IFIs in Africa News Briefing

Issue #26

Wednesday, November 14, 2007

In this issue:


  • Nurses, teachers in Burundi strike over IMF-mandated constraints
  • Government panel recommends cancellation or renegotiation of over 60 mining contracts in DRC
  • IFC maintains “clear development benefits” result from its African mining investments
  • BHP Billiton eyes Congo's Inga dam complex to power new $3 bn aluminum smelter
  • IMF says Africa “enjoying its best period of sustained growth”
  • IMF cancels Liberia's debt
  • Additional articles

Nurses, teachers in Burundi strike over IMF-mandated constraints

Reuters reports that thousands of teachers and hundreds of nurses in Burundi went on strike in October to protest the government’s failure to meet its commitments to increase wages and improve working conditions. In an attempt to end the strike, the government reiterated its promises to grant civil servants the 34 percent pay raise that it announced in May 2007.

It remains unclear, however, whether the government will be able to keep up its end of the bargain, since the International Monetary Fund (IMF) had already registered its opposition to the wage increase and, according to Burundi Réalités, “stressed the country’s finances must be improved before the government should even think about increasing the salaries of civil servants.” Reuters reports that primary school teachers and nurses earn just $1 a day on average.

The IMF’s predisposition to introduce public wage caps in borrowing countries has drawn substantial criticism from civil society groups worldwide, who insist that the Fund unnecessarily restricts government budgets to maintain low inflation rates. In April 2007, ActionAid released a critical report on the impacts of the Fund’s restrictive macroeconomic policy prescriptions, such as wage caps and inflation ceilings, on the education sector in Africa. The report argued that such restrictions have undermined long-term development goals by requiring “many poor countries to freeze or curtail teacher recruitment.”

Last week, an IMF delegation arrived in Bujumbura and, according to Javno News, praised the government’s record on inflation, which was “well within Burundi's target of keeping it under 10 percent.” The IMF, however, also advised that Burundi “get a handle on its financial management and in particular its wage bill.”



Government panel recommends cancellation or renegotiation of over 60 mining contracts in DRC

A leaked portion of the report by an inter-ministerial panel charged with reviewing mining contracts signed over the last decade in the Democratic Republic of Congo (DRC) has sent shockwaves across the country, with its calls for renegotiated or outright cancellation of all of the 61 contracts it examined. While officials of both the DRC government and mining companies scurry to downplay the significance of the report, shares in many mining companies heavily invested in DRC have tumbled. The stock price for Africo Resources Ltd., for example, dropped by nine percent last week, after it emerged that the report recommended Africo’s disputed Kalukundi concession agreement be suspended pending a Supreme Court decision on its legality.

Just last month, the World Bank’s private investment arm, the International Finance Corporation (IFC), approved a $7.6 million investment in Africo to conduct the feasibility study for the Kalukundi cobalt-copper deposit in DRC’s Katanga Province, and is reportedly considering an additional $50 million investment in the operation of the mine. Civil society groups have argued that the willingness of public lenders such as the IFC to invest in projects whose contracts are under examination appears to prejudge the outcomes of the government review, or signal a serious disregard for relevant sovereign processes.  

Following widespread press coverage of the recommendations contained in the leaked document, the DRC government made an official statement in an attempt to placate investors, stressing that “the great majority of companies currently in the DRC will remain in the country for the long term,” and adding that it is ultimately up to the government, and not the commission, to decide which contracts will be renegotiated or cancelled. According to Bloomberg, the panel is expected to recommend that 23 of the contracts be cancelled outright, and that the remainder be changed.



IFC maintains “clear development benefits” result from its African mining investments

According to Reuters, the International Finance Corporation (IFC) will commit 75 to 80 percent of its total mining portfolio this year to Africa. One of the IFC’s senior mining division executives, William Bulmer, told Reuters that its mining portfolio has been “fairly modest” to date, but that he “expect[s] that to increase significantly.”

Bulmer also said that the IFC was seeing “a total convergence in the sort of objectives that we have as a development bank to those of successful mining companies,” and that he “expects clear development benefits to come out of projects.” Civil society groups, however, have been critical of the IFC’s support for the mining sector in Africa, precisely because they feel the IFC’s objectives have been too closely aligned with that of mining companies: to earn a substantial profit. Recent years have seen heightened public attention to the harmful social and environmental track-record of many mining projects in Africa, and their adverse impacts on the poor.

