IFIs in Africa News Briefing

Issue #23

Friday, July 13, 2007

Please note that following this issue, there will be a hiatus in the release of the IFIs in Africa News Briefings through mid-September. Thanks for reading!

In this issue:


  • AfDB private sector investments reach record high
  • Civil society organizations call for public lenders to respect DR Congo mining contract review
  • IMF cautions Ghana on management of newly discovered oil resources
  • World Bank-backed gas pipeline project under investigation
  • World Bank governance report meets resistance, while painting rosy picture of Africa
  • Additional Articles

AfDB private sector investments reach record high

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.



Civil society organizations call for public lenders to respect DR Congo mining contract review

Civil society groups issued a statement last week demanding that US, Canadian, and EU public lenders await the outcome of an ongoing government review of mining contracts in the Democratic Republic of Congo (DRC) before investing in the Tenke Fungurume copper mine in the country's Katanga province.

The Tenke deal is among the 60 contracts signed over the last decade, during the war in Congo and under the transitional government, which are currently under examination by an interministerial commission in Kinshasa.

The Overseas Private Investment Corporation (OPIC) was slated to approve a guarantee and investment for the project on July 12, but postponed its decision in response to civil society concerns over the project’s impacts on the contract review process and questions about OPIC’s compliance with certain statutes limiting its mining investments.

The European Investment Bank (EIB), however, did not delay its decision. On July 17th, the EIB went ahead with approval of financing for the Tenke project, although it made disbursement of its loan conditional on final approval of financing by other lenders, as well as the DRC government’s non-objection to the loan.

There are indications that other public financiers, such as Export Development Canada (EDC) and the Multilateral Investment Guarantee Agency (MIGA) may also support the project.

Civil society groups argue that approving financing for Tenke before the Congolese government concludes the mining contract review, which only began on June 18th, seems to prejudge the review’s outcomes or at least sends a clear signal to the government about the expected results.

The Tenke project covers what is reportedly the world's largest untapped copper-cobalt deposit.



IMF cautions Ghana on management of newly discovered oil resources

According to Reuters, news of the recent discovery of commercially viable quantities of oil off the coast of western Ghana has been met with cautious optimism by the IMF, which advised the government to ensure that oil revenues benefit Ghana’s citizens and that they not upset the economy. The remarks by the IMF’s deputy managing director, Takatoshi Kato, about the need for careful oil revenue management alluded to the danger of Ghana’s newfound oil leading to Dutch Disease – a phenomenon by which oil exports increase a country’s exchange rate, making non-oil export sectors less competitive.

Meanwhile, Ghanaian news source Myjoyonline reports that the World Bank’s Country Director for Ghana, Mats Karlsson, has offered to “assist Ghana in the area of oil exploration.” Karlsson reportedly added that the Bank is “interested in developing the West Africa economy whether they are dependent on diamond, oil or bauxite,” citing the Bank’s work in Sierra Leone, Liberia and Guinea.

Many critics contend that the Bank’s emphasis on natural resource extraction as a driver for development in Africa is misplaced, given the negative economic, social and environmental impacts associated with the extractive industries throughout the continent. Reuters writes that the exploitation of oil in Africa has more often than not “exacerbated ethnic tensions and corruption and…widen[ed] the gap between rich and poor.”



World Bank-backed gas pipeline project under investigation

The World Bank’s Inspection Panel began its official investigation this past week into complaints lodged by communities affected by the Chevron-led West Africa Gas Pipeline (WAGP) project. Both the World Bank and its private sector insurance arm, the Multilateral Insurance Guarantee Agency (MIGA), support the project through investment guarantees.

According to a press release put out by concerned civil society groups, the complaint submitted by communities in April 2006 “raised concerns about the inadequacy of compensation paid to landowners, insufficient pipeline safety measures, lack of information about environmental impacts and the project’s failure to make a meaningful contribution to gas flaring reduction.”

The West Africa Gas Pipeline will transport natural gas from the Niger Delta in Nigeria to provide power in Ghana, largely for the country’s burgeoning industrial sector. Despite significant outstanding social, environmental and security issues, construction of the pipeline has continued unabated, and the project is expected to be completed and gas to begin flowing this year.



World Bank governance report meets resistance, while painting rosy picture of Africa

A new report indicates that governance in Africa has taken a positive turn, despite the spiraling situation in Zimbabwe, persistent conflict in Sudan, and escalating violence in Somalia. A new governance report from the World Bank Institute ranks Ghana as the most improved country in Africa between 1998 and 2006.

Meanwhile, strong reactions to the study reveal a divide at the World Bank which could present Robert Zoellick with the first major test of his leadership. As reported in the Financial Times, nine of the Bank’s 24 executive directors wrote a letter to the Bank’s new president, questioning whether the Bank’s research institute should issue such governance reports on its member countries at all.

The Financial Times notes that the EDs for China, Argentina, Mexico and Russia were among those challenging the report, which measured countries’ performance in various areas such as voice and accountability, government efficiency, and corruption. As the report is not an official Bank publication, it does not bear directly on Bank lending. However, there is an ongoing debate about whether the Bank’s financing decisions should in fact be more closely tied to evaluations of borrowing country governance – a highly political, and politicized, proposition. Some critics contend that the Bank is in no position to champion a “good governance” and anti-corruption agenda, in light of recent scandals at the institution and given the continued ”democratic deficit” in the Bank’s own governing body.



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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