Last month, ONE’s Erin Thornton blogged about the decision by the Board of Governors of the African Development Bank (AfDB) to recommend a 200% capital increase to the shareholders for their approval at the Bank’s Annual Meetings. Today the approval was granted without discussion bringing the capital base to approximately $100 billion.
The AfDB invests most of its money in infrastructure programs meant to stimulate growth on the continent. This increase will be a huge boost for the continent where the deficit in roads, railways, telecommunications and mechanisms to deal with climate change remain huge.
At the annual meetings, the shareholders also agreed to renew the tenure of the Bank President, Donald Kaberuka, for another 5 years. After receiving two standing ovations recognizing his tremendous effort in the last 5 years, Kaberuka said one of his major objectives in the next 5 years will be to transition the continent from just a supplier of raw materials and would work on accelerating economic integration to create a platform for demand. Trade within Africa accounts for only 9.5% of all exports from the continent.
There was a quiet victory last week for an emerging powerhouse in Africa’s development. The African Development Bank Group (AfDB) is a critical resource for the continent. It’s funded by—and for—Africa with additional assistance from outside donors and it has been playing an increasingly important role financing some of Africa’s most critical needs both for poverty reduction and for economic growth such as infrastructure, the private sector and governance.
The Group consists of the African Development Bank which provides “hard” lending to qualified countries and the African Development Fund which provides concessional finance to low income countries. Unlike the regular envelope of resources allocated through its replenishments, the Bank can fund middle-income countries which can often be regional engines of growth and can also finance private sector entities in any country—low or middle income. In fact, more than half of the private sector operations done by the AfDB last year were in low income countries.
Because of its role, demand for Bank financing has been on the rise—especially in the face of the financial crisis. Last year, the G20 asked the Bank to make more resources available more quickly and in so doing, the Bank basically exhausted its available resources. But growing economies—that have posted impressive expansion rates—need continued access to such resources in order to continue growing.
The African governments have already signaled their recognition of that fact this winter when they gathered in South Africa but this past week they met with external shareholders as well to discuss the future of the African Development Bank. Thankfully, the news was good. The “Governors” agreed to recommend a 200% capital increase for the African Development Bank to the Board of Directors. If the Board approves the decision at the annual meeting in May, it will mean that 200% more borrowers will be able to access financing for creditworthy investments in the continent’s growth. And that’s the sort of growth Africa needs.
According to AfricaGoodNews.com, the president of the African Development Bank Donald Kaberuka predicts gross domestic product could reach 7 percent in 2011.
“When we look at this year 2010, I totally concur with the numbers from the International Monetary Fund… (of) around 5.5 percent of real GDP growth and going into 2011, perhaps 1.5 percent more,” AfDB president Donald Kaberuka said.
Kaberuka was speaking at the AfDB’s Committee of 10 (C10) meeting. The C10, consisting of African finance ministers and central bank governors, was formed to develop an African response to the global financial crisis after a meeting in November 2008.
He told journalists separately that 7 percent growth was the least that Africa needed.
“If we get 7 (percent growth) that would be very good. That is the minimum we need,” Kaberuka said.
The world’s poorest continent, mainly dependent on minerals and commodity exports for revenue, surprised economists by weathering the global economic crisis better than the West, where recession has curbed growth in many developed countries.
Top African economy South Africa — which exited its first recession in 17 years last December — together with Nigeria and Kenya, is expected to help spur Africa’s recovery on the back of improved global demand.
Donald Kaberuk, President of the African Development Bank, has a piece in Business Daily today explaining the AfDB’s response to the global financial crisis. In it, he calls for the need to “do what it takes to sustain the recovery and regain a momentum to growth”.
He elaborates on this:
At the Bank, we strongly believe we should take leadership in Africa’s economic integration. It is one of our core areas.
It is the leading source of funding for regional integration in Africa having invested close to $9 billion over the last nine years.
Many of our non-regional members have undertaken massive domestic stimulus programmes, and now face pressures to consolidate or reduce their budgets.
Unsurprisingly then, the major donors will take a view across the international system and assess what they see as the comparative merits of competing bids.
But they also want to know what the views are of the clients.
They want to hear what priority you give to this Bank, to investing in it as an African institution, or as a lender of choice, On 12 November 2008, at the very start of the financial crisis, accompanied by Central Bank governors, countries adopted joint African response to the global financial and economic crisis raging at the time.
Today, African governments stepped up to provide more resources for their own development through the African Development Bank. In two weeks, wealthy donor countries like the U.S. will decide if they will follow suit.
The African Development Bank Group (AfDB) is a key player in fueling Africa’s economic transformation. The Group consists of the African Development Bank which provides “hard” lending to qualified countries and the African Development Fund which provides concessional finance to low income countries. The Group is African led—with the majority of its shareholders coming from the continent. And it responds to Africa’s needs- aligning its assistance with country priorities and concentrating its lending on infrastructure, the private sector and governance.
The needs on the continent as we know are great, especially in light of the recent financial crisis. For that reason last year at the April G20 Summit in London, the global community called upon the AfDB to scale up its assistance to African countries urgently so as to counteract the crisis’s impact on the continent. The Bank heeded the call but now faces a need for new resources two years sooner than originally anticipated.
A general capital increase (GCI) for the African Development Bank is critically important for two reasons. Unlike the regular envelope of resources allocated through its replenishments, the capital increase can be used to fund middle-income countries which can often be regional engines of growth and it’s also critical because private sector entities in any country—low or middle income—can draw upon these resources for critical financing. In fact, more than half of the private sector operations done by the AfDB last year were in low income countries.
Today, African shareholders met and agreed that they would support a 200% general capital increase. This means that all of the African shareholders—including the low income countries—feel that this tool is important enough to put their own resources forward and support an increase. Next up is for the donor nations to do the same—to see that a general capital increase for the Bank is a critical tool for all of Africa and to support African countries in their effort to finance it. Western donors see this as a 2012 issue but Africa sees it differently. Hopefully the leadership shown today will spark action amongst western capitals as well.
Our friends at the African Development Bank have launched a new blog called Building Africa Today. Right now the blog is focused on private sector activity, a priority area for the AfDB, and is providing great data that examines economic trends on the continent.
For those of you that are unfamiliar with the African Development Bank (AfDB), it is one of several multi-lateral development banks serving developing regions—in this case, of course, Africa. The AfDB provides development financing and technical assistance to African member countries and the private sector within Africa for projects in a variety of sectors. In addition to funding country-specific projects designed to eradicate poverty and promote sustainable development on the continent, the AfDB houses several initiatives and mechanisms that aim to leverage additional resources for Africa.
The AfDB is known for investing in several specific development arenas including infrastructure and agriculture. The AfDB is often equipped to invest in these sectors when other donors are not. The Bank has played a particularly important role during this past year: as the financial crisis has unfolded, the AfDB has disbursed the money they have in the bank much more rapidly—called frontloading in bank speak. This funding has helped to buttress against the impacts of the crisis on African countries. Because of this frontloading, the AfDB will soon be out of money and will need to fundraise to replenish its covers. This will be a big priority for ONE this year—stay tuned for information there.
Our friends at the African Development Bank created this video about Alice Mbullah, a woman in Cameroon who has been able to grow his fishing business with the help of a small loan.
As the film tells us, more than 100,000 entrepreneurs in Cameroon received loans to support their farming and fishing business and more than 70% of the fishing entrepreneurs are women.
These businesses have helped these women send their children to school and improve their positions in society.
This is just one of a series of short videos the Africa Development Bank is creating and that we’ll be posting here on the ONE Blog.
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