African Development Bank

African Development Bank

AfDB logo
Formation August 4, 1963
Type International organization
Legal status Treaty
Purpose Regional development
Headquarters Abidjan, Ivory Coast
Membership
 78 countries
President
 Akinwumi Adesina
Main organ
 Board of Executive Directors
Website African Development Bank

The African Development Bank Group (AfDB) is a multilateral development finance institution established to contribute to the economic development and social progress of African countries. The AfDB was founded in 1964 and comprises three entities: The African Development Bank, the African Development Fund and the Nigeria Trust Fund. The AfDB’s mission is to fight poverty and improve living conditions on the continent through promoting the investment of public and private capital in projects and programs that are likely to contribute to the economic and social development of the region.[1] The AfDB is a financial provider to African governments and private companies investing in the regional member countries (RMC). While it was originally headquartered in Abidjan, Côte d'Ivoire, the bank's headquarters moved to Tunis, Tunisia in 2003, due to the Ivorian civil war; before returning in September 2014.[2]

History

Following the end of the colonial period in Africa, a growing desire for more unity within the continent led to the establishment of two draft charters, one for the establishment of the Organisation of African Unity (established in 1963, later replaced by the African Union), and for a regional development bank.

A draft accord was submitted to top African officials, then to African Ministers, before being cosigned by twenty-three African governments on August 4, 1963, in the form of an agreement establishing the African Development Bank. The agreement came into force on 10 September 1964. Although established officially in under the auspices of the Economic Commission for Africa, the AfDB began operation in 1966.

Although originally only African countries were able to join the bank, since 1982 it has allowed the entry of non-African countries as well.

During its forty years of operations, AfDB has financed 2,885 operations, for a total of $47.5 billion. In 2003, it received an AAA rating from the major financial rating agencies and had a capital of $32.043 billion.

Group entities

The African Development Bank Group has two other entities: the African Development Fund (ADF) and the Nigeria Trust Fund (NTF).

African Development Fund

Established in 1972, the African Development Fund started operations in 1974."The African Development Fund" United Nations Convention to Combat Desertification (UNCCD) 2004], no longer available (2006) It provides development finance on concessional terms to low-income RMCs which are unable to borrow on the non-concessional terms of the AfDB. In harmony with its lending strategy, poverty reduction is the main aim of ADF activities. Twenty-four non-African countries along with the AfDB constitute its current membership. The largest ADF shareholder is the United Kingdom, with approximately 14% of the total working shares followed by United States with approximately 6.5 percent of the total voting shares, followed by Japan with approximately 5.4 percent. The Federal Reserve Bank of New York was designated as the depositor bank for the fund according to telegraphs sent from the U.S. Embassy in Abidjan in 1976.[3]

The ADF’s general operations are decided by a Board of Directors, six of which are appointed by the non-African member states and six designated by the AfDB from among the bank's regional Executive Directors.

The ADF’s sources are mainly contributions and periodic replacements by non-African member states. The fund is usually replenished every three years, unless member states decide otherwise. The total donations, at the end of 1996, amounted to $12.58 billion. The ADF lends at no interest rate, with an annual service charge of 0.75%, a commitment fee of 0.5%, and a 50-year repayment period including a 10-year grace period. The tenth United Kingdom replenishment of the ADF was in 2006.[4]

Nigeria Trust Fund

The Nigeria Trust Fund (NTF) was established in 1976 by the Nigerian government with an initial capital of $80 million. The NTF is aimed at assisting in the development efforts of the poorest AfDB members.

The NTF uses its resources to provide financing for projects of national or regional importance which further the economic and social development of the low-income RMCs whose economic and social conditions require financing on non-conventional terms. In 1996, the NTF had a total resource base of $432 million. It lends at a 4% interest rate with a 25-year repayment period, including a five-year grace period.[5]

Management and control

The AfDB is controlled by a Board of Executive Directors, made up of representatives of its member countries. The voting power on the Board is split according to the size of each member's share, currently 60%-40% between African (or "regional") countries and “non-regional” member countries (“donors”). The largest African Development Bank shareholder is Nigeria with nearly 9 percent of the vote. All member countries of the AfDB are represented on the AfDB Board of Executive Directors.

