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How the United States plans to control the African Development Bank

An illustration of the new cold war that the United States and China are waging within institutions and international donors.

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Africa Development Bank. AfDB develops Index to aid women empowerment , African Development Bank awards $1.1 million to boost food production in Africa , AFDB increases capital to $208 billion in bid to secure Africa’s future , African Investment Forum: AfDB eye $67 billion deals , ECOWAS backs Adewunmi Adesina’s re-election as AfDB election nears , AfDB bows to pressure from U.S., orders an independent probe of Akinwumi Adesina, Fitch rating agency affirms AfDB's AAA rating with stable outlook

The economic and trade war between the United States and China is opening up front lines in Africa. After openly neglecting the continent at the start of Donald Trump’s mandate, the US administration is working hard to block Chinese expansion and regain abandoned market shares. This is a strategy developed by the shadow advisers of the American president since 2017.

In this fight, the takeover of financing levers on the continent is a priority for the Americans, with the African Development Bank (AfDB) as a major target. In this context, is its president Akinwumi Adesina a pawn to be released?

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*Adesina, a stone in the shoe of American influence?*

Engaged in a lip-service campaign to win a second term at the head of the African Development Bank at the end of August, Akinwumi Adesina has been plunged into the heart of a fight that is beyond him. Of course, the Nigerian remains the only candidate for his own succession. And even if he can avail himself of the support of the African Union, he will not obtain the easy victory that everyone promised him, essentially due to the economic and commercial rivalry between the United States and China raging across Africa. In this fight, to control the decision-making and financing levers on the continent, the AfDB, and therefore the president who directs it, are major issues for the American camp.

READ MORE: Here is what Akinwunmi Adesina said about allegations against him

*The Trump administration’s strategy of winning back?*

Since coming to power in January 2017, Donald Trump has seemed to ignore Africa. So far, the American president has received only two heads of state from the continent at the White House. This is unprecedented. Worried about the omnipresence of Beijing on the continent and the loss of Washington’s economic influence on the ground, beginning in 2018, the advisers of the Trump administration concocted a strategy of reconquest to counter China in Africa .

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*A slow work of persuasion begins with regard to the American president and turns into obsession in the ranks of the neoconservatives*

Ironically, the offensive was designed and led from the start by the hawk John Bolton, then-National Security Advisor

The American conservatives are very worried. From 178 billion dollars in 2016, the volume of trade between China and Africa reached 186 billion dollars in 2018, and exceeded the symbolic mark of 200 billion dollars in 2019. Even if the objective announced by Beijing in 2014 to aim for 400 billion dollars in trade by 2020 is proving unrealistic today, the inexorable and rapid upward trend in trade between China and Africa is irreversibly written.

This is quite the opposite of trade relations between the United States and the continent.

READ ALSO: African Development Bank joins Nasdaq sustainable bond network

*Attack through commercial means*

The cornerstone of the American trade strategy on the African continent, the AGOA (law on growth and opportunities in Africa) has a poor record for its 20 years in 2020. Launched in 2000 under Bill Clinton, AGOA offers duty-free entry into the American market for 6,500 African products (petroleum, agricultural, textiles, handicrafts, etc.). Thirty-nine predominantly sub-Saharan countries benefit from it. AGOA goals? Help diversify trade with the continent and promote industrialization in sub-Saharan Africa.

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However, petroleum products continue to represent two thirds of American imports. According to USAID figures, bilateral trade between the United States and the United States quadrupled from 2002 to 2008, to reach 100 billion dollars. But Africa trade is crumbling. It fell to $ 39 billion in 2017, only to rebound slightly to $ 41.2 billion in 2018, mainly due to the United States’ energy self-sufficiency.

Meanwhile, over the past five years, US exports to sub-Saharan Africa have stagnated on average at $ 19 billion per year. With $ 54 billion in foreign direct investment in Africa, the United States is still ahead of China in this area.

