6 September 2007
While the World Bank pumps more money to sub-Saharan Africa, much of it to finance large-scale infrastructure projects, poverty levels across the continent continue to rise. How effective is the Bank's aid to Africa?
The World Bank approved a record total of $5.8 billion in new commitments to sub-Saharan Africa during fiscal year 2007. Many believe, however, that it is precisely the Bank's preoccupation with its lending volume that undermines its effectiveness. The pressure to lend, inherent in Bank policies and staff incentives, ensures that money gets out the door. But it often contributes to a bias in favor of large projects over more suitable alternatives tailored to the needs of the poor. It also encourages the Bank's expansion and pushes staff to move on to the next operation rather than focus on achieving positive results from projects already underway.
Much of the increase in lending to Africa in FY 07 can be attributed to a spike in financing for infrastructure, energy and regional integration projects. These sectors are typified by large-scale investments that require massive amounts of capital, and often generate significant foreign-denominated debts for borrowing countries. The flagship FY07 projects highlighted in the Bank's recent press release include some of its most controversial, such as the $800 million Bujagali dam on the Victoria Nile in Uganda.
While there is broad consensus on the importance of infrastructure for development, there is far less agreement on what kind of infrastructure is appropriate to meet whose needs. The trend toward regional infrastructure inter-connections and transnational electricity trading schemes, pushed through initiatives like the New Partnership for Africa's Development (NEPAD) in Africa and the Initiative for the Integration of Regional Infrastructure in South America (IIRSA) in Latin America, holds clear benefits for industry. What is far less clear is whether local populations stand to gain from these mega projects, or whether their needs and interests will be (literally) overshadowed by the pylons and pipelines built by and for the private sector.
The Bank continues to make declarative statements about the virtues of its economic growth-centered development model, despite ample evidence that the trickle-down approach has failed poor people around the world at least as often as it has helped them. In its latest press release describing FY07 lending to Africa, the Bank states that "Higher economic growth is lowering poverty levels." However, the number of people living on less than $1 per day has increased steadily in Africa over the past decade and the Bank itself admits that most African countries aren't on track to meet the MDGs by 2015. According to the 2007 World Development Indicators, average poverty rates in sub-Saharan African countries remain above 40 percent. As these statistics illustrate, GDP figures say little if anything about the quality of life for a country's population. The Bank's own publications (like the World Development Report 2006: Equity and Development) have acknowledged that it's the distribution of the benefits from economic growth, not the rate of growth alone, that has an impact on sustainable development.
The Bank is typically the first to cry foul when others draw causal links between its operations and poverty trends on the ground. Bank economists will often claim that there are too many factors involved to isolate the causes of changes in poverty levels, and thus, conveniently, that it is not possible to assess whether Bank projects are in fact contributing to the institution's stated mission of reducing poverty. This reluctance to identify clear poverty impact assessment criteria and independently verifiable measures of Bank effectiveness has earned the Bank a hefty amount of criticism over the years. Most recently, a book called "The Dinosaur Among Us" by former IFC employee, Jeffrey Hooke, lists the Bank's lack of accountability and failure to measure its development effectiveness among its chief flaws. He identifies ten major problems with the institution, and warns that unless actions are taken to resolve them, and urgently, the Bank is on the path to extinction.
More than once, the press release cites the increase in cell phone use in certain African countries as a sign of development success. While the booming cell phone industry in Africa no doubt had positive impact on commercial activity and quality of life for many people, last time we checked, there was no MDG focused on mobile phone access.
Resources
Read the World Bank's press release on its FY07 lending to Africa. (World Bank website, September 4, 2007)