Money awaits viable projects, says African bank

While there is an overall shortage of donor funding for regional integration projects in Africa, this is not the case at the African Development Bank (ADB), its former Vice-President Cyril Enweze told Africa Recovery. "The problem has really not been the lack of resources. We have not been able to utilize all of the resources that were put at our disposal by the end of 2001." More than half of the Bank's $200 mn budget for regional projects for 1999 to 2001 was not disbursed.

African countries "have not moved aggressively and constructively ... to come up with good, viable project proposals," Mr. Enweze told Africa Recovery in March, before he left the ADB to become vice-president of the UN's International Fund for Agricultural Development. In some cases, projects were not carried out because some countries were under sanctions for failing to pay their ADB dues.

Overall, however, inadequate financing has been a major hindrance to regional integration programmes in Africa. Founded in 1964 to promote economic and social development on the continent, the ADB has from the outset sought to address this gap by making regional integration a priority. While it aims to allot 10 per cent of its annual financial resources to multinational projects, observers note that problems such as political differences among members have prevented the institution from attaining these levels. The ADB provides loans at highly discounted rates for a wide range of multinational projects such as roads, energy and communications. Its policy-based lending is done in collaboration with the World Bank and International Monetary Fund (IMF), and loans are granted on condition that African countries carry out economic reforms.

For integration to succeed on the continent, Mr. Enweze said, African countries need to live up to their commitments and implement protocols they have signed. The continent also needs to create an environment that allows the development of a dynamic private sector.

To enhance trade among African countries, Mr. Enweze said, the ADB, together with the World Bank and IMF, advocates tariff reductions on imports. But many countries have been reluctant to do this because external trade tariffs are important sources of government revenue. To reduce such dependence, Mr. Enweze recommends that countries "begin a very important process of diversifying the tax base, to see what can be done with various types of taxes -- income tax, sales tax and value-added tax."

Also, he said, current levels of government spending need to be examined. "In a number of countries there are high defence expenditures," he said. "Are these necessary for poor countries? In some countries, there are high levels of subsidies. Some of these are very wasteful. Can we get rid of these subsidies? Or can we at least have targeted subsidies? We need to look at the efficiency of government expenditure."