“I do not think anyone in Nigeria needs persuading of the need for urgent action on the environment. Desertification in the north, floods in ... the centre, pollution and erosion on the coast are enough evidence. For Nigeria, climate change is not about the perils of tomorrow, but what is happening today,” President Muhammadu Buhari said during the UN Climate Change Conference (COP26) in October. And today means Nigerians are finding it increasingly hard to afford basic food items.
“These are extraordinary times,” said Akinwumi Adesina, the head of the African Development Bank (ADB) since May 2015, in his video welcome to the 55th annual meeting of the institution, which opens August 26.
Because of the coronavirus pandemic, this flagship meeting of the pan-African bank is held entirely virtually. It should conclude on August 27, barring for dramatic turn of events, with Adesina being reappointed to his post.
The context in which this meeting is taking place is also unprecedented as the health and financial crisis caused by Covid-19 is putting African states and economies to the test. “Never has the need to strengthen economic, social, climatic and environmental resilience been more critical to support growth and development,” Akinwumi Adesina continued, highlighting the “essential relief” provided by the bank to member countries.
After raising three billion dollars through a “social bond” in March, the ADB set up a rapid response mechanism to the coronavirus in April, which mobilized 2.29 billion dollars as of August 20, with more than a billion more to be disbursed through the African Development Fund.
Last minute increase in Nigeria’s voting rights
While Adesina’s re-election to a new five-year term of office seemed straightforward, everything changed at the beginning of the year. A group of whistleblowers within the bank denounced “bad governance” within the group, expressly pointing to its president and triggering a serious crisis.
Although cleared by the ADB’s ethics committee, and then cleared by an “independent review” precipitated by US pressure, the divisions left behind have yet to be healed.
This is the context in which the AfDB’s governors, namely the ministers of finance, economy or central bank governors of the 54 African member countries and the 27 other non-African members, will meet.
While to be elected, a candidate must obtain a double majority of African shareholders and all shareholders, Nigeria intends to secure the reappointment of one of its own.
Nigeria was among the first to pay its contribution to the capital increase voted in 2019, almost doubling its voting rights (from 8.5 percent as of March 31 to 16.8 percent as of July 31) to become the bank’s largest shareholder, overtaking the number two and three, Germany (from 8.2 percent to 7.4 percent) and the United States (from 6 percent to 5.4 percent), and all African shareholders.
Beyond the political balance of power and whatever the outcome of the future election, the institution will have to manage four crucial issues to ensure its future.
1. Resolving the Adesina affair
If the conclusions of the “independent review”, made public on July 27, are in complete agreement with the report of the ethics committee, the Adesina affair does not seem to be over yet.
At the beginning of August, the whistleblowers, whose identity is not known, came back.
A lawyer posing as their counsel, Rishi Gulati, a specialist in international organizations law and a member of the Australian bar in the state of Victoria, sent a letter to Ivorian Nialé Kaba, chair of the board of governors of the ADB, pointing out the shortcomings of the work of the “independent review” and the ethics committee.
In this 50-page document, which we have had access to, he reiterates the arguments developed since the beginning of the year by the whistleblowers and again calls for an independent and thorough investigation, the only way, according to his clients, to settle the matter.
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This insistence, without new proof, underscores the limits of internal management of governance issues, despite the measures already provided for in the AfDB’s statutes.
And the Adesina affair revealed the existence – if not of flaws – at least of a malaise with regard to the capacities of action of the ethics committee, limited by statute, for example, to a simple preliminary examination of the accusations of whistleblowers.
“We respect the fact that the General Counsel is the legal expert for the entire bank. However, the members of the committee strongly recommend to the governors the use of independent legal expertise if they expect a relevant report of the preliminary review,” said Takuji Yano, Japanese Executive Director and Chairman of the Ethics Committee of the ADB, in a communication sent May 11 to the Board of Directors which we have seen.