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However, Chinese domination in Africa is a snub for Uncle Sam. Little by little, advisers will convince the American president to look beyond the borders of the United States. The Vice-President of the Center for Strategic and International Studies (CSIS), Washington, and the President, of the Sub-Saharan Africa Advisory Committee for the Export-Import Bank of the United States United (Exim), Daniel Runde, among others, feeds the Trump administration’s perspective on the economic engagement of the United States in the world, in particular in terms of development.

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READ ALSO: AfDB agrees to the review of ethics committee’s report on Akinwumi Adesina

*Go through development institutions, including the AfDB*

Countering China in Africa, by relying on development institutions, has become an end in itself. In a memo titled “The Trump Administration Will Eventually Lead the Bretton Woods System,” Daniel Runde wrote in mid-2017 that “the United States will seek to have a say in the upcoming appointments of the heads of the multilateral banks of development.

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In October 2017, Steven Dowd, the current Executive Director of the AfDB who is the representative of the United States at the Bank and the chairman of the audit and finance

committee of the pan-African bank, confirmed this desire. “I will leverage the US financial contribution to the bank to ensure that it is best used for Africa and serves the interests of US foreign policy there.” […] I will endeavor to open Africa to American investments and know-how.” This close friend of Daniel Runde then made the promise to American senators in order to get the post with the AfDB.

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In October 2019, Daniel Rundee, a Republican loyal to Donald Trump, specified the interest of the Americans in controlling the AfDB to halt Beijing’s long march on the continent. “The AfDB is an alternative to engaging in Africa that is not led by China and it can help reframe Africa as a tremendous economic opportunity. ”

In a charge against Adesina carried in a column on the American online site ‘The Hill’, the message is clear. The writer, Daniel Rundee led a charge against the management of the bank by Akinwumi Adesina, its president. Runde insisted on his lack of transparency and his support for authoritarian regimes, in particular by organizing the AfDB’s annual meetings in Malabo (Equatorial Guinea), in June 2019. “Anyone who has read the classic book Tropical Gangsters will recognize that the government of Equatorial Guinea is probably one of the most corrupt in the world”, asserted Daniel Runde.

The offensive had already accelerated following the appointment of Tibor Nagy in July 2018 as US Assistant Secretary of State for African Affairs, a post left vacant for several months. On March 3, at the United States Embassy in Kinshasa, he began his speech on what “the Trump administration in Africa should do: counter China’s narrative and clearly show that the breadth and depth of the United States’ engagement in Africa is second to none.”

On the ground, Tibor Nagy could count on the rebirth, in May 2019, of the Export-Import Bank of the United States (Exim) chaired by Kimberly Reed, a lawyer who served as senior advisor to the Secretaries of the United States Treasury in 2004. Congress gave a mandate to the federal agency, which now has a theoretical strike force of $ 135 billion. It is up to the Exim to devote 20% of its resources to unlocking financing that is capable of neutralizing Chinese offers in Africa. On May 14, 2020, the board of directors of the American agency validated a loan of 4.7 billion dollars for the benefit of Mozambique to build an LNG installation. “This is a prime example of how a revitalized Exim, thanks to the leadership of President Trump and bipartisan support from Congress, can help ensure the use of made in USA products and services, without giving way to countries like China and Russia, ”said Kimberly Reed.

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*From 2018, a tool called Prosper Africa …*

In addition, when John Bolton presented the US Strategy for Sub-Saharan Africa in December 2018, he took the opportunity to launch Prosper America. This initiative, which brings together the resources of more than 15 American government agencies, is intended to counter the new Silk Road (Belt & Road), traced by Beijing since 2013, with the mission of doubling trade and investment between United States and Africa. Prosper America is establishing a one-stop-shop to make it easier for US businesses to access more than 60 business investment support services.

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However, the initiative is slipping. “It has lost a lot of its momentum due to a very slow deployment,” said Judd Devermont, Africa program director at CSIS last June.

