Prometheus 6   

INTERNATIONAL FINANCIAL INSTITUTIONS AND DEVELOPMENT IN AFRICA

http://www.pambazuka.org/index.php?category=Editorial

Akong Charles Ndika

In less than a year, the African Development Bank (AfDB) will be celebrating its 40th anniversary. This comes at a time when there is growing consensus all over the continent on the need for Africa to have ownership of its development. In tune with this, African heads of states in June 2003 committed their leadership to the New Economic Partnership for Africa's Development (NEPAD), which centres on African ownership and management of the agenda, strategy and process of the continent's development. In fact, the overarching goal is for �Africa to claim this millennium�.

The AfDB is tasked with co-ordinating and facilitating NEPAD. The African Development Bank (AfDB) is widely regarded as the premier financial and development institution of Africa. The Bank started operations in 1966 with a clear mandate to promote the economic and social development of its regional members and to promote international dialogue and understanding of development issues relevant to Africa. Within its general policies, the AfDB emphasised the importance of planning an energy sector for social and economic development, and indicated the intention to provide energy services to the maximum number of households at the least economic and environmental cost. This was to be done through loans, equity investments, and technical assistance to regional member countries. This envisaged regional leadership has remained a pipe dream, however, as institutions of global economic governance like the World Bank and International Monetary Fund provided external influences on Bank operations.

It is important to assess how far the Bank has lived up to its commitment to position Africa's infrastructure on the path to sustainable development. A look at the AfDB energy portfolio provides answers to these questions, while basic indicators of transparency between the AfDB and the World Bank are also worth looking at.

Energy policy and accessibility is a pillar of economic and human development. It is estimated that between 40-45 percent of Africa's 730 million people live in absolute poverty. Thirty percent are extremely poor and most of these are women. Energy poverty prevails. The availability of clean, safe energy services is vital for human livelihood and sustainable development. Poverty prevalence and health standards are inextricably linked to energy policy. Africa boasts an array of substantial renewable energy resource options, which if exploited intelligently could electrify rural areas. Solar, micro-hydro, wind and geothermal energy would bring power sooner and with lower environmental impact than conventional policies have done.

The Bank says lending in the traditional sector (i.e. fossil-fuel power plants) has significantly declined [and that] over the recent past, there has been a shift in the bank's lending from conventional energy projects to rural, decentralised projects incorporating renewables. Such a shift is overdue: in the year 2000, just one renewable energy project was funded by the Bank and typically, about 3 percent of AfDB energy investments went to such projects.

The importance of energy to development is acknowledged in the AfDB 1994-draft energy policy which even stated Bank support for the promotion of solar, wind and micro-hydro initiatives. Several small initiatives have helped to identify and promote viable renewable energy technologies but these have been temporary and marginal to the vast majority of energy spending. And the new energy policy of the AfDB borrows greatly from the World Bank programme of privatising publicly owned energy companies. This programme has not resulted in improved development or sustainable energy in developing countries around the world. In this light, AfDB would-be energy policies are highly unlikely to improve energy access in rural areas nor boost development.

Though the AfDB was founded by African governments holding a majority ownership on paper, they don't exert proportionate influence over the Bank. Fifty-three member countries are African while 24 are non-regional members. Within the Bank, the role of non-regional members is large and growing. Since 1999, the share of regional members has shrunk to 60 percent, down from 67 percent, while non-regional members own the remaining 40 percent, up from 33 percent.

Conventions that are upheld within the Bank provide clear possibilities for skewed priority setting. The non-African member countries that provide the capital and set policies in the World Bank also strongly influence the AfDB. So far, the AfDB has not developed viable Africa-relevant alternatives and more often abides by World Bank prescriptions, remaining silent on the negative aspects of the privatisation of public services and assets.

