New review – The UK’s support to the African Development Bank Group

31 Jul 2020

  • ICAI review of UK aid’s support for the African Development Bank Group finds £181 million annual contribution provides good value for money, and awards green-amber rating.
  • Aid watchdog noted “strong alignment” between UK’s priorities for Africa and those of the Bank, with funding achieving more development impact and greater economies of scale than through direct contributions.
  • But warned against unilateral reform interventions that could undermine the multilateral governance of the Bank.

The UK’s work with Africa’s leading development institution is effective and relevant in addressing many of the continent’s priorities for international aid, but more could be done to strengthen strategic engagement with the Bank and “on the ground” cooperation, according to a new report from the Independent Commission for Aid Impact (ICAI).

The aid watchdog has today published its review of the UK’s support to the African Development Bank Group, a multilateral development bank that aims to promote sustainable economic development and poverty reduction across Africa. The UK contributes around £181 million a year to the three organisations that make up the Bank Group, representing around 1.3% of the UK’s development budget.

ICAI found that the institution’s reach and deep expertise in Africa meant that contributing to the Bank could be a more effective way for the UK to achieve development impact and economies of scale than through direct funding. This was particularly important in areas such as complex, cross-regional infrastructure programmes, or working in fragile states where the UK doesn’t have a presence.

But ICAI highlighted concerns about the UK government having “crossed a line” by unilaterally imposing performance measures on the Bank in 2017, in disregard of its multilateral governance structure. The review also expressed concern about the Bank’s critical lack of resources in key areas such as environmental and social safeguards and highlighted that its work could be improved through more engagement with civil society organisations. ICAI also noted that the UK should do more to build the Bank’s capacity to manage trust funds, including through strengthening fiduciary and results management, if it is going to continue to invest in them. ICAI gave an overall score of green-amber, and made five recommendations to government.

ICAI Chief Commissioner Dr Tamsyn Barton said: “The development challenge in Africa is enormous, and we were encouraged to see that, overall, the UK’s relationship with the African Development Bank Group represents good value for money – both for UK taxpayers and for those who benefit from the Bank’s work. We found that the Bank is making good progress towards achieving its priorities, and that these priorities align well with the UK’s own development goals.

“But we also identified some areas where the government and the Bank could work more effectively together and deliver more impact on the ground, and our recommendations are designed to address that.”

The African Development Bank Group is made up of three entities – the African Development Bank, the African Development Fund (ADF), which lends to low-income countries on favourable terms, and the Nigeria Trust Fund – and has been rated in independent assessments as one of the most effective multilateral development banks. Although the UK is one of the smallest shareholders in the Bank, it is the largest contributor to the ADF, with the forthcoming replenishment expected to be worth £620 million over three years, subject to parliamentary approval – which ICAI reported gives the UK an influential role in decision-making.

But despite the UK successfully influencing the Bank to improve in some priority areas, ICAI noted that DFID’s unilateral decision in late 2017 to put the Bank under a Performance Improvement Plan was seen as “problematic” and could have undermined other donors as well as the UK’s reputation as an honest broker operating in a multilateral context. However, the report noted that the UK’s relationship with the Bank is currently positive and that a planned increase in resources to support the UK’s approach to Africa could result in increased engagement with the Bank.

ICAI found “very strong” alignment between the UK’s priorities and those of the Bank, including building stability and resilience in fragile states, climate change, and gender. The report noted that the Bank was particularly well-placed to fill a “critical” gap in delivering large-scale infrastructure projects that individual donors would not be able to support directly, as well as regional integration projects. However, with nearly 60% of the Bank owned by borrowing countries – a figure that is greater than in comparable regional development banks and much greater than the World Bank – there is potential for the African Development Bank to be exposed to greater politicisation of decision-making.

Although the Bank was performing well in delivering the UK’s priorities, ICAI highlighted the Bank’s critical lack of resources in key areas such as environmental and social safeguards and said its approach to ‘leave no one behind’ and gender could be improved through more engagement with civil society organisations. The report noted the Bank’s progress in areas such as poverty reduction, job creation and gender, including through support for women-led SMEs and increasing the share of female STEM students, but it also highlighted the Bank’s slow implementation of its gender strategy.

In addition, ICAI reported that the Bank’s efforts to increase its engagement with the private sector had not resulted in significant amounts of private finance being mobilised, and that, like many peer organisations, it had a “poor” track record of leveraging private finance into low-income countries. Although the Bank manages a number of trust funds that are highly regarded by external stakeholders, overall it manages many fewer trust funds than other development finance banks, which gives it less flexibility. ICAI stated that, if the UK is going to continue to invest in trust funds for UK priorities, it should do more to build the Bank’s capacity to manage them, including strengthening fiduciary and results management.

ICAI’s review recommended that the new Foreign, Commonwealth and Development Office should minimise unilateral reform interventions with the Bank; focus on ensuring that key areas of understaffing are addressed; pay particular attention to ensuring environmental and social safeguards are implemented on the ground; build the Bank’s capacity to manage trust funds, including strengthening fiduciary and results management; and encourage closer working through country teams.

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