African Development Bank and the challenge of addressing Africa’s infrastructure crisis

Business Day website. Horatius Egua, who covered the last Annual General Meeting of the African Development Bank which held in Abidjan, writes that despite the huge funds at the bank’s disposal efforts towards developing the continent are being frustrated by corruption, political instability and general insecurity across the continent. The board of governors of the African Development Bank (AfDB) last week, in Abidjan approved a 200 per cent sixth general capital increase for the institution. This is another piece of good news for the continent, considering the fact that Africa, like other continents of the world is emerging from a scathing economic crisis.

By the end of the 2009 financial year AfDB had delivered support equal to $12.6 billion compared to $5.5 billion in the previous year. It also provided frontloaded additional budget support, trade finance and liquidity,” while the “private sector window filled the gap left by sponsors of key infrastructure projects”. This is good news also but despite the over $100 billion fresh fund approved for the bank, the challenges for developing the continent are still huge especially in the face of dwindling finances, corruption, political instability, lack of drive, wars and general insecurity across the continent.

In the 2009 financial year alone, the bank committed $1.8 billion, building regional transport corridors, electricity power pools and supporting regional economic commissions. This is meagre considering the difficult conditions faced in the continent as a result of the shortage of basic infrastructure.

Infrastructure of all types presently account for 52 percent of the bank’s portfolio. In response to power outages and the energy shortage in many countries, the bank gave particular attention to energy, which accounts for 57 percent of the infrastructure outlays, yet power remained dismal and frustrating. This calls for an urgent and holistic approach to tackling the endemic infrastructure problems besting the continent of Africa.

Infrastructural needs of Africa remained grossly dismal especially in the areas of power, transportation, education and sanitation. The well-articulated Millennium Development Goals (MDGs) targets are far from been met. In fact, the continent is behind on the economic scale and if Africa must be taken seriously, it must as a matter of urgency reinvent the wheel of development otherwise the huge infrastructure deficit will continue to kept the continent in the background on the global economic scale as non of the developed economies of the world take Africa seriously as a result of this infrastructure problem.

The World Bank (WB), the International Monetary Fund (IMF) and the AfDB have claimed to have spent billions of dollars on the continent of Africa in the past years without any significant improvement in the decayed infrastructure.

These international and continental financial institutions present year in year out, papers but with no meaningful results that has been able to concretely address the infrastructure needs of the African continent. While accepting his re-election as AfDB president, last Friday, in Abidjan, Cote d’Iviore, at the 2010 AfDB annual meeting, Donald Kaberuka, said the bank under his leadership “will strive to meet the expectations of African people. We will work to achieve regional integration, fight against climate change and ensure food security”.

He was however quick to add that the solution to unlocking the internal market potentials and developing the continent’s vast resources lies on regional integration. “Connecting Africa to itself, and with the rest of the world is the essential starting point – exactly what we have been doing – corridors – power pools – maritime ports etc. Last week, a major sub-marine cable, we are partly financing, landed next door in Ghana and shortly in Nigeria”.

Kaberuka noted that the move “will have a major impact on the cost of doing business in the region and cost of access to the world, the world of education, of business information etc. However, that is part of what must be done. The second critical element is the role of the large regional economies, the regional engines”.    He was emphatic about what the continent need to do to be able to stabilise its infrastructure facilities and noted that the larger question must be addressed that is “how we manage commodity revenues; to build our infrastructure, to spread the benefits, in short to build diversified, self sustaining rather than supply economies?”

Olusegun Aganga, minister of finance also stressed the need for prudent management of resources and a collective determination on the part of African leadership to addressing the nagging problems faced by the continent. He was very emphatic about the need for economic self-determination on the part of the continent. “I wish to state that the responsibility of charting Africa’s development lies squarely on Africa. Development partners can only support us. This is more so in the current challenging fiscal context, where our foreign partners are facing economic challenges of their own,” he said.

“Nigeria wishes to re-affirm the imperative for all of us to strengthen efforts to mobilize internal resources and manage costs efficiently, embark on the necessary institutional reforms to remove obstacles to growth, implement sound macro policies, promote good governance as well as improve south-south and intra-Africa exchange of ideas, experiences and cooperation for mutual progress”.

AfDB project financing in Africa The key infrastructure projects approved in 2009 included airport projects in Morocco and Tunisia, national road projects in Burkina Faso, Cameroon, Chad, Ghana, Guinea, Mali, Sierra Leone, Malawi, Rwanda, Senegal and Uganda. The others are multinational road projects connecting Cameroon-Nigeria, Cameroon-Gabon, Kenya-Ethiopia and Mozambique-Malawi-Zambia.

Thierry de Longuemar, vice president in charge of finance for AfDB, said the bank group approved power projects in Botswana, Kenya, Lesotho, Nigeria, South Africa and Tunisia. He listed other projects approved by the bank to include water sector projects in Tunisia, Morocco and Egypt in 2009 while supporting the private sector in 2009 with $1.8 billion (UA1.16 billion), an increase from $1.4 billion (UA901) in 2008.

Others projects listed under the 2009 financial year are the $35 million trade finance facility for Ghana, financing international marketing of Ghana’s 2009 cocoa harvest; $5 million loan to Liberia Bank for Development and Investment and the $55 million for submarine fibre optic cable. On regional integration, de Longuemar said “the Bank committed $685 (UA453.2) million which covered projects in regional infrastructure development and institutional capacity building, close collaboration with the African Union, (AU) Economic Commission for Africa (ECA), African Peer Review Mechanism, (APRM) Budget review and public procurement”.

In supporting the recovery process in fragile states, the bank group approved $551 million (UA 364.8 million) in 2009 to finance 12 operations in Guinea-Bissau, Togo, Cote d’Ivoire, Liberia, Sierra Leone, Comoros and Central Africa Republic.

The bank’s capital increase Troubled by the global economic recession that rocked the world between 2008 and 2009, the governors representing the AfDB’s shareholders approved the tripling of the Bank’s capital base to about $100 billion. The argument put forward by the governors is that the continent is faced with “significant hurdles, such as financing gaps in excess of $117 billion in 2009 and $130 billion in 2010 just to meet the Millennium Development Goals (MDGs).

The question agitating the minds of economic and political commentators across the continent is that with all these huge budget and projections, would those charged with the responsibility of executing and monitoring the projects for which the fund would be allocated be prepared to do their jobs?

It is pertinent to ask this question because despite all the huge investment in infrastructure and ancillary facilities in the continent, in the past, nothing significant seems to be achieved, as infrastructure remained decayed and moribund.

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