IFIs in Africa News Briefing

Issue #31

Friday, June 20, 2008

In this issue:


World Bank continues to push African hydro despite concerns over vulnerability to climate change

According to a recent Reuters report, the Bank’s private sector lending arm, the International Finance Corporation (IFC), is taking the lead on financing feasibility studies for the proposed Kafue Gorge Lower Dam in Zambia. Preparations for the proposed 750 MW dam have been revived – the dam was initially proposed in the 1970’s - to address recent energy shortfalls affecting the country’s lucrative copper mining industry.

Kafue is being promoted as the largest privately funded power project in Africa, and the expected output of the dam would represent three times the purported capacity of the controversial World Bank-backed Bujagali Dam in Uganda, which has been criticized as highly vulnerable to climate change-induced drought and economically unviable. The accountability mechanisms of both the World Bank and African Development Bank are expected to submit their investigation reports for Bujagali this month, in response to complaints from local groups about these and other concerns. Kafue

Meanwhile, the World Bank has indicated that it is considering backing the construction of the Kafue Dam with a partial risk guarantee, similar to one it announced for Bujagali last December. The Kafue site is located on a major tributary of the Zambezi River, and the project is expected to cost over $1 billion. The stated reason for resurrecting the project – ensuring continued energy supplies for foreign mining operators - brings into question the Bank’s poverty reduction mandate, as Kafue is expected to do little to address low levels of energy access of Zambia’s impoverished people.

Similar questions are being raised about the much-vaunted Inga Dam complex on the Congo River in the Democratic Republic of Congo (DRC). A recent conference of potential financiers for the Inga 3 hydro project in London brought together private investors, multilateral institutions and representatives from southern Africa’s power utility companies to raise the estimated $6 billion required for the construction of the proposed 4500 MW project. Inga 3 is widely seen as the first step in realizing the ambitious Grand Inga Dam which, at a supposed capacity of 44,000 MW, would be the largest dam in the world, dwarfing China’s Three Gorges Dam, and costing upwards of $80 billion.

The World Bank, African Development Bank and European Investment Bank are all keen to take part in Inga: rehabilitating the existing Inga 1 and 2 dams, financing feasibility studies for Inga 3, convening investors, and constructing transmission lines. The institutions appear poised to champion a continued reliance on hydropower in DRC and more broadly across Africa. However, the development benefits of these initiatives remain unclear, as nearly all the output is earmarked for export and to ease the expansion of major mining operations in the region.



As Newmont prepares mining operations in Ghana forest reserve, civil society challenges purported benefits for local communities

Ghana’s Minister for Mines, Lands, & Forestry, Esther Obeng Dappah, announced in early June that Newmont/Ghana Gold, the local branch of one of the biggest mining corporations in the world, was expected to get a permit to start gold mining operations in the Akyem forest by the end of 2008.

Civil society reacted negatively to the announcement, saying that it pre-empts a scheduled public forum on July 4, which is to bring together Newmont/Ghana Gold and other stakeholders.

“With such a decision already taken it is worthless for the people to even continue with the public forum since the outcome will not have any effect on the decision by government to give the concession to Newmont,” said Daniel Owusu-Koranteng, Executive Director of Wassa Association of Communities Affected by Mining (WACAM).

According to Ghana’s Public Agenda, Owusu-Koranteng also noted that the announcement follows closely on Dapaah’s public acknowledgement at the May meeting of UNCTAD in Accra that Ghana had benefited only minimally from decades of mining.

Dapaah promised that mining in Akyem would provide jobs and economic development to the local community. She also took credit for getting the company to agree to compensate farmers for lost crops and pay annual rent to local landowners. Owusu-Koranteng, however, said that the affected communities should negotiate arrangements directly with the company, as provided for under Ghanaian law.

WACAM has also raised concerns that mining in Akyem would have negative impacts on a significant regional watershed and could lead to the loss of cultural and historic sites. The mine would include substantial portions of land falling in the Ajenua Bepo forest reserve.

Two hundred fifteen local farmers petitioned the government earlier this year to deny Newmont/Ghana Gold a license to operate in Akyem.

Newmont has said it expects to invest more than $700 million in Akyem, and projects that it could produce 7 million ounces of gold annually for the next 15 years.

Newmont/Ghana Gold is the company behind the Ahafo gold mining project, also in Ghana, a project with substantial financing from the World Bank’s private sector arm, the International Finance Corporation (IFC). Ahafo has been controversial for dislocating some 10,000 farmers so far, and possibly another 10,000 in the near future as Newmont prepares the second phase of the project. It is not clear if Newmont will seek IFC participation in the Akyem project, but the company anticipates using common processing facilities for both projects.

