Development Effectiveness Reviews 2012
Launched in 2011, the Annual Development Effectiveness Review (ADER) provides an overview of the performance of the African Development Bank. With inclusive growth as its theme, this second ADER reviews development trends across the continent from this perspective and explores how the Bank’s operations have addressed them. It also looks at how well we manage our portfolio and our own organisation.
Africa today presents a far more optimistic picture than it did a decade ago. With growth rates above 6% for most of the past decade, it has established itself as one of the fastest-growing regions in the world today. A decade of reform, Africa’s abundant natural resources and growing middle class make it an increasingly attractive market for both domestic and foreign investors. Poverty rates are falling, the private-sector environment is improving rapidly, trade is expanding, and more and more people are becoming connected—to roads, electricity, information technology, water and sanitation. Education and health are making steady progress and the number of fragile states has declined. However, Africa’s growth is often concentrated in a few sectors and areas, benefiting only part of the population. We need to change the quality of growth, to create more and better jobs and economic opportunities and lift more Africans out of poverty.
Most of our operations — from overcoming infrastructure deficits to boosting agricultural productivity and improving education and training for African youth — help to promote inclusion by creating opportunities for isolated or marginalised groups. But there is always scope to do more. This ADER lays out what the Bank has achieved, and helps sharpen our focus on this key theme. The ADER also reviews how well we manage our portfolio and our own organisation. This has been a dynamic period for the Bank as we reorganise our structures and business processes to make us more responsive to the needs of our member countries. Many of these reforms are beginning to bear fruit. However, we must keep our operations under constant scrutiny. This ADER is one of the tools by which we ensure continuous improvement.
It is widely acknowledged that the quality of governance is one of the most important factors in Africa’s development performance. Helping African countries build capable and responsive states is one of the strategic pillars of the Bank’s Long Term Strategy. Our Governance Action Plan and Strategic Directions sets out the guiding principles and objectives for our governance work at the country, sector and regional levels. We build on our comparative advantage and focus on strengthening transparency and accountability in the management of public resources, including public finances and natural resources.
In preparing for this review, we have developed a Results Measurement Framework for our governance operations, structured around four levels. Level 1 measures Africa’s overall progress on governance in recent years, using indicators on public financial management, business enabling environment, macroeconomic management, political governance, the rule of law, and corruption and governance effectiveness. Level 2 measures the Bank’s contribution to these results. Level 3 measures how well we manage our operations in the governance field, while Level 4 tracks our efforts to improve our own ability as an organization to engage in this challenging arena.
Looking forward, our new Governance Action Plan and planned Long-Term Strategy 2013–2022 include a strong commitment to inclusive growth. We are enhancing our engagement in governance with more intensive efforts to promote horizontal reforms of public financial management and public administration and more engagement in sectoral governance such as infrastructure and natural resource management (including the extractive industries, water and forestry). We will continue to give high priority to promoting a favourable business environment, with a particular emphasis on employment creation. The Bank is also committed to helping its Regional Member Countries enhance their domestic revenues and reduce their dependence on aid.
In the coming period, we will develop our programming along the following lines: deepening and broadening our support of financial governance reforms, promoting reform and capacity building across the sectors, strengthening governance of natural resources, promoting employment creation through a better environment for business and deepening development partnerships.
This report examines the operations of the African Development Bank (AfDB or Bank) in fragile and conflict-affected countries (fragile states) between 2009 and 20111. It is part of our Development Effectiveness Review series, written to enhance accountability and promote learning.
Around a third of African states, home to over 200 million people, can be classed as fragile2. Historically, fragile states have received less aid, relative to their needs and absorptive capacity, than most developing countries. Some of them – the so-called ‘aid orphans’ – have suffered from serious, long-term neglect. In recent years, the AfDB has enhanced its capacity to help fragile states – especially those emerging from periods of conflict and political crisis – to consolidate peace, stabilize their economies and lay the foundations for sustainable poverty reduction and long-term growth. In 2008, we adopted a new Strategy for Enhanced Engagement in Fragile States and created a Fragile States Facility to implement it. With these new instruments, we were able not just to scale up our investments in fragile states, but also to tailor our operations to their specific needs. Between 2008 and 2011, the AfDB is committed to scaling up and strengthening its support to Africa’s fragile states. Since 2008, with the development of the new Strategy for Enhanced Engagement in Fragile States and the founding of the Fragile States Facility, the Bank has provided substantial support to a key group of fragile states. Between 2008 and 2011, the Bank provided around US $2.5 billion for 124 operations in Africa’s fragile states, and the level of investment is set to increase over the coming years. The scale and flexibility of Bank support were central to helping some of the most vulnerable countries weather the financial crisis of 2008–2009.