Dr. Akinwumi Ayodeji Adesina is the 8th elected President of the African Development Bank Group], having taken the oath of office on September 1, 2015. He chairs the Boards of both the African Development Bank and the African Development Fund. Dr. Adesina served as Nigeria’s Minister of Agriculture and Rural Development from 2011 to 2015.

Member governments are officially represented at the AfDB by their Minister of Finance, Planning or Cooperation who sits on the AfDB Board of Governors. The AfDB Governors meet once a year (at the Annual Meetings of the AfDB each May) to take major decisions about the institution’s leadership, strategic directions and governing bodies. The Governors typically appoint a representative from their country to serve in the offices of the AfDB’s Board of Executive Directors.

Day-to-day decisions about which loans and grants should be approved and what policies should guide the AfDB’s work are taken by the Board of Executive Directors. Each member country is represented on the Board, but their voting power and influence differs depending on the amount of money they contribute to the AfDB.

Unit of Account

The African Development Bank is using a Unit of Account which is registered as XUA as ISO 4217 standard currency code. It is not exchanged directly by individuals, it is used for accounting between state members.[6]

Functions

The primary function of AfDB is making loans and equity investments for the socio-economic advancement of the RMC. Second, the bank provides technical assistance for development projects and programs. Third, it promotes investment of public and private capital for development. Fourth, the bank assists in organizing the development policies of RMCs. The AfDB is also required to give special attention to national and multinational projects which are needed to promote regional integration.[7]

(i) Mobilizing financial resources from the Government or the foreign financial institutions with; (ii) A view to lending the money for development of specific sectors of the economy

Status

The ADB promotes economic development and social progress of its RMCs in Africa and the bank commits approximately 3 billion dollars annually to African countries. Its relatively small lending and tendency to follow in the footsteps of more prominent public institutions like the World Bank, implies that the African Development Bank has been receiving little interest from civil society organizations as well as academia.

AfDB emphasizes the role of women along with education reforms, and lent its support to key initiatives such as debt alleviation for Heavily Indebted Poor Countries and the New Partnership for Africa's Development (NEPAD).

The Bank is currently based in Abidjan, Côte d'Ivoire again. It employs approximately 1,020 employees as of 2007, and has 78 members: 53 countries in Africa and 25 American, European, and Asian countries.

Recent trends and directions

One of emerging views, repeatedly cited by the AfDB’s Board of Directors and management, is that the AfDB should be more “selective” and “country-focused” in its operations. Though this policy has still to be clearly defined, it appears to be driving certain lending priorities.

The infrastructure sector, including power supply, water and sanitation, transport and communications, has traditionally received the largest share of AfDB lending. This focus was re-affirmed in the AFDB’s 2003-2007 Strategic Plan, which identified infrastructure as a priority area for AfDB lending. In 2005, the AfDB approved 23 infrastructure projects for approximately $982 million, which totaled 40 percent of AfDB approvals that year. Given the increased attention to infrastructure development in Africa from donors and borrowers, it is likely that AfDB’s infrastructure lending will increase significantly in the coming years. In 2007, infrastructure operations accounted for approximately 60 percent of the bank's portfolio.

Regional integration infrastructure projects will be a key part of the AfDB’s future business. According to the AfDB’s 2005 Annual Report, regional economic blocs will make Africa “more competitive in the global market”, while transport and power interconnections between smaller African economies will help create larger markets in the continent. The AfDB’s member countries claim that AFDB, as a multilateral institution, is particularly suited to support regional integration projects.

