EBRD’s Africa expansion plans facing resistance


One Exchange Square, the headquarters of the European Bank for Reconstruction and Development (EBRD) stands in London (file).

The European Bank for Reconstruction and Development’s plan to expand its operations into sub-Saharan Africa is facing resistance from some of its top shareholders, several sources at the London-based development bank told Reuters. Set up in 1991, originally to help ex-communist countries of eastern Europe shift to market economies, and majority owned by G7 top economic powers, the EBRD has spread rapidly over the last decade to more than 35 countries from Morocco to Mongolia. Ambitions to continue that into sub-Saharan Africa were laid out last year but governments including the United States, Germany and France as well as many in its eastern European heartland have reservations, sources say. The struggle isn’t the only issue shaping the bank’s future.

Europe is looking to streamline its development financing this year, the bank is due a new president next May, a move to new London headquarters is bogged down by Brexit and the Africa push is part of a broader identity shift. EBRD management had hoped to overcome some of the scepticism after internal analysis showed only a fraction of €3bn-a-year ($3.34bn) proposed increase to its near €10bn annual lending could be done in its existing bloc. Two national sources who spoke on condition of anonymity said management had proposed an “Africa full-speed ahead” agenda for the bank’s annual meeting in Bosnia next week, only to see government representatives who sit on the bank’s board of directors intervene. “It was almost unprecedented,” one of the sources, involved in the discussions, said. “It was a rare example of where the board comes together and said ‘no this is not what we want’ and changed it.” Sixty-seven countries are EBRD shareholders.

Previous expansions have required unanimous backing but changes since mean a ‘qualified majority’ might now be enough. That would give the United States, which holds 10% of EBRD shares, and Britain, Germany, France, Italy and Japan with 8.5% each, by far the most clout. The EBRD declined to comment on the discussions, but sources said months of toing and froing over the Bosnia agenda resulted in a drastically reworked final version with five key ‘work streams’ tied to the bank’s ‘Medium-Term Directions’ — its priorities for the next five years. Feasibility work on African countries with “strong links” to the existing EBRD region may get approved, but emphasis will now be on expansion into Algeria, Libya, Iraq and Syria, as well as doing more in its existing bloc. Potentially eye-catching too is a still-to-be-quantified increase to the EBRD’s financial buffers to give it additional protection in case the slowdown in the European and global economy worsens and causes losses on its loans. The bank had promised to review the possibility after it received a €10bn capital increase in 2011. The United States also floated the idea of dividends in 2008 when there was talk of winding down the bank or merging it with the European Investment Bank (EIB).

Sources and photo-credits: Reuters, Gulf Times