Fate of millions hangs on ADF 17 Replenishment pledges
The final meeting for the 17th Replenishment for the African Development Fund takes place in London on 15th and 16th December. For many African countries, the volume of funding that will be raised could well be a make or break issue, with ramifications not only on the continent but globally.
On the 15th and 16th of December, officials from the African Development Bank (AfDB), the African Development Fund (ADF) and most – if not all – Africa’s traditional donors will meet to wind up a year of consultations and make pledges on the 17th Replenishment for the ADF.
The African Development Bank Group and the governments of the United Kingdom and Ghana are co-hosting the final meeting.
The final total of the pledges that will emerge could well decide the shape of the future for millions of Africans in some of the continent’s lowest-income and fragile states.
The signs are not looking very encouraging but African negotiators are keeping their fingers crossed that donors will take a long-term and globally broader view and find sufficient funding to at least match their commitments for their 16th Replenishment. The ADF Replenishment cycle is every three years – the 17th will be for the 2026-28 cycle.
The ADF is the arm of the African Development Bank that supports the region’s 37 poorest countries, and is a vital source of affordable finance for sub-Saharan Africa.
Since its creation in 1972, the Fund has disbursed more than $45bn in concessional financing, offering a blend of grants, guarantees, highly concessional loans, and technical assistance. The type of funding is determined by whether the countries are considered as being at high or moderate risk of debt distress.
Discussing ADF Replenishment 17, the Center for Global Development says: “This is a time of extreme hardship: most ADF countries are facing heavy debt burdens and have limited fiscal space to support critical development goals, challenges that will be compounded by the US action on tariffs”.
The ADF countries urgently need financing to help mitigate the climate change attrition which has been particularly severe in some sub-Saharan regions, leading to disrupted crop cycles, constant food shortages, degraded soils, loss of livestock and depletion of fisheries stocks.
In addition, the ramifications of the Covid-19 shutdowns and disrupted grain supply chains as a result of the Ukraine-Russia conflict continue to cause severe hardship and loss of income.
The Black Swan imposition of a blanket 10% tariff on virtually all African countries led to near panic, especially among countries that have depended on tariff-free exports to the US under the African Growth and Opportunity Act (AGOA), which expired on 30th September.
The one silver lining is that the House Ways and Means Committee of the US Congress has passed the AGOA Extension Act, a bill to extend AGOA for three years, until 31 December 2028. It would be retroactively reinstated to September and importers who have meanwhile paid the duty will be reimbursed. It was expected that it would be passed into law by the full House.
(However, South Africa, which seems to have incurred the ire of President Donald Trump, has been singled out and is likely to be left out of the AGOA deal – but South Africa is not an ADF recipient.)
The situation was very different during the last replenishment cycle. ADF Replenishment 16 (2023-5) was the largest replenishment so far, mobilising over $8.9bn. This included $429m for a new climate window.
Thirty-two countries pledged to ADF 16 but four countries, Germany, France, UK and the US accounted for 45% of the donor commitments to the fund, or 28% of total resources, according to the Center for Global Development.
The ADF says the funds were deployed where they were most urgently needed and often went beyond basic development: for example, cancelling all outstanding concessionary loans to Somalia reduced the country’s external debt obligations by $17.7m, freeing up public resources for urgent development needs and giving what is still considered a fragile state, a decent chance to sustain stability.
During the last cycle ADF investments helped 2.9m people gain access to clean water services, connected 500,761 people to electricity (including 251,766 women), and improved health services for 1.2m people.
Operations also supported 24,403 agribusinesses, over 520,000 farmers with climate-resilient technologies, and involved the construction or rehabilitation of 614km of roads, improving transport access for 3.5m people. Access to basic ICT services was improved for 1.3m people.
The results were so encouraging that in 2024, the then AfDB President, Akinwumi Adesina urged shareholders to support a highly ambitious target of $25bn for ADF 17.
However, observers say this figure is now out of sight and if the Bank can persuade donors to match the pledges for ADF 16, it will be considered a triumph of sorts. (The ADF 17 project pipeline works out at around $11bn.)
Development experts believe commitments from top donors will fall because of the reallocation of resources towards defence and domestic budgets in the UK, Germany, and France, and a shrinking aid budget in the US. Some are worried that given the open hostility of the Trump administration for ‘third world countries’, the US might not support ADF 17 at all in any form.
“Like ADF 16, focus areas for the current replenishment will likely include climate change and the empowerment of women and girls, an agenda that the Trump administration is primed to reject. The near-complete eradication of USAID programs in Africa is also an ominous sign. Unfortunately, these factors could result in an ADF 17 replenishment that falls well short of ADF 16 levels,” warns the Center for Global Development.
In the run-up to the final meeting this December, the AfDB has made a robust and cogent defence of the urgent need to maintain sufficient funding for the ADF.
Dr Sidi Ould Tah, the AfDB’s current president and in position only since September, called the ADF’s replenishment “both an investment in Africa’s development as well as in shared global prosperity.” He pointed out that the Fund has over the past decade connected more than 18m people to electricity, enhanced agricultural productivity for 11m farmers, improved access to water and sanitation for 48m people, and transport for more than 87m.
Creative approaches now imperative
“The replenishment is an opportunity to signal our collective commitment to Africa’s growth and development, its institutions, and to innovate modern approaches to development finance in a challenging global environment,” says Baroness Jenny Chapman, UK’s Minister of State for Development and Africa.
Dr Tah has also been urging shareholders and partners to look for creative solutions in the face of rapidly changing global environments. He wants mind-sets to switch from regarding development funding as aid to “investment, with measurable returns”.
At the bank’s 17th replenishment meeting in Zambia earlier this year, he presented a framework where each donor dollar is projected to unlock $2.50 in additional capital, mobilising private capital and co-financing.
The ADF is seeking a change to its charter to enable an 85% market borrowing threshold. Currently, the fund cannot borrow or lend from non-concessional sources. The ‘Market Borrowing Option’ will allow the Fund to leverage its equity to directly access capital markets. It, however, requires approval by 75% of shareholders to come into effect. Dr Tah says without it, “our capacity to serve will be fundamentally limited”.
“We believe that we can raise up to $5bn in every three-year cycle. But in order to get there, we have to actually change our charter,” says Valerie Dabady, the AfDB’s Head of Resource Mobilisation and Partnerships.
Whatever the outcome of the ADF 17 Replenishment meeting, there is no escaping the fact that since the last cycle, the external environment has changed very radically and all parties need to adapt to the harsher new realities.
The AfDB has been ahead of the curve so far and made some radical but essential proposals that if implemented, will generate the funding the continent’s low-income countries desperately need while actually reducing the burden on traditional donors. It will be interesting to see how the response unfolds.
In the meanwhile, the issue of illegal migration from the developing world, including Africa, has become a huge issue in the West with profound influence on not only elections but, with the alarming rise of extreme right-wing parties, the entire ideological structure of societies. The surest way to stop mass migration is to ensure that the conditions that are fuelling this drive – essentially, lack of economic opportunity – are improved at source.
Crédito: Link de origem