READ MORE: Recession: Nigerian economy to slide by 3.4% in 2020 – IMF

*… Followed by the Build Act*

Another brick laid by Congress in March 2018, is the adoption of the Build Act, which created the US International Development Finance Corporation (IDFC), and the American development bank, with $ 60 billion in investments compared to $ 29 billion for its predecessor. Concretely, the Trump administration is also seeking to score points by dealing directly with states. Washington is therefore trying to sign a free trade agreement with Kenya at all costs. Negotiations are underway. After the one concluded with Morocco in 2004, it would be the second time that the United States would ratify and conclude a deal with a country on the continent. The example would be symbolic of the return of Uncle Sam. In 2019, Kenya imports from the United States totaled 391 million dollars, against more than 3 billion from China. In the minds of the Americans, an agreement with Kenya would serve as a springboard for negotiating new agreements bilaterally with other states.

But Washington’s neoconservatives are convinced that the United States can only effectively curb China’s stranglehold in Africa if it controls the major levers of financing on the continent, such as the AfDB, which approved more than $ 7 billion in commitments in 2018 and which benefits from the remarkable triple A rating from international rating agencies.

*Final objective: control the funding levers with candidates dubbed by Washington*

Is the statutory designation of a new AfDB president in 2020 a dream opportunity for Washington to maneuver and control the Pan-African institution and promote the appointment of a president committed to American interests? Except that Akinwumi Adesina stands in the way of Washington advisers. And he is the only candidate to run for his own succession. In addition, he is a national of Nigeria, the largest shareholder of the AfDB with 9.1% of the bank’s capital. With 6.5% of the shareholding, the United States comes “only” in second position.

Whatever. The bank has 80 shareholder countries, including 26 non-African countries. Daniel Runde openly contests the governance of the AfDB which gives the voting preeminence to African countries, with “58.89% of the votes”.

However, in October 2019, the Republican in a note from the CSIS on the future role of the AfDB, said “at the World Bank, the United States has 15.7% of the vote and a de facto right of veto, while they do not hold a veto similar to the AfDB”. One thing is obvious for the adviser: “Regional development banks work best when they follow the golden rule, namely: whoever owns the gold sets the rules”. Clearly, those who finance designate the kings and commanders.

READ ALSO: African Development Bank to launch African Economic Outlook 2020 Supplement

*Obstacles on the way to the AfDB’s capital increase*

As luck would have it, this pressure from the United States came when Akinwumi Adesina was negotiating the Bank’s general capital increase, which was concluded favorably in October 2019, and will raise capital from $ 93 to $ 208 billion over ten years from 2020 to 2030. This represents an increase of 125%. At the same time, Daniel Runde writes: “Shareholders are going to have to ask serious questions. The United States, as the main donor, does not have the same vote and influence within the AfDB as it does in other multilateral development banks,” such as the Asian Development Bank and the Inter-American Bank of development. “The AfDB should reconsider the position of its large non-regional shareholders, who are increasingly speaking out about the disproportionate voting power they hold in relation to the size of their contributions. If they are ready to pay, they should have more actions to take in the bank. ”

Obviously, the United States did not succeed. Did Akinwumi Adesina reject them? Did he stand up against American design? Hard to say. For the moment, the protagonists remain walled in silence. But this is where the troubles of the AfDB President began.

*In the wake of whistleblowers alleging unethical behavior*

To strengthen the attacks against Adesina, the architects of the Nigerian destabilization operation took the opportunity of a letter sent to the governors of the Pan-African bank in January 2020 by whistleblowers. The latter accused Akinwumi Adesina of unethical behavior, favoritism in appointing Nigerians to senior positions, and personal enrichment. Allegations he denies. In the meantime, the grievances against the president of the bank were leaked to the press, giving a global echo to the accusations against him, while he was engaged in the campaign for his re-election. Conservative Steven Dowd, the current US chairman of the AfDB’s audit and finance committee, is suspected of being behind the leaks over the accusations affecting the Nigerian.

