointed to the ADF Board. These positions rotate on an annual basis.
African countries have approximately 60 percent of the voting power for the African Development Bank window and non-African countries have 40 percent. The largest African Development Bank shareholder is Nigeria with nearly 9 percent of the vote. All member countries of the AfDB are represented on the ADB Board of Executive Directors.
On the ADF Board, African member countries have 50 percent of the voting power and non-African countries have 50 percent. The largest ADF shareholder is the United States with approximately 6.5 percent of the total voting shares, followed by Japan with approximately 5.4 percent.
There are 18 Executive Directors on the ADB Board – 12 for African “regional” member countries and six for “non-regional” (donor) member countries. Each of the Executive Directors, with the exception of the United States, represents more than one country. Usually, the various countries in each Executive Director’s constituency rotate responsibility for filling the staff positions and sometimes that of the Executive Director. The constituencies are formed in part on the size of each country’s voting share, the objective being to ensure relatively equal voting power for each Executive Director. Unlike at the World Bank, none of the ADB’s Executive Directors has a significant enough voting share to single-handedly block decisions at the ADF or the ADB Board.
Recent Trends and Directions
The ADB and its member countries are continuously trying to clarify the institution’s role and articulate its vision for the future. One of the main drivers of this re-thinking process, repeatedly cited by the ADB’s Board of Directors and management, is the view that the AfDB should be more “selective” and “country-focused” in its operations. What exactly that means for the AfDB has yet to be defined, although it appears to be driving certain lending priorities.
The infrastructure sector, including power supply, water and sanitation, transport and communications, has traditionally received the largest share of ADB lending. Members of the ADB’s Board of Directors argue that the AfDB has strong staff and expertise in the sector. This focus was re-affirmed in the ADB’s 2003-2007 Strategic Plan, which identified infrastructure as a priority area for ADB lending. In 2005, the ADB approved 23 infrastructure projects for approximately US$982 million, which totaled 40 percent of AfDB approvals that year. Given the increased attention to infrastructure development in Africa from donors and borrowers, it is likely that AfDB’s infrastructure lending will increase significantly in the coming years. In 2007, infrastructure operations accounted for approximately 60 percent of the bank's portfolio.
Regional integration infrastructure projects will also be a key part of the AfDB’s future business. According to the ADB’s 2005 Annual Report, regional economic blocs will make Africa “more competitive in the global market”, while transport and power interconnections between smaller African economies will help create larger markets within the continent. The ADB’s member countries claim that ADB, as a multilateral institution, is particularly suited to support regional integration projects.
The ADB has also been designated the lead agency to facilitate NEPAD infrastructure initiatives, which are regional integration projects led by African Regional Economic Communities (RECs). Additionally, the ADB hosts the Infrastructure Consortium for Africa (ICA). The ICA was established by G8 countries to coordinate and encourage infrastructure development in Africa, focusing on regional infrastructure development in particular. The ADB also helps to prepare projects so they may obtain financing from others sources through an initiative called the Infrastructure Project Preparation Facility (IPPF). So even if the ADB is not directly involved in financing a particular infrastructure project, it may have helped to make that project possible.
Another key area of concentration of the ADB’s support of RMCs is the fight against HIV/AIDS. The ADB has five policies towards securing Africa's future through health funding:
- Institutional capacity building through assistance of policy/strategy formulation and implementation
- Human capital development to create an environment for the operation of national AIDS strategies through training and technical assistance support
- HIV/AIDS multi-sectoral responses with emphasis on prevention and control interventions that include IEC (Information, Education and Communication), STI (Sexually Transmitted Infections) control, VCT (Voluntary Counselling and Testing), infrastructure support for the establishment of laboratories and blood transfusion facilities, and provision of equipment and supplies, including antiretroviral drugs
- Advocacy through participation in international and regional fora to raise political commitment and leadership towards a collaborative effort in the fight against the pandemic among RMCs and development partners
- Partnership development with a view of forging new alliances and revitalizing existing collaboration to cover critical development concerns such as HIV/AIDS and to bringing partnership activities within the framework of the bank's vision
[African Development Bank Group,(2006), Topics, HIV/AIDS from http://www.afdb.org/portal/page?_pageid=473,970125&_dad=portal&_schema=PORTAL]
To date, the bank's contribution in the fight against HIV/AIDS is estimated at over UA 500 million. The bank is also among the initiating partners of AIDS in Africa – Scenarios for the future, a project whose outcome will enable governments and development partners alike to make strategic choices of current and future development paths and define their activities accordingly in order to face the challenges posed by HIV/AIDS.
