Africa's position in the World Bank (WB) and the International Monetary Fund (IMF) has never been very clear to many people.

The defeat for the top post and subsequent departure from the WB in 2011 of Ngozi Okonjo-Iweala, a Nigerian economist, dimmed the continent's hope of ever heading one of these powerful institutions that continue to be dominated by the US and Europe.

The common view about these Washington-based bodies in Africa is that they may have to up their game or be rendered redundant soon. They have been too slow to act in times of crisis and some of their policies have failed to spur economic growth. Despite carrying out several reforms, they are still inadequate at addressing Africa's current economic dynamics.

But last month's news in Durban that China, Russia, South Africa, Brazil and India were launching with a "great sense of urgency" a BRICS bank reignited some optimism in the continent.

The development bank with a proposed initial capital of $50 billion will potentially rival the WB, with a focus on developing countries.

Yet it is not well-defined what the new bank's priorities will be. What is certain, however, is that its initial assignments will rotate around improvement of Africa's infrastructure such as roads, rails and energy. Furthermore, the bank will help rebuild economies that were once stunted by relatively expensive, conditions-tied loans from global financial institutions.

So, what will the new bank's policies for Africa be? Will there be any strings attached to the new body's loans?

It is critical to appreciate that the continent is still suffering from the debt hangovers of the 1980s and early 1990s. It was a remarkably arduous period and one when many African nations almost collapsed.

During this period, Africa's portion of global trade contracted. Export earnings, too, went down as commodity prices fell. Faced with these tests, the WB and the IMF came to the rescue of the continent by providing loans. But they were neither free nor without conditions. Famously referred to as structural adjustment programs, the loans would only be disbursed to prospective countries after they had privatized their industries, cut government spending, imposed user fees and introduced higher interest rates.

Many countries questioned the effectiveness of these conditions. Some described them as a problem rather than a solution. Cote d'lvoire, the world's chief cocoa producer, suffered severely from this "rescue" plan. After its cocoa industry was privatized in 1988, the country's poverty levels more than doubled.

The criticisms forced the WB and the IMF to shift to more flexible policies where member countries would be involved in the negotiations.

But the turn has done little to change the negative perceptions of these institutions in Africa. Many nations still believe that their underdevelopment is the result of external pressure meted by the IMF and the WB. Indeed, former Ghanaian president Kwame Nkrumah once argued that Africa had turned into a pawn in the chessboard of experimentation for all manner of ill-digested development theories.

This brings to question the aspect of how the proposed BRICS development bank would avoid a recurrence of the highlighted IMF and WB subpar performance in developing countries.

It will be important for the BRICS to encourage African countries to integrate more. This will attract investment flows, make countries benefit from economies of scale and encourage intra-Africa trade.

For instance, the ongoing integration of Rwanda, Kenya, Tanzania, Uganda and Burundi under the East African Community umbrella is already a success story for Africa. So is the Southern African Development Community, a socioeconomic union of 15 states.

It will be prudent for the development bank to come up with a diagnostic arm tasked with forecasting risks facing developing countries. This will help check on careless and excessive borrowing habits of some nations. The move will also enable the bank to devise an appropriate counter-strategy against imminent risks.

Most importantly, African governments should undertake the responsibility of revamping their investment profiles. They must move from merely depending on primary industry such as agriculture to the more lucrative manufacturing sector.

The development bank can help African countries to come up with the basic infrastructure required to build up a competitive industrial sector.



The author is a journalist on African issues based in Nairobi, Kenya. mkapchanga@gmail.com

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