There are other reasons to question Bulmer’s optimistic view that mining projects will deliver “clear development benefits.” In August 2007, the IFC’s own evaluation unit, the Independent Evaluation Group (IEG), released a report which found that over 40 percent of IFC projects implemented between 1996 and 2006 failed to deliver positive development results, and that the Corporation performed particularly poorly in Africa. A September 2006 briefing paper by civil society organizations questioned the IFC’s investments in gold mining, and challenged the IFC to prove that these projects lead to poverty reduction. To date, however, the IFC does not publicly report on the impacts of its individual projects, making it difficult for civil society groups to assess whether it fulfills its development mandate.



BHP Billiton eyes Congo's Inga dam complex to power new $3 bn aluminum smelter

Bloomberg recently reported that BHP Billiton, the world’s largest mining company, has signed an agreement with the Democratic Republic of Congo (DRC) to pursue the construction of a $3 billion aluminum smelter. As part of the agreement, the Australia-based company will finance a pre-feasibility study on the expansion of the Inga hydroelectric dam complex in southwestern DRC.

According to Bloomberg, BHP would require 2000 MW of electricity to operate the plant, and has set its hopes on exploiting the hydroelectric potential of the Congo River at the site of the proposed Inga 3 dam. Experts estimate that Inga 3 could yield between 3000 and 3500 MW of electricity. The World Bank is currently financing the rehabilitation of the Inga 1 and 2 sites, which are operating at less than half their combined capacity of 1700 MW. The Bank previously indicated that it may be willing to support the construction of Inga 3.

BHP’s intention to consume up to two-thirds of Inga 3’s output has been met with consternation in southern Africa. As reported in Business Day, a consortium of regional power companies called Westcor had already signed an agreement with the DRC to study the viability of the project, which was expected to form the centerpiece of the regional partnership that envisions the interconnection of electricity grids in the DRC, Namibia, Angola, Botswana, and South Africa. The World Bank, the African Development Bank, and the European Investment Bank have all expressed interest in pursuing the project with Westcor.

The prospect of developing a massive, revenue-generating, centralized infrastructure project in a country suffering from ongoing political instability and weak government capacity for project oversight, infrastructure maintenance and revenue management has generated some concerns locally and internationally. Moreover, the project is seen by many as a first step toward the construction of the ambitious Grand Inga complex, which is reported to have the potential to produce between 35,000 and 40,000 MW of electricity, over twice the generation capacity of the Three Gorges Dam in China. Estimated at $50 billion, this massive project is being touted not only as the solution to Africa’s electricity deficit, but also as a viable source of energy for export to the Middle East and Europe.

The proposed projects at Inga raise significant concerns regarding the risks of reliance on hydropower at a time when Africa is becoming increasingly susceptible to climate change-induced drought. Furthermore, in a country where only 6 percent of the country’s population has access to electricity, critics charge that the expansion of Inga is geared to serve large mining interests in the country, and will not contribute meaningfully toward increasing electricity access for the poor, particularly in rural, off-grid areas.



IMF says Africa “enjoying its best period of sustained growth”

The Agence France-Presse (AFP) reported last month that the IMF has praised recent economic growth in sub-Saharan Africa, calling the trend the “strongest economic momentum” in the region in the last 40 years. But the IMF’s Regional Economic Outlook: Sub-Saharan Africa for 2008 acknowledges that the high growth rate, expected to reach 6.8 percent, is fueled mostly by high commodity prices, particularly in the oil sector. The report also admits that few sub-Saharan countries are making demonstrable progress in achieving the Millennium Development Goals (MDGs), especially that of halving poverty by 2015.

The IMF’s use of growth rates as the yardstick by which to measure economic progress, particularly in Africa, is not uncontroversial. Even the IMF’s own monitoring unit, the Independent Evaluation Office (IEO), noted earlier this year that while many African countries have registered positive economic growth and improved macroeconomic indicators under IMF programs, the proportion of people living in poverty actually increased.



IMF cancels Liberia's debt

The International Monetary Fund (IMF) announced yesterday that it will write off Liberia's debt by securing $842 million from its own institutional reserves and donor country pledges. The move comes after the Fund endured heavy criticism in the international media last month for not following through on its commitment to Liberia, eighteen months after the country had met the IMF's stringent policy conditions.

Read the full article on BIC’s website.



Additional articles


Note: The text of the IFIs in Africa News Briefing may be freely used providing the source is credited.

The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF.

BIC is supported by private foundations and organizations that work in the fields of environment and development. BIC is not affiliated with any of the Multilateral Development Banks, nor does it receive any funding from them.


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