Questions around the environmental and social legacies in Ghana’s gold mining communities, particularly in IFC-backed projects, have also arisen of late. Last year, the IFC sold its shares in the Iduapriem gold project to AngloGold, the mine operator, at an unknown but likely substantial profit after 17 years of involvement. As Ghanaian and international observers note in a recent publication, the project has led to the destruction of large tracts of agricultural land as well as serious declines in access to and the quality of drinking water for local communities. The IFC maintains that once it has sold its shares, it has no further responsibility for the impacts of a project - a position many civil society activists and even some within the World Bank Group believe requires re-thinking. The IFC’s decision to divest from the project despite serious ongoing concerns suggests the need for greater accountability and openness from the institution in proving the development benefits of its investments.

WACAM has also received attention in the Ghanaian press recently for its arguments that the country’s expanding mining sector is causing serious damage to its agricultural potential, a serious problem in light of the current food crisis affecting Ghana and much of Africa. They note that 30% of the country’s surface area has been assigned to companies as mining concessions. WACAM was speaking out, in part, in response to the Ghana Chamber of Mines’ commemoration of its 80th anniversary with the heavy-handed – and dubious – slogan, “Life without mining is impossible.”



Colin Bruce Named to #2 Post in World Bank's Africa Department

Colin Bruce, the World Bank's Country Director for Kenya, Comoros, Rwanda, Eritrea, Somalia, & Seychelles, has been named the Bank's Director of Operations and Strategy for Africa. He moves from Nairobi to Washington to take up a position the Financial Times calls the "de facto number two in the bank's Africa hierarchy." Obiageli Ezekweseli is the Bank's Vice President for Africa, the highest-ranking Africa-focused position.

Bruce came under fire from critics of the Kenyan government during his tenure for presiding over a nearly twofold increase in Bank disbursements to the country despite what the FT termed "persistent evidence of high-level graft." In March 2008, the Wall Street Journal made available on its website a leaked report by the World Bank's Department of Institutional Integrity on evidence of corruption in Bank-funded projects in Kenya.

Under President Paul Wolfowitz, Bank lending to Kenya was temporarily curtailed in response to the corruption allegations, but ultimately restored as part of a new agreement to increase Bank monitoring of the government's efforts to fight against corruption in 2007.

The sense that Bruce might be too favorably inclined to the government of President Mwai Kibaki was intensified with the leaking of a memo in January 2008 during the political chaos that followed Kenya's flawed presidential elections. The memo, sent by Bruce to his superiors in Washington, seemed dismissive of the allegations of vote fraud that had been made by the majority of election monitors. While Bruce claimed that he was merely trying to strike a balance between the two sides, to most readers it appeared to take the side of Kibaki, who had had himself sworn in for a second term within an hour of the dubious declaration of election results.

The memo was leaked while Bruce was trying to help mediate the election dispute – a role that he probably should have avoided in the first place. It seems likely that, to some degree, Bruce became the subject of domestic political manipulations he was ill-placed to discern.

Bruce's case was not helped by reminders that he lived in a house the Bank was renting from Kibaki and his wife (though, to be fair, he inherited the lease from the previous World Bank country director).

Despite his cameo in Kenya's election controversy, Bruce probably gained greatest recognition in Kenya the year before when he was exposed trying to use his influence to get out of a speeding ticket.



DRC Civil Society Denounces Disinformation Campaign by Industrial Logging Industry

Civil society groups in Democratic Republic of Congo (DRC) released a widely-publicized statement in the wake of a visit to Kinshasa by French Environment Minister Jean-Louis Borloo in May 2008. The statement, which took the form of demands on the French government, protested the limitation of civil society representation to one person in meetings with Borloo while many private sector figures were invited.

The NGOs assert that the World Bank-inspired moratorium on new logging titles is being violated "on a daily basis" and that logging companies are cutting down the forest "at a dizzying speed" since the legal review of existing titles got underway. They point to the desperate situation of forest dependent communities and indigenous peoples who are increasingly suffering from forest exploitation and call on the French government to promote alternatives to industrial logging. The groups also denounce the disinformation campaign launched by the logging industry and its advocates "to make the French minister believe that all is well with industrial timber production in the DRC."

The "conversion process" of logging titles, initiated and financed by the World Bank, will come to a close this year, after an inter-ministerial commission appointed by the government will review all 156 titles submitted by the companies. The process has been widely criticized as inherently flawed, and Congolese groups have expressed particular disappointment with the fact that social and environmental criteria have been excluded from the review. Over a hundred titles covering 15 million hectares of forest have been handed out to logging companies in breach of the moratorium. In April 2008, Congolese and international NGOs send a letter to the DRC Minister of Environment, recommending that the government maintain and extend the May 2002 moratorium on new logging titles to include a full moratorium on all industrial-scale logging.



