Aid Architecture - The Role of the Regional Development Banks
Donald Kaberuka, President African Development Bank
John Battle MP, Chair, APGOOD
Donal Kaberuka posed the big question for the meeting: what was the value-added of the African Development Bank, in comparison with the World Bank, other multilaterals, many bilaterals and many philanthropic organisations, some of them large.
To answer the question, he began by describing the strengths of the AfDB: a forty two year history; total expenditure over that period of $US 55 bn; $US6 bn approved last year; a AAA rating; a first-class staff. 'We know Africa', he said. And in a continent in which the World Bank was viewed suspiciously by many actors, the AfDB was a friend who could tell the truth.
Despite these strengths, the AfDB was thinly spread over 55 countries. The Inter-American Development Bank, for example, had twice the resources for a much smaller number of countries.
In thinking about the future, it was important to realise that progress in Africa would depend on collective action: each donor should play to its strengths and work strategically with others. The challenges were very large - the whole Region's GDP was similar to that of Belgium - especially so if the recommendation of the Africa Commission was to be met, that by 2015, countries should start to graduate from being aid recipients. So far, none in Africa had done so.
Donald Kaberuka identified growth as the key feature of Africa's development strategy, with rates of 7% per annum needed over a sustained period. That would need investment rates of perhaps 30% a year. Among other issues to be tackled, he listed corruption, water, infrastructure, energy and governance. A particular problem was the small size of national markets in Africa: regional integration should be a priority.
Where did the AfDB fit in this picture? Donal Kaberuka said that the choice between bilateral and multilateral channels should depend on outcomes. He thought the AFDB had a particular niche in 'orphan' countries neglected by others, especially in post-conflict countries. He also mentioned vocational and technical training. He reported that he was setting up an eminent person's panel to look at the AfDB's own architecture.
In discussion, Donald Kaberuka was asked to expand on his points about the future role of the AfDB. The Bank was currently a small player, providing only about 4% of aid to Africa. What would need to happen for it to grow? Workshops conducted by ODI in different regions had shown that recipients valued scale and cost-effectiveness, but also regional knowledge, quality of analysis, being close to the customer, governance and accountability. The AfDB had a comparative advantage in some of these areas. Being an African institution, it could exploit the niche of being the friend who tells the truth. Could it also help countries to manage recipients better?
Replying to this question, Donald Kaberuka said that:
He recognised that effectiveness needed to improve. The AfDB had been spread too thin. He hoped to concentrate more and perhaps have more regional projects;
The Bank needed to scale up in post-conflict countries. At present, the level of resources was determined largely by performance-based formulae, which disadvantaged such countries because they had not performed well. This needed to change.
The Bank had also been highly centralised - he wanted to decentralise and was setting up 25 country offices.
The Bank had not been good at generating knowledge. It needed to know the countries and the issues better. One example was the use of remittances, where he was keen to explore how $US 6bn a year to SSA could be leveraged through capital market instruments.
On the key issue of 'speaking truth', he intended to exploit the fact that he had been elected not appointed and deal with difficult issues, even if it meant that he was only a one-term President. He would do that selectively and strategically, however, and would not use his office as a pulpit.
And on the question of managing donors, he agreed with the need, but the issue needed to be managed incrementally.
Other questions dealt with debt relief, the brain drain from Africa, and sectoral issues like water. There was also a discussion about how to conceptualise MDG multipliers.
The fifth meeting in the 'What's Next in International Development?' series was held on Tuesday, 28 March on the topic of the role of regional development banks.