Though it has not assumed leadership in Africa's development, the AfDB is still an important influence over regional and domestic energy policy. Aside from direct spending influence, regional development banks can actually prescribe national policy reforms. The introduction of the Structural Adjustment Program (SAP) in the 1980s by the World Bank and the IMF prompted the AfDB to equally engage in policy based lending. Rather than alleviating poverty, these economic adjustment policies instead generated poverty in the sense that unemployment increased, real wages fell and governments cut social expenditures.

Through policy-based lending, International Financial Institutions (IFIs) facilitate the opening of emerging energy markets to foreign investment through privatisation and deregulation. Development bank sponsored energy sector restructuring and projects for the extraction, processing, transport and combustion of fuels for energy provision have enormous impacts on peoples livelihoods and health and on the environment as well as the affordability or otherwise of essential electricity and liquid fuels. At least in theory - through the resultant economic growth and exposure to market rules - this process facilitates competition and transparency. But in practice the transfer of control and ownership of resources and infrastructure is removing, rather than introducing opportunities for public oversight.

African Development Bank representatives reside in most client countries often with a skeleton staff for basic tasks excluding public liaison. The total absence of full resident missions in some countries of operation precludes the facilitation of information dissemination and public dialogue. AfDB units such as that in Cameroon, which is housed within UNDP offices, have as few as two staff to follow up Bank financed projects and who therefore do not provide information on general Bank operations. Most offices maintain only limited information on projects and are not always ready to release it to the public. The absence of functioning Bank structures in most member countries makes it difficult even for the Bank itself to evaluate the projects it finances, let alone for those operations to be transparent to others.

Public notification is not a requirement when a project comes up for internal consideration: the first step in the approval process. It is invariably difficult to obtain project information, especially project briefs for which access is limited to management and Board members. Project documents are only released once an internal evaluation of the project has taken place and even then, only at the Bank's headquarters in Abidjan. Even this after-the-fact information disclosure can be avoided when the Bank cites legal restrictions or practical constraints or deems the information sensitive or privileged in which case it may be classed as confidential, for official use only. When they are finally available to the public, project files contain the terms of reference and operational directives of the bank but not the financial aspects or information about private sector partners. At this point, the project-in-pipeline becomes available on the official web-site including country, sector and cost of project but has already reached an advanced stage of the approvals process with minimal stakeholder input. Even so, it is regarded as very difficult for an affected community to discuss a planned project with the bank once it appears publicly.

It is worth noting that, though the AfDB and World Bank shareholder constituencies are European and US dominated, the standard of Information Disclosure, Environmental Impact Assessment and Resettlement Policy are substantially lower in the AfDB.

Given the demonstrable power IFIs wield over development prospects and energy sector reform, and the urgent need for sustainable energy provision, transparency within International Financial Institutions is imperative. Because a projects value depends not only on its profitability to investors but its contribution, or at very least its absence of detriment, to the people that live most closely with the consequences, they must have a say over whether the project proceeds and under what terms. Effective public participation, in turn, relies on good information disclosure policy and practice on the part of the Bank. Even as lenders of last resort for many types of programmes, the African Development Bank could function better by aligning policies and projects more carefully with a broader spectrum of stakeholders, especially those directly affected by individual projects. Public funds should not be used for projects or policy reform exercises that affected people are not informed of prior to implementation nor for which no reasonable avenue of appeal exists.

As the controversies over bank reform priorities, policies and projects are broadcast from project-affected people and NGOs to a wider audience - including the major constituencies of Bank Executive Directors in the US, Japan and Europe, greater accountability is being demanded. Development banks and the private sector must exercise the principles and standards of operation that would be expected in their shareholder countries, starting with the basics of reasonable and consistent information disclosure standards across regions. To position Africa on the trajectory to sustainable development, AfDB should make its policies and project documents transparent and based on public input. This is the only path to true ownership of any development initiative for Africa. Until use of public funds is subject to public scrutiny, energy policy that reflects African needs, aspirations and sustainable development will remain elusive for this millennium.

* Akong Charles Ndika is an Energy Policy Analyst with Global Village Cameroon

* Please send comments on this editorial to [email protected]