However, pressure from non-African shareholders seems to have subsided. “We were among the first to advocate for an independent investigation. We are satisfied with the fact that it took place and the way it was conducted, although there is always room for improvement,” said the representative of a foreign shareholder.
2. Carrying out the capital increase
After governance, the bank’s financial health is the other key point. Despite the confirmation in June and July of the AfDB’s AAA rating by S&P and Fitch, the institution is under pressure.
“While the bank’s internal prudential ratio is very close to the 100% limit, its ability to continue to disburse at a rapid pace is closely linked to the shareholders’ payment of their share of paid-in capital,” Fitch said in July.
In other words, the bank must successfully complete the capital increase – the largest in its history – approved in October 2019 if it is to maintain its ability to raise debt on the international markets and its rate of disbursement, which has risen sharply since 2016.
However, according to our information, only four countries have already paid their financial contribution, which leaves uncertainty – increased by the context of the pandemic – about the timely completion of the capital increase.
For some observers, the AfDB’s AAA rating is not set in stone either.
Determined by the bank’s callable capital (that can be mobilized if necessary), it is linked to the rating of the countries themselves (rated A- or better), therefore mainly non-African shareholders.
“If one of them decided not to participate in the capital increase or if some of them saw their rating downgraded because of the pandemic, the AfDB’s rating would automatically be downgraded, compromising its ability to borrow on the financial markets,” says a European member of the institution.
For him, more generally, the coronavirus plays as a “revealing of the unconscious lending policy conducted in recent years by the ADB”, having provided no buffer to absorb a possible crisis.
3. Narrowing the gap with non-African shareholders
It is an open secret: during Adesina’s term of office, relations between regional (African) and non-regional (foreign) shareholders have become strained.
As proof, the reluctance of the latter (who entered the capital of the bank in 1982) to express themselves on the ADB. Of the fifteen or so non-African representatives we solicited for comment, the majority did not follow up, some declined because of “the sensitivity of the subject” and the latter expressed themselves but only under cover of anonymity.
And if some did not hesitate to express their strong support for the institution and its president, a majority pointed out areas of tension, ranging from the choice of priorities to transparency, through the style of President Adesina. This movement is explained by the strengthening of the African camp, majority shareholder of the bank (60%), Adesina having managed to bring together its members that were long divided.
The candidacy for his re-election has moreover received the support of the African Union.
If the primacy of African shareholders at the AfDB is not questioned by anyone, the non-regional shareholders – and some African shareholders – recall a fact often forgotten: the AfDB needs these foreign shareholders, which allow it to obtain a AAA rating and therefore to raise debt.
On the other hand, they are also the ones who contribute the majority of the usable capital: the United States, Japan, Canada, Germany and France contribute to the bank’s budget in a proportion much higher than their voting rights.
“A purely African AfDB would not be viable and could not play the role it does today with African countries,” summarizes a continental source. “Without the non-regional capital, the institution would be, at best, the equivalent of the West African Development Bank”, a more direct foreign interlocutor. These statements suggest the need to renew a more peaceful relationship.
4. Recruiting and Filling Positions
This is another sensitive point at the AfDB: the weakness of human resources management and the difficulty in maintaining in-house skills. During Adesina’s tenure, several voices were raised to criticize the excessive use of consultants – 683 contracts at the end of 2018. In 2017, the vacancy rate was 24%.
While this rate had fallen to 14 percent in 2018, and was expected to reach 10 percent in 2019, according to AfDB forecasts, these aggregate data poorly reflect the reality observed at the Abidjan headquarters and in the institution’s other offices: the increase in the number of managerial and executive positions not filled or occupied by temporary workers – sometimes for extended periods of time.
If the explanations diverge – from the difficulty in finding qualified and available candidates to the length of the recruitment validation process, to the supposed “docility” of temporary employees compared to established employees – the AfDB needs stability to carry out its projects.
Nelly Fualdes contributed reporting to this article
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