The Economist May 21st 2022 Middle East & Africa 45to a senior oversight role requiring integri
ty and deep trust from staff. Yet a few years
earlier the same member of staff signed a
statement to the bank’s ombudsman ad
mitting to having made a false allegation of
sexual harassment. The allegation was
withdrawn and the member of staff
blamed stress. The bank says that the indi
vidual in question did not file a complaint
for sexual harassment and it “does not
have any record of any such complaint”.
Turnover in senior jobs is also high. Mr
Adesina is onto his fourth senior vicepres
ident and fourth general counsel since
2015. Not all staff go quietly. Judgments by
the bank’s independent tribunal have more
than tripled since Mr Adesina took office.
Among the cases were employment dis
putes filed against the bank by three vice
presidents. The bank says the increased ac
tivity of the tribunal is a clear sign of its
“commitment to transparency, equity, and
fairness to all, through a recourse mecha
nism that is fully independent”.
Does your watchdog bite?
A weakening of the bank’s watchdogs rais
es questions over the quality of informa
tion reaching the board. Reports about fi
nancial risks, for instance, do not go di
rectly to the board but are sent via senior
executives. In several instances these exec
utives have demanded changes, according
to a former senior official. “There is an aw
ful lot of sanitising and massaging infor
mation that gets presented formally as
board papers,” the official says. In one in
stance this contributed to the board ap
proving a pandemic response fund that
could have harmed the bank’s credit rating
had it been fully implemented. Yet rather
than taking the nearmiss as a lesson on
the need for transparency, the bank’s exec
utives are understood to have given them
selves greater control over the flow of in
formation, including requiring risk re
ports to be cleared by the president. The
bank says it “does not withhold data or
‘massage’ information in its formal reports
to the Board of Directors” and it “rejects
any suggestion of a lack of probity in the
conduct of risk management”.
The wider consequence of the rum
blings within the afdbhas been an erosion
of trust in it, and thus of its ability to fund
development. After Mr Adesina’s appoint
ment lending by the bank shot up, with the
value of outstanding loans increasing by
41% between 2015 and 2017. But this was at
the cost of eroding the bank’s capital cush
ions. A report to governors in March 2018
warned that the bank had “no protection
today against significant shocks”. Yet Mr
Adesina played down warnings that the
bank could face problems caused by a cap
ital squeeze, according to a former official.
The bank says this is false and that Mr Ade
sina and managers had “persistently raised
the need for a timely capital increase with
the Bank’s shareholders”. Yet in 2018 and
2019 the bank was forced to slow disburse
ments to avoid breaching limits that could
have led to a downgrade by Fitch, a rating
agency. By mid2020 its balancesheet had
run out of lending capacity. In 2021 some
rich countries rescued it with a temporary
pledge to provide “callable capital” to avert
the danger of it losing its tripleacredit rat
ing. The bank says the capital was needed
because of exogenous factors such as the
credit downgrades of its shareholders.
Yet this was against a backdrop of
shareholders and donors appearing to cool
on the bank. In 2019 they approved a small
er percentage increase in capital than in
the previous round (though larger in abso
lute terms) and a much smaller increase
than Mr Adesina had requested, according
to a person with knowledge of the talks.
Some capital trickled in slowly, in part be
cause some countries seemed to delay
their contributions amid the corruption al
legations. As a result, when covid19 hit Af
rica’s economies, the bank had little dry
powder. Development banks elsewhere
sharply increased lending. Yet the afdb’s
new lending fell by 51% between 2019 and
2020, with approvals from its concessional
arm, the African Development Fund,
slumping by 24%. The bank says some
shareholders paid in early and that the
drop in new commitments was because it
focused on the rapid disbursement of ex
isting loans rather than on new ones.
Donor countries appear to prefer to di
rect much of their aid through the World
Bank. In 2018, before the pandemic, the
afdb distributed about $1.5bn a year in
grants and concessional loans. By contrast
the International Development Associa
tion (ida), the World Bank’s concessional
arm, was distributing about $15bn a year in
the region, in part because shareholdershave enough confidence in it to allow it to
borrow in private markets to supplement
donor funds. When the pandemic hit, do
nors pushed money into an early replen
ishment of the ida, 70% of which goes to
subSaharan Africa. The afdbgot no such
treatment. “idawas really the preferred in
strument of shareholders,” says Clemence
Landers of the Centre for Global Develop
ment (cgd), a thinktank in Washington
and London. The afdbsays this is not the
case and that it has strong donor support.
At a recent meeting to discuss the con
cessional window Mr Adesina demanded
an unprecedented increase and told do
nors six times that no could not be an an
swer. He then accused the representative
of the Italian government of colonialism
after it pushed back on the bank’s borrow
ing plans. The afdbsays this should be
seen in the context of “unprecedented ur
gency to avert a catastrophe” and that the
exchange happened “on the back of some
times robust and heated discussions”.
At the afdb’s annual meeting next
week, governors and the board are expect
ed to discuss an external report into the
bank’s governance. But it ought to go fur
ther, by looking into its own structure. In
almost all other development banks a ma
jority of shareholders’ votes are wielded by
creditor countries. At the afdbabout 60%
of the votes belong to borrowing countries.
This may make it more responsive to the
needs of African governments. But it may
also be having an impact on the bank’s abil
ity to raise finance cheaply. A paper pub
lished in 2018 by Nancy Birdsall, an econo
mist at the cgd, argued that the afdb’s vot
ing structure makes it less competitive
than its peers in sustaining donor confi
dence and raising capital or concessional
finance. The bank argues that this view re
flects “ignorance of the intrinsic character
of the Bank and seems to perpetuate old
stereotypes about and against Africa”.
When viewed in isolation, some of the
failings may not seem too worrying. But
when taken as a whole they paint a picture
of an organisation in need of reform. Its
shareholders may have many reasons for
not demanding change. Borrowing coun
tries may worry that speaking up could re
sult in fewer loans. NonAfrican donors,
some of which are former colonial powers,
may worry they will be seen as meddlers.
Yet the bank’s mission of funding devel
opment is much too important for it to be
allowed to underperform. The pandemic
and the war in Ukraine are inflicting huge
shocks on Africa. Absolute poverty is ex
pected to rise sharply, making it all the
more essential that the afdbis able to raise
money from donors and markets—and use
it well—to support struggling economies.
Unless the bank’s directorsand governors
grapple with the bank’sproblems, they will
Lofty ambitions be failing Africa’s poor.n