On May 5, an internal bank investigation exonerated Akinwumi Adesina for lack of evidence. Annoyed, the United States threw a stone in the pond. In a letter dated May 22, US Secretary of State for the Treasury, Steven Mnuchin, expressed “serious reservations” about the findings of the investigation. And as a member of the Board of Directors of the AfDB, he calls for “a thorough investigation of these allegations by an independent external investigator”. After 15 days of silence, the Board of Governors of the AfDB accepted, on June 5, that a new investigation be “carried out by a neutral, honest person, of high caliber with undeniable experience and a proven international reputation, in a period of two to four weeks at the most, taking into account the electoral calendar of the bank. This mission was entrusted at the beginning of July to the former Irish president Mary Robinson.

*Suspense as to the outcome, but the battle will leave its mark*

Whether cleared or accused, what will be the fate of Akinwumi Adesina, under the threat of the American steamroller? Washington has meanwhile garnered support from Switzerland, as well as Denmark, Sweden, Norway and Finland, according to Bloomberg. The Nigerian still enjoys the backing of the African camp and the rating agency S&P Global Ratings. While maintaining that AfDB’s triple A rating, S&P stated in a press release dated June 19, 2020 that “the Board of Governors of the AfDB endorsed the conclusions of the ethics committee which exonerated the president of any wrongdoing, although it allows for an independent review of the report given the differing views of the Governors. We believe that, in accordance with our expectations, this issue has been dealt with appropriately through the appropriate institutional channels. […] We expect shareholders support to remain strong, regardless of the outcome of the independent investigation.”

Asked by the BBC on May 30, 2020, Nancy Birdsall, senior associate at the Center for Global Development, an Anglo-Saxon think tank, predicted that “the US Treasury would seek a form of discreet compromise in which no one loses face”. The end of the suspense is expected in a few weeks.

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COVID-19 and its impact on the cement industry

Our outlook for the cement industry is mixed due to a plethora of factors…

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The impact of the restrictive measures put in place during the second quarter to contain the global pandemic was apparent in the financial performance of two of the major players in the cement industry (Dangote Cement and Lafarge) as Revenue was pressured. Specifically, the industry leader, Dangote Cement recorded a decline of 15% in Sales volume in its Nigerian Operations while Lafarge reported a decline of 10%. Notably, the CBN Manufacturing PMI showed that demand for new orders in the cement subsector slowed to 63.6 points at the end of Q2 from 70 points in Q1.

READ: Measures introduced by Nigeria to ensure transparent use of the $3.4 billion IMF loan

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In our view, the lockdown in the month of April in three key states across the federation (Lagos, FCT and Ogun) coupled with heavy rainfall in June led to the decline in the industry’s sales volumes during Q2. Furthermore, we think the increased level of government attention on the healthcare sector amidst revenue challenges led to the suspension of most construction projects across the nation. Meanwhile, we highlight that the FG reduced the amount budgeted for capital expenditure by 20% in the revised 2020 budget following the downturn in oil prices which undermined oil revenue. Based on the recent presentation made by the Minister of Finance on budget implementation, the sum of N253.3bn has been spent on CAPEX as at end of May, which pales in comparison to the pro-rated revised budgeted capital spending of N816.70bn and translates to a performance ratio of 31%.

READ ALSO: COVID-19: Abuja Sheraton suffers 88% drop in revenues

Looking ahead, our outlook for the cement industry is mixed due to a plethora of factors ranging from subdued private investment in gross fixed capital formation, rising inflationary pressures on essential food items (which could dampen the quest for capital goods such as housing), increased energy costs due to the devaluation in the local cuurency amidst heightened competition in the industry that may limit industry players from hiking prices to preserve margins. Although, we expect pressure on volume growth to persist in the short term until there is a significant pick up in economic activities, we note that the relaxation of lockdown measures and the low interest rate environment are positive factors that will support the earnings of industry players.