Gabon: Suppression of Civil Society

Marc Ona, the head of Gabonese environmental organization Brainforest and coordinator of Gabon's Publish What You Pay Coalition, was detained at the Libreville airport earlier this month as he tried to board an airplane to begin a trip to New York for an international meeting of Publish What You Pay. He was told that there were outstanding charges against him, but was not told what they were. Ona has been one of the most outspoken activists in Gabon, calling for accountability from the Gabonese government in its management of the oil-rich country’s resource revenues.



Some highlights from the African Development Bank’s annual meetings in Maputo

The African Development Bank (AfDB) held its 43rd Annual Meeting in mid-May in Maputo, Mozambique. The event did not produce surprising news or contentious debates, but a number of announcements were made, including:

  • a joint launch of the “African Economic Outlook” by the AfDB, the Organization for Economic Cooperation & Development (OECD), and the United Nations Economic Commission for Africa (UNECA), which claimed that Africa experienced real GDP growth of 5.7% in 2007, and predicted that it would top 6% this year. The AfDB’s Chief Economist, Louis Kasekende, however, cautioned that the current food crisis and the increased inflation it is likely to cause may derail growth projections. Indeed, Kasekende said “there is a big risk to unwinding progress made by many countries in attaining the MDGs, especially the likelihood of pushing millions back into poverty, if the current high food prices persist.”
  • the release of the AfDB’s annual report, which indicated that the AfDB had a net income of $592.75 million in 2007 – a 66% increase -- and a 59% increase in project and program approvals. Private sector lending by the AfDB nearly quadrupled over 2006 levels, increasing to $1.6 billion in 2007 from $440 million the previous year. Infrastructure projects – which the AfDB has in the last year declared to be its chief priority – were approved at double the rate of 2006, increasing to $3 billion from $1.4 billion. Total AfDB lending and grants amounted to $3.8 billion in 2007, with overall operational commitments up by 20%.
  • the news that Zimbabwe paid off $650,000 in arrears to the AfDB – surely the most surprising of the meeting. According to press reports it came as a surprise even to Zimbabwe’s Central Bank Governor, Gideon Gono, who denied that such a payment could have been made (though he has apparently accepted it by now). That the payment was made as the country slips deeper into its worst political, financial, and social crisis ever raises questions about the priorities of both the Harare government (though it has perhaps already lost all credibility) and the AfDB. An AfDB press release called the move “testimony of the government’s determination to live up to its international financial obligations vis-à-vis donor agencies and development partners.” The release further asserted that the Zimbabwean government “fully acknowledges its external financial obligations” and “remains committed to honoring its debt obligations.” With five paragraphs of the release detailing Zimbabwe’s supposed commitment to “instituting macro-economic reforms aimed at addressing its economic challenges,” questions could be raised about the AfDB’s decision to insert itself into the controversies surrounding Zimbabwe, and apparently taking the side of President Robert Mugabe’s government.
  • the admission of Turkey to AfDB membership.
  • the renewal of the Nigerian Trust Fund, a separate window of the AfDB endowed by the Nigerian government but nearly dormant for the last few years. The Nigerians have apparently pledged to revitalize it for a new ten-year period.
  • the establishment of the Fund for Reconstruction and Development of the Great Lakes Region.
  • the re-affirmation of Abidjan as the AfDB’s headquarters, though it will continue to be housed in Tunis, at its “temporary relocation agency,” for at least another year. There was, however, commendation for progress toward peace and stability in Côte d’Ivoire. The AfDB fled Abidjan because of the country’s civil war in 2003.
  • the Board called for rapid assistance to Africa in response to the current food crisis, and President Donald Kaberuka indicated general satisfaction with donor response thus far. He added, “As we rethink agriculture, this is the opportunity to clearly bias policy in favour of more than half of Africa’s farmers, the old women and young girls tilling the land with bare hands to scrape a living. Recovery of our agriculture which does not frontload the interest of the women majority farmers, is doomed to fail.”

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Note: The text of the IFIs in Africa News Briefing may be freely used providing the source is credited.

The Bank Information Center (BIC) partners with civil society in developing and transition countries to influence the World Bank and other international financial institutions (IFIs) to promote social and economic justice and ecological sustainability. BIC is an independent, non-profit, non-governmental organization that advocates for the protection of rights, participation, transparency, and public accountability in the governance and operations of the World Bank, regional development banks, and IMF.

BIC is supported by private foundations and organizations that work in the fields of environment and development. BIC is not affiliated with any of the Multilateral Development Banks, nor does it receive any funding from them.


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