AfDB’s $55 million anti-corruption fund languishes for seven years

AfDB's $55 million anti-corruption fund languishes for seven years. AfDB's $55 million anti-corruption fund languishes for seven years.
AfDB's $55 million anti-corruption fund languishes for seven years.

The African Development Bank has come under fire for its failure to activate a $55 million integrity fund, which was established seven years ago to combat corruption in Africa, Financial Times reports.

The fund, launched in November 2016 amidst much excitement, was intended to support anti-corruption initiatives through grant disbursements to non-governmental organisations. However, NGOs applying for grants have been informed that the fund is not yet operational.

The fact that the AfDB has been unable to put the money to use is raising questions about the institution’s efficiency, particularly given the significant role it plays in channelling billions of dollars from Western governments to development projects across the continent.

This failure not only undermines the credibility of the bank, but also hampers efforts to tackle corruption, a pervasive issue that hinders economic growth, development, and political stability in Africa.

AfDB's $55 million anti-corruption fund languishes for seven years.
AfDB’s $55 million anti-corruption fund languishes for seven years.

The AfDB, which boasts 54 African member countries and 27 non-regional members, including major shareholders like the United Kingdom, Japan, China, and the United States, holds substantial authorised capital of $250 billion. These funds are intended for disbursement towards vital sectors such as infrastructure, power, and agriculture.

Critics argue that sitting on such a significant sum of money without any transparency or concrete action is both surprising and disappointing. The integrity fund was specifically designed to target corruption, which has plagued the continent for far too long. It is well-documented that corruption poses a serious threat to the economic and social development of African nations. By combating corruption, the AfDB has the potential to contribute significantly to the improvement of economies and political systems across Africa.

Joshua Meservey, a corruption expert and senior fellow at the Hudson Institute think-tank, has expressed his disappointment at the bank’s inaction. Meservey stated, “What have you been doing with $55 million for seven years?” He questions the bank’s lack of transparency and the absence of progress in their efforts to address corruption.

When the AfDB’s board approved the Africa Integrity Fund, it promised a substantial sum of $55.25 million. This money was said to be collected from companies that had settled alleged corruption or misconduct cases with the bank. The purpose of the fund was to disburse grants to several African entities involved in fighting corruption, including enforcement agencies, tax authorities, educational institutions, and civil society groups.

Anna Bossman, the director of the bank’s integrity and anti-corruption department at the time, expressed confidence that the Africa Integrity Fund would serve as a model for others. With such high hopes, it seemed like a significant step towards combating corruption in Africa.

However, recent revelations have brought forth some concerning information. The AfDB has confirmed that the integrity fund has never been put into operation, and no grants have been made. It attributes this outcome to several issues related to conflict of interest, transparency, and due process that were identified during the implementation process.

To address these concerns, the AfDB has decided that the funds should be managed by an external entity. This measure aims to prevent the commingling of funds with the bank’s resources, ensuring the utmost transparency and accountability. Unfortunately, the statement from the AfDB does not specify the institution that will be entrusted with the management of the funds.

The news of the Africa Integrity Fund’s failure to materialise is undoubtedly disappointing. It raises questions about the bank’s ability to effectively combat corruption and fulfil its promises. The AfDB plays a crucial role in supporting development projects across the African continent, and ensuring integrity in its operations is essential.

It is imperative that the AfDB takes swift action to rectify this situation. The proposal to formally close the Africa Integrity Fund and appoint an independent institution to manage the funds must be presented to the board of directors for approval without delay. Transparency and clear communication regarding the chosen institution are essential to rebuild trust and ensure accountability.

Moreover, it is crucial for the AfDB to learn from this experience and take the necessary steps to identify and address the issues that led to the failure of the integrity fund. Conflict of interest, transparency gaps, and deficiencies in due process must be thoroughly examined and remedied to prevent such setbacks in the future.

AfDB's $55 million anti-corruption fund languishes for seven years
AfDB’s $55 million anti-corruption fund languishes for seven years.

The AfDB recently revealed that it had taken seven years to seek alternative arrangements for the establishment of an integrity fund. While the bank did not provide an explanation for this delay, it stated that it had followed customary and prudent procedures for the implementation of any new initiative.

The integrity fund, which was launched to combat corruption in Africa, was initially funded by a sum of $55.25 million, derived from penalties imposed on international companies investigated by the AfDB. One notable penalty was paid by Hitachi in 2015, following an inquiry into sanctionable practices related to a power plant contract in South Africa. Although the exact amount of the penalty has not been disclosed, Hitachi reached a settlement with the AfDB, agreeing that part of the fine would be allocated to anti-corruption efforts in Africa. The integrity fund was intended to serve as a framework through which financial penalties resulting from the bank’s sanctions regime would be reinvested into anti-corruption measures.

However, some officials within the bank, including its president, Akinwumi Adesina, have expressed reservations about the use of fines to fight corruption. These concerns have led to a reevaluation of the fund’s practical implementation, despite it being hailed as an innovative instrument initially. This reevaluation has raised serious concerns regarding the viability and effectiveness of the fund in its current form.

The AfDB clarified that the funds contributed to the integrity fund had been stored in a separate interest-bearing account, ensuring that the value of the fund had grown to $57.03 million over the years. This reassurance indicates that the fund remains intact and fully available for its intended purpose.

Organisations that had applied for grants from the fund were unaware that it had been put on hold. The Pavocat Stellenbosch Academy, an organisation based in South Africa with a focus on counter-corruption, submitted a grant application this year. “We were aware of the fund and its conditions when it was established in 2016 because we stay informed,” stated James Stuart, co-founder of Pavocat. “However, we were simply told that the account has not been activated. No further explanation was provided.”

Former officials from AfDB recall that any internal concerns regarding the integrity fund were dismissed shortly after board approval. In 2020, the bank’s governance came under scrutiny when whistleblowers accused Adesina of disregarding bank procedures and favouring his acquaintances, many of whom were fellow Nigerians.

At that time, Steven Mnuchin, who served as the US Treasury secretary, expressed reservations about an internal investigation into these allegations and advocated for an independent inquiry.

In July 2020, an external panel chaired by Mary Robinson, former president of Ireland, cleared Adesina of any wrongdoing. He was subsequently re-elected to serve another five-year term in August 2020.

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