On 28-29 November 2016, donors will convene in Luxembourg to pledge funds towards the African Development Fund for the next three years. The Fund is a dedicated source of finance for the poorest and least-developed countries in Africa. Established in 1973 as an arm of the African Development Bank, it provides critical development finance at affordable rates. While African countries direct the operations of the Bank, this special Fund is reliant on ordinary (non-concessional) loan repayments from other African countries, and on contributions from largely developed economies.
Since the Fund depends on the voluntary contributions of donors, its resources are limited. It is therefore critical that available funds are dispersed in a manner that effectively addresses the development needs of Africa’s poorest countries. Failure to do so would have a devastating impact on countries in desperate need of financing for their development projects, such as hospitals, roads, emergency services and schools. Their chances of reducing poverty and improving the everyday lives of African people, especially women, would be jeopardised.
South Africa, as one of few African contributors to the Fund, has the opportunity to amplify African voices in the Fund’s processes and decisions. This week, South African representatives will be attending the meeting in Luxembourg, where they’ll not only pledge South Africa’s contribution, but also participate in a review of the Fund’s policy framework, its development impact, and its long-term financial situation.
New research from the GEG Africa project uses two case studies (Lesotho and Senegal) to illustrate the challenges low-income countries face in accessing finance from the Fund. The research shows that apart from the low reserves of the Fund, there is too much red tape and a lack of support during the loan application process. There is also a tendency by the Fund to apply a one-size-fits-all approach to countries seeking finance.
The Fund has a critical role to play in helping Africa get the right infrastructure in place, but a change in approach is required. This new research offers concrete policy recommendations for the Fund to improve its services to African members. Otherwise, low-income countries will turn to high-interest commercial loans, which will negatively impact their debt levels and development prospects.
- What are the current problems with the African Development Fund, and how can it better respond to the needs of the poorest African countries?
- What happens if infrastructure development is not adequately funded in poor countries?
- How could the AfDB work with domestic private investors to bridge the infrastructure gap in Africa’s poorest countries?
Expertise and resources available
One of the co-authors of this new research, Ms Talitha Bertelsmann-Scott, is available for comment and interviews. Contact Ms Fortunate Xaba to arrange, on +27 (0)11 339-2021 or firstname.lastname@example.org.
About Global Economic Governance Africa
The Global Economic Governance Africa project is a partnership between SAIIA, DNA Economics and Tutwa Consulting. Funded by the UK's Department for International Development (DFID), its focus is on strengthening the influence of groupings within and outside South Africa working for pro-poor outcomes through the institutions of global governance. Read more on www.gegafrica.org.
For more information or to arrange for interviews please contact:
Ms Fortunate Xaba,
SAIIA Communications Assistant
Tel: +27 (0)11 339-2021