African bank hit by protests

Mozambique, hit by flash floods in March, won a grant from the AfDB

The African Development Bank, which works to reduce poverty and help struggling economies, has become a target of anti-capitalist protestors, despite its popularity amongst the governments of Africa's poorer nations.

Combating poverty is the bank's number one priority

The demonstrations have come as a surprise to the continent's leading financial development institution which began a three-day meeting in Valencia in Spain on Tuesday to find ways to end the plight of Africa's struggling economies.

Officials believe the protestors confuse the AfDB with the oft targeted World Bank Group which recently cancelled a poverty conference that had been due to be held in Barcelona next month.

"These groups were looking for an opportunistic target after the World Bank conference was cancelled. They found a semblance of an excuse, because the African Development Bank has been erroneously referred to here in some reports as a subsidiary of the World Bank," a senior bank official said.

Struggling economies

The AfDB meets as economic growth is slowing dramatically on all continents.

And once again, Africa is the loser, receiving less aid and less investment from abroad than it did just a few years ago.

Ghana this month won a loan to help develop rice fields

Hampered by regional conflicts, the HIV/Aids virus and sub-standard health and education, the AfDB has expressed concern at the pace of Africa's development.

For the bank, matters have been made worse by the political unrest in Ivory Coast's Abidjan where it has its headquarters, forcing it to hold its annual general meeting at this 'emergency temporary location' in Spain.

The lack of stable headquarters is not helpful for the bank which is struggling with a cumbersome leadership structure and a wealth of outstanding funds owed to it by some of the world's poorest countries

This does not make it easier for the bank to achieve its stated goal: To combat poverty and raise cash and other resources to help Africa develop, both socially and economically.

Success stories

AfDB's most recently endorsed projects have included a $12.65m loan to Mauritania for a fiscal adjustment programme, $0.5m of grants for both Malawi and Mozambique following recent floods, a $19m loan to Ghana for rice cultivation and a $100m loan to develop the information infrastructure sector in Morocco

The AfDB granted Mozambique half a million dollars after the floods

Last year, it approved loans worth $2.5bn. So far this year it has allocated about $450m.

Having won fairly widespread popularity amongst African people, the bank says that it is puzzled about why it is the target of demonstrators.

A coalition of local anti-globalisation groups - campaigning under the slogan 'another Africa is possible' - have planned a series of events to protest against what it calls "neo-liberal policies".

But the Spanish authorities have banned the demonstrations from outside the conference centre.

Rising arrears

Rising arrears, that is unpaid debts by African member nations, is perhaps the biggest area of concern for those monitoring the progress of the AfDB, including the credit agencies Standard & Poor's and Moody's.

An analyst briefing ahead of this week's meeting revealed that arrears rose to $1.23bn in 2000, compared to $1.06bn the previous year.

The AfDB says that Africa is not developing fast enough

The bank was brought to the point of collapse in the mid-1990s, when arrears rose sharply and the bank continued to extend loans which some considered to be uncreditworthy - because they were loans to troubled African economies which would, predictably, have problems repaying their debts.

This led some western members to lose confidence in the bank's management, with many withdrawing financial support.

But tighter controls introduced by the bank's president, Omar Kabbaj from Morocco, have helped reform the bank, winning back the confidence of outside investors.

The US resumed loans to the AfDB last year.

The bank says that a rise in arrears this year will be offset by increased capital reserves.

And it points out that Gabon and Angola have both completely cleared their arrears this year, after being behind with payments since 1985.

"Our financial situation is very solid. We remain concerned about arrears, but we think that we have now reached the stage where arrears won't go much further," said Mr Kabbaj.

Attracting investment

Foreign investment into Africa is declining, with the continent winning $9.3bn in 2000 compared to $9.8bn in 1998.

In 2000, Africa won just 3.9% of all foreign direct investment to developing countries, with much of that channelled into the more developed countries of North Africa.

To make matters worse, aid to Africa is also declining sharply, falling from $32 per head in 1990 to $19 in 1998.

Leaders of the World Bank and the International Monetary Fund launched an impassioned appeal for more aid to Africa in March.

Relocation?

The AfDB is majority owned by all 53 African countries.

It was established in 1963 by the Organisation of African Unity with start-up capital of $250 million. Since then it has grown into a $33 billion, multinational development bank, with 53 African and 24 non-African members.

Abidjan: one of the most developed African countries, is now plagued by political unrest

It believes that Africa's development can be best achieved through self-reliance and cooperation among African states, rather than by reliance on outsiders.

It is generally popular with African people for its development work, notably in the fields of health, education and road-building

The bank concentrates on poverty reduction through investments in agriculture and rural development, leaving many of the loans for more costly infrastructure such as power, industry, telecommunications and transportation to the likes of the World Bank.

Amongst items on this week's agenda is a special seminar on African women in finance and economics

And there is also expected to be heated discussion about the location of the bank's headquarters in Ivory Coast where there has been political and military unrest for the past eighteen months.

Sources say its new headquarter could be based in Ethiopia, Tunisia or Egypt.