Frequently asked questions
What is Governance?
According to the 2000 Bank Group Policy on Good Governance, governance is “a process that refers to the manner in which power is exercised in the management of the affairs of a nation, and its relations with other nations.” Furthermore, the policy identifies key elements of good governance such as accountability, transparency, participation, combating corruption, and the promotion of an enabling legal and judicial framework.
Why is Governance important?
There is a consensus in Africa that governance underpins sustainable development and poverty reduction. Weak governance institutions represent key impediments to equitable growth, economic competitiveness and private sector development. The quality of financial governance is key to government effectiveness.
Some statistics are telling:
- The AU estimates that the direct and indirect costs of corruption account for 25% of the continent’s lost GDP and it increases the cost of goods by as much as 20%.
- Research by the African Development Bank found that poor governance systems lead to a loss of approximately 50% of tax revenue, in some instances this is a more than the total foreign debt of a country.
Improving these unfortunate situations, even by only half, will lead to the following gains: - US$70 billion added to African GDP annually. This is almost 3 times the current total amount of annual development aid given by G8 nations to Africa.
- 25 percent more in tax revenue, to be used for roads, bridges, water systems, schools and hospitals.
Daniel Kaufmann, a World Bank Institute Director, calls it the “300 percent dividend.” His research indicates that “a country that improves in governance gets three times more income per capita in the long term.” That is a huge return on investment and one we work to help countries capitalize on.
Few things the Bank does has the power to harness and promote African growth like the work we do in governance. In fact, between 2000 and 2006, the Bank Group invested US$2.5 billion to strengthen African governance structures and institutional capacity to accompany African countries in their journey towards progress. Governance and the fight against corruption is everyone’s job – a challenge we can only achieve by working together. This is particularly important for fragile states that show decisive commitment to move forward and turn-around. Using the GAP as a guideline, the Bank will play a catalytic role in crystallizing Africa’s voice on governance. The Bank will, in particular, help to develop an African-owned and led agenda for good financial governance. As Africa makes progress in improving its governance standards and practices, the donor community must also deliver on its commitments. This is essential for mutual accountability.
What does the AfDB seek to achieve via its governance programs?
The Bank’s core objective in governance is to assist African countries to build capable and responsive states by strengthening transparency and accountability in the management of public resources, with an emphasis on oversight institutions and accountability systems. Reinforced public sector governance and enhanced country systems for managing public resources will contribute to open governments, engaged societies and an improved business environment. The Bank’s governance work will focus on public sector governance to improve the effective use of public resources for poverty reduction and the enabling environment for private sector development.
Operationally, the Bank’s strategic focus in governance will be deployed at the country, sector, and regional levels. The Bank will focus on certain dimensions of governance (Economic and Financial management) most relevant to its mandate and core objectives. The Bank’s approach will be tailored to governance priorities of client countries and their commitment to reform, differentiating the special needs of fragile states (FS), performing low-income countries (LICs) and middle-income countries (MICs). It will seek to balance alignment to country priorities with the Bank’s need to focus its contribution where it can add value. This approach will inform the choice, mix and sequencing of Bank instruments.
How does the Bank differentiate its governance approach in Fragile States?
One of the Bank’s objectives is to provide more effective assistance to fragile states in their transition from fragility. The Bank also aims to support risk countries in their effort to prevent slippages and assist countries progressing from post-crisis and post-conflict to promote political stability and economic development. The following countries are currently identified as fragile states: Burundi, Cote d’Ivoire, the Comoros, Guinea Bissau, Liberia, Central African Republic (CAR), DR-Congo, Sierra Leone, and Togo.
In fragile states, the Bank’s governance department focuses on building institutions and strengthening capacity in financial governance and, where relevant, in natural resources management. Restoring basic systems for sound management of public resources is essential for rebuilding government capacities, delivering essential services and restoring public confidence in the state. Effective engagement in fragile states nevertheless requires continuous policy dialogue in the field, which will be driven by Bank field offices.
How do you measure good governance?
In the last decade, governance assessment has taken a more prominent role as: (i) donors have sought to measure a return on their “investment”; (ii) governments have sought to understand the effects of their “good governance” implementation efforts; (ii) private sector and financial analysts have looked for ways to assess their investment risk and opportunities; and (iv) the civil society has looked for better ways to measure performance and target their support and accountability efforts.