The AfDB has been designated the lead agency to facilitate "NEPAD infrastructure initiatives", which are regional integration projects led by African Regional Economic Communities (RECs). Additionally, the AfDB hosts the Infrastructure Consortium for Africa (ICA). The ICA was established by G8 countries to coordinate and encourage infrastructure development in Africa, focusing on regional infrastructure development in particular. The AfDB helps to prepare projects so they may obtain financing from others sources through an initiative called the Infrastructure Project Preparation Facility (IPPF). So even if the AfDB is not directly involved in financing a particular infrastructure project, it may have helped to make it possible.

Another key area of concentration of the AfDB’s support of RMCs is the fight against HIV/AIDS. The AfDB has five policies towards securing Africa's future through health funding:

To date, the bank's contribution in the fight against HIV/AIDS is estimated at over UA 500 million. The bank is among the initiating partners of "AIDS in Africa – Scenarios for the future," a project whose outcome will enable governments and development partners alike to make strategic choices of current and future development paths and define their activities accordingly in order to face the challenges posed by HIV/AIDS.

Energy projects are likely to become a more important area of the AFDB’s infrastructure work, given the lack of access to energy services across Africa and continued high oil prices affecting oil-importing countries. It is not clear if the AFDB’s role in the energy sector will prioritize energy projects for domestic consumption or for export, although the AfDB has supported both in the past. The AFDB is currently drafting an energy policy and developing its contribution to the G8-mandated Clean Energy Investment Framework.

Although there is no official statement or consensus to this effect, AFDB lending for agriculture, (non-infrastructure) rural development and social sectors, such as health and education, is reportedly likely to decrease over the coming years.

Prospects

The AfDB's financial standing has been restored from the near collapse of 1995, but its operational credibility remains a work-in-progress. A working group convened by the Center for Global Development, an independent Washington think tank, released a report in September 2006 that offered six recommendations for Bank's president and board of directors on broad principles to guide the Bank’s renewal. The report contains six recommendations for management and shareholders as they address the urgent task of reforming Africa’s development bank. Prominent among the recommendations is a strong focus on infrastructure.

AfDB is still a relatively small source of development finance for Africa. According to the most recent figures, the AfDB provides only 6 percent of total development assistance to the continent. Through its International Development Association (IDA), the World Bank annually approves about four times more in low-interest loans and grants to Africa than the AfDB does. The AfDB lacks the financial resources, the staff capacity and the range of staff skills and experience of the World Bank. For example, at the World Bank there are more than four times the number of staff working on any given project than at the AfDB. A number of the AfDB's projects, especially its policy loans, are financed jointly with the World Bank and other donors. The AfDB also relies extensively on World Bank research and analysis. As a larger institution and often the lead financier on joint projects, the World Bank attracts more attention than the AFDB.

While the AFDB’s lending had not expanded significantly in recent years, 2006 figures indicate that things may be changing. Between 2005 and 2006, the AfDB’s lending activities increased by more than 30 percent to $3.4 billion. Over the same period, private sector operations doubled in value. The AFDB has specific mandates from the New Partnership for Africa’s Development (NEPAD) and other international organizations to take the lead amongst financial and development institutions in areas such as infrastructure, regional integration, and banking and financial standards in Africa. These mandates have also increased the AFDB’s profile in the media. The increased international emphasis on Africa’s development needs in recent years (for example, surrounding the 2005 Gleneagles G8 Summit), and on the importance of infrastructure investment in Africa, has highlighted the role of the AfDB.

Some research has indicated that a high percentage of respondents in African countries has a marked preference for additional aid from the African Development Bank, despite the fact its relatively low rating against most of the aid effectiveness criteria found to be important by donor recipients.[9] This suggests that donor recipients in Africa views on the ‘multilateral donor of choice’ are informed by additional aid effectiveness criteria that are not commonly identified or reported against, though exactly what those criteria have not been discussed.

