AfDB private sector investments reach record high
21 July 2007
Unprecedented increase raises question of whether the Bank wields sufficient leverage to ensure compliance with its social and environmental safeguards.
In a recent press release, the African Development Bank (AfDB) announced that its private sector operations have surpassed $1 billion in a single year for the first time. The AfDB’s private sector lending operations, which began in 1991, have experienced a major surge in the last two years.
According to the release, public-private partnerships accounted for much of this increase, although it is difficult to obtain details of these deals. Little information is disclosed about the AfDB’s private sector operations, especially in advance of project approval by the Bank’s Board of Directors. Given the dearth of public documents, some question whether the AfDB is in full compliance with its information disclosure policy.
The AfDB’s new financing commitments during the past year included a $110 million investment in the controversial Bujagali hydroelectric dam on Uganda’s Victoria Nile, and $150 million for the Ambatovy nickel mine in Madagascar.
This recent scale-up of private investments is unprecedented at the Bank. In 2005, private sector lending amounted to only $200 million, doubling to $401 million in 2006. As of July 2007, just halfway through the year, the Bank had already approved $1 billion in new private sector commitments, rivaling the investment portfolios of other larger public lenders such as the International Finance Corporation (IFC).
The AfDB’s limited experience in the private sector generates some concern about this recent trend. It remains unclear whether the Bank wields sufficient leverage to ensure that its social and environmental safeguards, which are fairly strong on paper, are adhered to in the projects that it supports.
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