By the standards of global banks this one is a tiddler. With total assets of just $33 billion the African Development Bank (AfDB) is little bigger than the Bank of Oklahoma, America’s 38th-largest. The proposed Asian Infrastructure Bank, whose founding members met this week, will likely be larger at birth: it expects to start out with authorised capital of $50 billion. Yet the AfDB, a multilateral bank owned mainly by African countries, is the biggest financier of infrastructure on a continent that is desperately short of roads, rails and power plants. And since it is African, it has licence to criticise governments and suggest policies that may otherwise be shrugged off if they came from institutions such as the World Bank or IMF.
The AfDB has had a troubled history. Two decades ago it almost went broke because of poor management and dud loans. In 2003 it was forced temporarily to decamp from its headquarters in the Ivory Coast because of civil war there. But the past decade has treated it more kindly. Under the able leadership of Donald Kaberuka, a former finance minister of Rwanda, its finances have improved. So too has its standing. Its shareholders ponied up in 2010 to increase its capital and to support its plans rapidly to step up lending, mainly for infrastructure. And during his two terms as president Mr Kaberuka has chivvied African members to improve governance and lower barriers to trade. At its annual meeting on May 28th the bank’s shareholders face a difficult task in choosing a worthy successor to him.
Unlike some other multilateral institutions such as the World Bank or the IMF, where the top jobs are jealously guarded by the biggest shareholders, the AfDB runs a remarkably open selection process, at least on the face of it. A shortlist of candidates has been produced and shareholders will whittle these down in successive rounds of voting. Three front-runners have emerged: Akinwumi Adesina, Nigeria’s agriculture minister; Cristina Duarte, the finance minister of Cape Verde; and Thomas Sakala, a Zimbabwean and AfDB veteran, who has the backing of South Africa.
Of the three, the smooth-talking, bow-tie-sporting Mr Adesina has the more ambitious plans for the bank. Counting against him may be his nationality. Although Nigeria has a 9% vote, the bank’s smaller members generally tend to vote against candidates from the continent’s biggest economies out of fear they may be bullied by them. Nigerian candidates have lost out twice before. Mr Adesina’s platform may disarm some critics. Among his proposals is to have the bank take more risk and lend to smaller and needier countries. For the moment the AfDB’s focus is slanted towards financing infrastructure in big, creditworthy countries such as Nigeria and Kenya that could easily raise money in private markets. Such conservative lending may have made sense when it was trying to restore its credit rating, but the AfDB should now concentrate on filling gaps left by private investors.
One way of doing that could be to use its balance-sheet to help take on some of the risks that private markets find difficult to price. These would include the political risks of, for instance, governments expropriating privately-funded infrastructure or changing the rules over the returns they can earn. Whoever wins the race, the new boss should say yes a lot more.
Photo: AFP
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