IFIs in Africa News Briefing

Issue #27

Tuesday, December 18, 2007

In this issue:


  • Donors promise $8.9 billion to the African Development Bank; Bank president praises UK’s “concretization of commitments to double aid to Africa”
  • West Africa Gas Pipeline to start operations by year’s end
  • Financing complete for IFC-sponsored EASSy Cable
  • Special Feature: Press highlights World Bank blunders in Congo's forest
  • Special Feature: Malawi wins results and recognition for rebuffing World Bank prescriptions
  • Additional articles

Donors promise $8.9 billion to the African Development Bank; Bank president praises UK’s “concretization of commitments to double aid to Africa”

Last week, the African Development Bank (AfDB) secured commitments from donors to contribute at least $8.9 billion toward the Bank’s concessional lending window for impoverished countries, the African Development Fund (ADF), during the final meeting of its current replenishment push in London. While the donations fell short of the $10 billion the Bank sought to finance its lending for the period 2008 to 2010, the amount still represents a 52 percent increase over the pledges to the ADF in the previous replenishment round.

Similar to the World Bank’s International Development Association (IDA) lending window, the ADF provides grants and concessional loans to nearly 40 African countries, the bulk of the AfDB’s members. Donor countries contribute new funds to the ADF every three years.

Apart from the small amounts the AfDB realizes from repayment of ADF loans, donor governments are the source of all ADF resources. This dependence gives the donors considerable influence over the way the money is used, and in shaping the policies and strategic directions of the institution. In line with donor priorities, the AfDB has identified four main areas to focus its work: infrastructure, governance, regional integration and fragile states.

The United Kingdom agreed to contribute $863 million toward the replenishment of the ADF. According to an AfDB press release, the UK’s contribution represents a doubling of its commitment during the last ADF replenishment in 2004, and the British Government urged other donor countries to follow suit. Donald Kaberuka, the AfDB’s president, called the move “a concretization of commitments to double aid to Africa” made by donor countries at the Gleneagles Summit of the G-8 in 2005.

Aside from unresolved questions concerning the AfDB’s professed comparative advantage in fragile states and the Bank’s capacity to ensure compliance with environmental and social standards in its infrastructure portfolio, President Kaberuka’s willingness to credit the UK with “concretizing” its pledges to double aid to Africa appears overly generous. To date, the UK and the seven other members of the G-8 have fallen well short of the mark in meeting their Gleneagles promises to Africa, as G-8 aid to the continent actually fell in 2006 for the first time since 1997.

Meanwhile, the highly contentious Economic Partnership Agreements (EPAs) that the European Union (EU) is currently pursuing in Africa threaten to further undermine efforts to alleviate poverty on the continent. The EU has insisted that EPAs be concluded by December 31, when Europe’s current trade agreements in the region expire. While the EU maintains that EPAs will foster economic growth in Africa, critics argue that controversial clauses in these agreements would limit governments’ ability to protect local firms or stipulate certain investment conditions. These “competition clauses” have been omitted to date from negotiations at the World Trade Organization (WTO) after intense resistance by developing countries.

Discussions around EPAs featured prominently at the EU-Africa Summit held in Lisbon, Portugal last weekend, where Senegalese president Abdoulaye Wade publicly rejected the agreements as manifestly unfair and contrary to Senegal’s national interests. To date, the East African Community, five countries in the southern African economic bloc, and most recently Ghana and Cote d’Ivoire, have initialed interim agreements with the EU that will ensure that exports of certain sensitive products to the EU markets are protected from higher tariffs while negotiations on the full EPA continue. Many critics, including government officials, have accused the EU of putting inordinate pressure on African governments to sign the deals.



West Africa Gas Pipeline to start operations by year’s end

Reuters reports that the long-awaited West Africa Gas Pipeline (WAGP) will begin operations by December 23 this year. The 680-kilometer pipeline, estimated to cost $620 million, will transport natural gas from Nigeria’s volatile Niger Delta to Ghana, largely to power that country’s burgeoning industrial sector.

In 2004, the World Bank and its private sector insurance arm, the Multilateral Investment Guarantee Agency (MIGA), together provided risk insurance totaling $125 million for WAGP, which is financed by a consortium of private companies led by Chevron.

According to the Ghana Broadcasting Corporation, the project experienced a setback this year after a ship caused $25 million worth of damage to an offshore segment of the pipeline near Cotonou, Benin. Completion of the pipeline had earlier been delayed by instability in the Niger Delta region where the gas is to be extracted, a scenario predicted by local groups even while the project was under preparation.