The African Development Bank has also moved forward with decentralization in fragile states, recognizing that proximity to clients and responsiveness to needs are particularly critical in ensuring effectiveness in these contexts. In 2011, the Bank established new country offices in Burundi, the Central African Republic, Liberia and Togo. We now have country offices in more than half of the countries currently supported by the Fragile States Facility.
The AfDB has become a key development partner for fragile states and will consolidate its leadership role in the coming decade. We are inspired by and believe in a vision of a dynamic, diversified and competitive African economic zone in which extreme poverty is eliminated within peaceful, stable and vibrant societies. We believe there is every prospect for realizing this vision within the next half century.
Regional integration has been at the heart of Africa’s political agenda for many years. Given the continent’s low population density, wide geographic spread and low levels of urbanization, Africa’s leaders have recognized integration as critical to building economies of scale and making the continent internationally competitive. The impact of globalization on Africa over the past decade has only intensified its importance. Regional integration can help overcome geographical challenges by concentrating economic activity and increasing access to global markets. But regional integration is by no means easy to implement.
Many early African initiatives foundered, in part due to the inevitable preoccupation of newly independent states with establishing national policies and institutions. The legacy of these initiatives is a complex architecture of overlapping Regional Economic Communities (RECs), of which eight are recognized by the African Union. The 1991 Abuja Treaty renewed the commitment to creating a continent-wide African Economic Community (AEC) in stages up to 2028, with existing RECs providing the building blocks. This first steps have already been taken by establishing a Tripartite Free Trade Agreement which will merge the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and (Southern African Development Community (SADC) into a single free trade area.
The African Development Bank (AfDB) is supporting this endeavour in a number of ways. It is the continent’s leading financier of infrastructure, with a strong focus on regional connectivity. It is promoting a common economic space through harmonization of national laws and institutions in areas such as customs and the financial sector. It is also working to build the capacities of the RECs and their national counterparts to promote regional integration. We note, of course, that regional integration is a shared endeavour across many African institutions, and many of our efforts are undertaken jointly with other partners, in particular the African Union and the United Nations Economic Commission for Africa (ECA).
The Bank remains committed to the pursuit of regional integration as a core objective. Regional integration forms one of three cross-cutting themes in our Long Term Strategy 2013–2022. Under our Regional Integration Strategy, we are committed to promoting regional integration, the development of hard and soft infrastructure, and to helping to addressing Africa’s many cross-border challenges.
We will also continue to make the case to other development partners on the need for more support for regional initiatives. We will develop new principles and approaches on how to provide aid effectively at this level. We have identified three focus areas for our regional operations: infrastructure connections and development corridors, strengthening of regional industrial policy, and development of new instruments.
Rwanda has set itself the goal of becoming a middle-income country by 2020, while maintaining national unity and ensuring inclusive growth and development. For a small, land-locked country with a troubled past, this is a deeply ambitious goal, requiring no less than the social and economic transformation of the country.
In the decade since the publication of its Vision 2020 document, Rwanda has already made considerable progress towards this goal. It has averaged eight per cent economic growth since 2000, demonstrating a healthy resilience in the face of adverse global economic conditions. In contrast to a pattern often seen, this growth has been broadly inclusive in nature, with income inequality falling over the past five years. Ambitious government programs to tackle rural poverty have played an important part in ensuring balanced development. As a result, the proportion of people living under the national poverty line declined from 57 per cent in 2005 to 45 per cent in 2011, representing over a million Rwandans who lifted themselves out of poverty.
The Bank is committed to continuing to improve the quality of our support to Rwanda. With the strong leadership shown by the Government and the solid foundations we have established in our programming to date, there is no reason we should not be ambitious in our goals.
There are a number of key priorities to address in the coming period. First, we will continue to increase the selectivity of our operations, in accordance with the division of labour agreed between the Government and development partners. Second, we will press ahead with decentralizing management responsibility to our Rwanda Field Office. Thirdly, we will extend the readiness filter to cover regional operations, which remain a source of delays in project commencement and implementation. Fourthly, we will continue to identify and address bottlenecks in project implementation. Finally, we propose to scale up our non-lending operations, including our analytical work and advisory services.