Energy projects are likely to become a more important area of the ADB’s infrastructure work, given the lack of access to energy services across Africa and continued high oil prices affecting oil-importing countries. It is not clear if the ADB’s role in the energy sector will prioritize energy projects for domestic consumption or for export, although the AfDB has supported both in the past. The ADB is currently drafting an energy policy and developing its contribution to the G8-mandated Clean Energy Investment Framework.
Although there is no official statement or consensus to this effect, ADB lending for agriculture, (non-infrastructure) rural development and social sectors, such as health and education, is reportedly likely to decrease over the coming years.
Prospects
The ADB today is an institution whose financial standing has been restored from the near collapse of 1995, but whose operational credibility remains a work-in-progress. A working group convened by the Center for Global Development, an independent Washington think tank, release a report in September 2006 that offered six recommendations for Bank's president and board of directors on broad principles to guide the Bank’s renewal. The report contains six recommendations for management and shareholders as they address the urgent task of reforming Africa’s development bank. Prominent among the recommendations is a strong focus on infrastructure.
Nonetheless, the ADB has always been, and still is a relatively small source of development finance for Africa. According to the most recent figures, the AfDB provides only 6 percent of total development assistance to the continent. Through its International Development Association (IDA), the World Bank annually approves about four times more in low-interest loans and grants to Africa than the ADB does. The ADB lacks the financial resources, the staff capacity and the range of staff skills and experience of the World Bank. For example, at the World Bank there are more than four times the number of staff working on any given project than at the AfDB. A number of the ADB's projects, especially its policy loans, are financed jointly with the World Bank and other donors. The ADB also relies extensively on World Bank research and analysis. As a larger institution and often the lead financier on joint projects, the World Bank attracts more attention than the ADB.
While the ADB’s lending had not expanded significantly in recent years, 2006 figures indicate that things may be changing. Between 2005 and 2006, the AfDB’s lending activities increased by more than 30 percent to US$3.4 billion. Over the same period, private sector operations doubled in value. The ADB has specific mandates from the New Partnership for Africa’s Development (NEPAD) and other international organizations to take the lead amongst financial and development institutions in areas such as infrastructure, regional integration, and banking and financial standards in Africa. These mandates have also increased the ADB’s profile in the media. The increased international emphasis on Africa’s development needs in recent years (for example, surrounding the 2005 Gleneagles G8 Summit), and on the importance of infrastructure investment in Africa, has highlighted the role of the ADB.
In general, whereas there has been progress at all levels with regard to democracy, growth and restoring the macro-economic balances in Africa over the past fifteen years, the challenges are still posed; half of sub-Saharan Africa lives on under one "greenback" a day, and AIDS is threatening the social fabric of the continent. The studies conducted by various organizations (including the African Development Bank and the World Bank) show that, with the exception of northern and southern Africa, the United Nations Millennium Development Goals (reducing by half the number of persons living in poverty and without access to potable water by 2015) will in most cases not be attained. Nevertheless, these same studies indicate that the majority of the African countries can make notable progress to these ends. The improved economic results since the end of the 1990s, the 4.3% growth expected for 2004 and the restoring of peace in numerous regions confirm this possibility. Moreover, the increase in commodity prices over the past eighteen months, the number of countries that have acceded to the rank of petroleum exporting country in recent years, including some of the poorest, the progress achieved in key areas concerning regional infrastructure are all windows of opportunity -even if the liberalization of the textile market, on 1 January 2005, within the framework of the World Trade Organization agreements called for repositioning. To make good, a three-level effort is needed; on the part of the donor countries, who are required to increase the official development assistance, as they have undertaken to do; on the part of the beneficiaries, who must pursue and deepen the economic reform; and on the part of the private foreign investors, who are required to integrate Africa into their industrial, commercial and financial strategies, as so many aspects cited in this text compel them to do. The leadership of the African Development Bank Group has, for its part recommitted itself to its founding mission: that of remaining in the service of the development of the whole continent.
Membership
ADB Beneficiary Countries:
ADF Beneficiary Countries:
ADB and ADF Beneficiary Countries:
Note: All countries in the African Union including Mauritania but excluding the SADR are eligible for NTF benefits. Morocco is also eligible though not a part of the African Union.
Non-African Member Countries:
External links
|
| |
|
|