Meanwhile, the World Bank Inspection Panel, the Bank’s internal, independent accountability mechanism, is expected to submit the results of its investigation into claims made by local communities in Nigeria that the project has violated Bank policies with respect to its social and environmental impacts and safety concerns. The claims also targeted the alleged inadequacy of compensation paid to owners of land used by the project, insufficient pipeline safety measures, lack of information about environmental impacts, and the project’s failure to make a meaningful contribution to a reduction in gas flaring.

The flaring of gas waste from oil production facilities in the Niger Delta has long frustrated communities, who complain of a 24-hour-a-day assault of light, noise, fumes, and destruction. WAGP drew initial support from some communities and civil society groups because of its promise to address the flaring, making its shortfalls in this regard especially troubling.



Financing complete for IFC-sponsored EASSy Cable

Project operators announced in November that the financing package for the $235 million East Africa Submarine Cable System (EASSy) is complete, after a group of development institutions signed loans toward the project worth $70.7 million.

The project would entail the laying of 10,000 kilometers of underwater broadband cable along the bottom of the Indian Ocean from Sudan to South Africa, where it would link to western Africa and Europe. The project is designed to reduce the cost of internet access in 21 countries in eastern, central, and southern Africa. Reuters reports that the chairman of the EASSy consortium of companies, Sammy Kirui, expects the cable to be commissioned by the first quarter of 2009.

The World Bank’s private sector lending arm, the International Finance Corporation, has agreed to loan $18.2 million to the EASSy consortium, and the European Investment Bank and African Development Bank have also approved investments in the project.

The project has generated controversy over access to the cable. Previously, the Kenyan government had withheld support for the project in part because of the widely held perception that South Africa has been dominating the EASSy project through NEPAD – an intergovernmental initiative established by the African Union.



Special Feature: Press highlights World Bank blunders in Congo's forest

On December 7, 2007 the Financial Times (FT) reported that the World Bank has admitted errors in its forest sector operations in the Democratic Republic of Congo (DRC), home to the planet's second largest rainforest. The Bank's admissions come in response to a damning internal investigation into its forestry projects in the DRC, set to be discussed by the Bank's Board in January 2008.

The Financial Times also reported that the Bank’s private sector arm, the International Finance Corporation (IFC), has been forced to face up to allegations that it has supported a company engaged in illegal logging activities in the DRC. Just two days after the FT article was published, the IFC announced its divestiture of a 3.35% equity stake, reportedly worth between $7 and $100 million, in Olam International Ltd. Greenpeace has accused the international commodity trading company of sourcing timber from "destructive and illegal" operations in the DRC.

As those gathered in Bali for the United Nations conference on climate change discuss the importance of forests to the future health of the planet, the Bank's missteps in Congo deserve a closer look.

Read the full text on BIC’s website.



Special Feature: Malawi wins results and recognition for rebuffing World Bank prescriptions

The front page of the New York Times on Sunday, December 2, 2007 prominently featured an article on recent successes in Malawi’s battle against regular outbreaks of famine.

Headlined “Ending Famine, Simply by Ignoring the Experts,” Celia Dugger’s article documents how the government of Malawi decided to re-introduce subsidies to small farmers for the purchase of fertilizer. The government’s move, a rare example of defying World Bank credo in a region still dependent on the institution’s good will, has produced solid, and virtually immediate, success.

After years of following the recommendations of the World Bank and donor governments to sharply limit, and ultimately eliminate, public financial support to farmers, the Malawian government in 2005 insisted upon subsidizing agricultural inputs for the country’s largely rural population. Last year, Malawi went from being a beggar dependent on food aid – much of it from the U.S. – to being a major provider of maize, the region’s staple crop, to neighboring countries like Zimbabwe.

Although Dugger only addresses the World Bank’s role in Malawi, the IMF played a key part in instituting market reforms in the agricultural sector. It was, in fact, blamed by many observers for exacerbating the country’s worst recent famine (2001-02) and causing unnecessary starvation.

While the Bank promises a renewed focus on agriculture in Africa in the wake of its 2008 World Development Report, it is not yet clear if it will reverse itself and support government intervention to ensure increased access to inputs on the more modest scale now being realized in Malawi.

Read the full text 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.


You have received this message because you requested email updates from www.bicusa.org.
Click here to manage your newsletter subscriptions
Click here to unsubscribe