In general, whereas there has been progress at all levels with regard to democracy, growth and restoring the macro-economic balances in Africa over the past fifteen years, half of sub-Saharan Africa lives on under one dollar a day, and AIDS is threatening the social fabric of the continent. The studies conducted by various organizations (including the African Development Bank and the World Bank) show that, with the exception of northern and southern Africa, the United Nations Millennium Development Goals (reducing by half the number of persons living in poverty and without access to potable water by 2015) will in most cases not be attained. Nevertheless, these same studies indicate that the majority of the African countries can make notable progress to these ends.

Membership

  AfDB Beneficiary Countries
  ADF Beneficiary Countries
  AFDB and ADF Beneficiary Countries
  Non-African Member Countries

AfDB Beneficiary Countries:

ADF Beneficiary Countries:

AFDB and ADF Beneficiary Countries:

Note: All countries in the African Union including Mauritania but excluding the SADR are eligible for NTF benefits. Morocco is also eligible though not a part of the African Union.

Non-African Member Countries:

List of 20 Largest Countries by Voting Powers

The following table are amounts for 20 largest countries by voting powers at the African Development Bank as of December 2014.[10]

The 20 Largest Countries by Voting Powers at the African Development Bank
Rank Country Voting Powers
(% of Total)
World 100.000
 European Union 18.756
1  Nigeria 9.281
2  United States 6.563
3  Japan 5.494
4  Egypt 5.379
5  South Africa 4.871
6  Algeria 4.209
7  Germany 4.127
8  Canada 3.802
9  France 3.760
10 Ivory Coast Côte d’Ivoire 3.687
11  Libya 3.683
12  Morocco 3.498
13  Italy 2.428
14  Ghana 2.137
15  Zimbabwe 2.052
16  United Kingdom 1.689
17  Ethiopia 1.587
18  Sweden 1.553
19   Switzerland 1.474
20  Kenya 1.430

United Nations Development Business

The United Nations launched Development Business in 1978 with the support of the World Bank and many other major development banks from around the world. Today, Development Business is the primary publication for all major multilateral development banks including the African Development Bank, United Nations agencies, and several national governments, many of whom have made the publication of their tenders and contracts in Development Business mandatory.[11]

See also

References

  1. ↑ Retrieved on 2012, November 15 from
  2. ↑ "Flag-raising ceremony marks AfDB’s return to its official headquarters in Côte d’Ivoire". AfDB. 8 September 2014. Retrieved 18 March 2015.
  3. ↑ "Unclassified wire to U.S.-Abidjan Embassy". US Department of State. Retrieved April 22, 2013.
  4. ↑ "The African Development Bank: Tenth Replenishment of the African Development Fund, Order 2006" Statutory Instrument 2006 No. 2327, Government of the United Kingdom ISBN 0-11-075060-8
  5. ↑ African Development Bank Group, (2005), about us, Group entities Retrieved on 2005 from http://www.afdb.org/portal/page_pageid=313,165673&_dad=portal&_schema=PORTAL
  6. ↑ "Amendment of ISO 4217 on 07 april 2011" (PDF). Retrieved 14 June 2014.
  7. ↑ Bank Information Centre, USA, (2005, July 27), African Development Bank Retrieved on 2005 from, July 27, from http://www.bicusa.org/bicusa/issues/african_development_bank/index.php
  8. ↑ African Development Bank Group,(2006), Topics, HIV/AIDS from http://www.afdb.org/portal/page?_pageid=473,970125&_dad=portal&_schema=PORTAL
  9. ↑ Cecilie Wathne and Edward Hedger 2010. What does an effective multilateral donor look like? London: Overseas Development Institute
  10. ↑ http://www.afdb.org/fileadmin/uploads/afdb/Documents/Boards-Documents/statement_of_voting_power_as_at_31_december_2014.pdf DISTRIBUTION OF VOTING POWER BY EXECUTIVE DIRECTOR STATEMENT OF VOTING POWER AS AT 31 DECEMBER 2014
  11. ↑ United Nations Development Business' website

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