The Bank has an instrument, the Country Governance Profile (CGP), which seeks to provide a framework by which the current state of governance and the Banks objectives in improving governance performance can be measured and evaluated within the Bank’s Regional Member Countries (RMCs). The CGP was introduced in 2002, following the adoption of the Bank’s Good Governance policy (1999) and its implementation guidelines (2001), as a diagnostic tool to systematically assess key governance issues confronting each of the RMCs. The CGP framework is currently under revision and a new framework is expected to be in place in 2009.
How does the Bank determine what activities it will undertake in governance?
There is a number of considerations taken into account when deciding on which initiatives and projects we support. The eight guiding principles listed below provide a useful framework for understanding this process.
| 1. African countries have the primary responsibility for improving their own governance to accelerate the fight against poverty. | Institutions cannot be imported or exported; they need to grow from within. Where there is country ownership and commitment to reform, improvements in governance can take place relatively quickly. The Bank’s work on governance will be guided by a country focus, working with governments, the civil society and the private sector to further good governance and fight corruption. |
| 2. Bank activities in governance will be sequenced and tailored to country circumstances. | The Bank will tailor its support to countries’ governance challenges, reform priorities and potential for progress. Every RMC has a unique combination of governance features, strengths and vulnerabilities; one size does not fit all. The Bank’s approach will therefore be tailored and sequenced to meet the specific developmental needs and governance challenges of fragile, middle and low-income RMCs. |
| 3. The Bank considers corruption as a symptom of broader governance challenges. | Therefore, the Bank’s approach to fighting corruption will focus on deterrence by strengthening country systems of financial integrity, especially financial accountability and budget oversight. |
| 4. The Bank will pursue a strategy of constructive and systemic engagement, including high-risk environments. | The approach will be predictable and consistent, to avoid punishing the poor twice and creating “aid orphans.” Potential for progress, rather than initial conditions, will guide its engagement in governance, based on countries’ commitment to reform and direction of change. [1] |
| 5. The Bank will strengthen country systems, rather than bypass them. | To optimize development objectives, the Bank will endeavor to strengthen and use country systems, in particular public financial management and accountability systems, consistent with the Bank’s strategy. |
| 6. Internally, the Bank will strengthen transparency in its own operations | To address its fiduciary concerns, the Bank will enhance its safeguards and integrity mechanisms, including financial management and procurement systems, [2] to ensure that the funds it provides are used for the purposes intended and are properly accounted for. [3] |
| 7. Bank activities in governance must be focused on delivering results, demonstrating impact and adding value compared to other partners. | Bank governance operations will be selective, based on the Bank’s mandate, track record, and internal capacity. Delivering results will require enhancing strategic alignment, upstream analytical work, improving quality-at-entry, and a results framework for measuring progress. The Bank is committed to mainstreaming gender concerns, strengthening social cohesion and encouraging domestic accountability. |
| 8. Bank governance activities will develop synergies and improve relevance. | Bank governance operations will be selective and based on the need to create positive interactions with the rest of the Bank’s portfolio and corporate priorities. |
| 9. The Bank will work with others to achieve common objectives. | This approach will be based on the Bank’s comparative advantage and its ability to complement other development partners, consistent with Paris Declaration commitments on aid effectiveness. |
[1] A profile of the situation by country will determine the choice and combination of aid instruments used by the Bank. A four-category classification was designed based on policy quality (good or bad) and the risk of corruption (high, low) to guide the use of Bank instruments. The Bank’s constructive engagement in high risk corruption-prone environments in 2006.
[2] ADB, Restructuring Procurement and Financial Management Services, AfDB, ORPU, draft August 2007.
[3] In 2006, the Bank established an anti-corruption and fraud investigation function and an Anti-corruption and Fraud Division was set-up in the Office of the Auditor-General (OAGL).
Documents
African Governance Outlook 2012 (680 KB)
Guidance Note - Adressing Sector Governance and Corruption Risk in Infrastructure Projects (1.8 MB)
Budget Practices and Procedures in Africa 2008-(Portuguese Version) (3.0 MB)
Governance Strategic Directions and Action Plan-2008-2012 (4.3 MB)
AfDB Group Strategy for the Prevention of Money Laundering and Terrorist Financing in Africa (169 KB)