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CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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The “new normal” in business and economy

In the new normal, business owners are faced with overwhelming, competing challenges.

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The "new normal" in business and economy

As the COVID-19 pandemic continues to ravage the world, leaving citizens of the world a new world order, businesses need to navigate their financial and operational obligations. They are also expected to meet the needs of their greatest assets – customers and suppliers.

The crises may have paved way for uncertainties, but it has also created opportunities for sectors to emerge and grow, while some will fall and vanish if not properly managed and strategized as the companies who will stand firm in this era will be those that implemented risk management as part of their business strategy.

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While this crisis is first and foremost a public health issue, which has claimed the lives of thousands of people worldwide and still counting, the economic would no doubt be overwhelming and is likely to create major economic meltdown in both the formal and informal sectors

READ ALSO: Airtel Africa’s profit up 12.9%, customer base reaches 111.5 million

The train must be primed to chug along now! In the new normal, business owners are faced with overwhelming, competing challenges. They are surrounded by treacherous waters now darkly infested with COVID-19 sharks. Still, they must continue to dive into the deep end of the global pandemic.

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A business’s success depends in part on the economic systems of the countries where it is located and where it sells its products. A nation’s economic system is the combination of policies, laws, and choices made by its government to establish the systems that determine what goods and services are produced and how they are allocated. The resources of a person, a firm, or a nation are limited. Hence, economics is the study of choices—what people, firms, or nations choose from among the available resources. Every economy is concerned with what types and amounts of goods and services should be produced, how they should be produced, and for whom. These decisions are made by the marketplace, the government, or both. In the United States, the government and the free-market system together guide the economy.

READ ALSO: UPDATED: Inflation rate jumps to 12.40%, highest in over 2 years

Business owners therefore should have their priorities clearly mapped out; providing support and being a backbone to their people, customers and suppliers. They must achieve all this, whilst simultaneously addressing supply chain disruptions, maintaining stable profit margins, aligning their businesses with evolving demand and changes and identifying potential pitfalls and new growth trends.

Businesses in the new normal require a new mindset to recover from the crises, thereby identifying, analyzing and addressing effective strategies that would help the business return to normality and grow. This is the time to build organizational relationships with strategic partners for proper execution of effective strategies.

Management personnel and stakeholders are quickly turning their attention to the ‘next’; that moment of unpredictable and probably muted economic recovery with newly identified threats and opportunities. This is a new era defined by fast-changing initiatives to shift the cultural norms, societal beliefs and values, such as renewed brand purpose.

READ MORE: IMF expects Nigeria’s GDP to shrink by 5.4% in 2020

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Leaders, corporate and political, are faced with the urgency to reopen their businesses.

To bridge the gap of uncertainty, reopening would require a series of ‘reinventive’ thinking. The pandemic offers a big opportunity to have companies invest in areas they wish they’d paid more attention to before the crisis. Now, to be more digital, data-driven, and in the cloud; to adopt a variable cost structure rather than fixed, to find its root in e-commerce and security are no longer deferrable agendas.

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Consequent to the pandemic, organizations globally are experiencing an unfamiliar change in their workflow processes and harnessing their workforces optimally. Companies are yet to fully understand and determine how working remote working will help achieve corporate objectives beyond the survival hump. Profitability and business models are being cautiously reviewed. Teams and workforces try to function and perform in line with expected deliverables whilst struggling to cope with even more sombre personal and existential challenges in the new normal.

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Organizations, teams and workforces need new and bespoke fitting plans today. They need to formulate strategies and drive policies that can position them advantageously to work out and around the emerging challenges as the state of global health and economic unfolds. All stakeholders have critical roles to play in developing and establishing systematic approaches that promote shared workforce resilience, flexibility and intelligence.

Similarly, the ongoing COVID-19 pandemic has changed customers, employees, citizens and humans’ experiences, attitudes and behavior forever. The norms of behavioral consumer psychology are deviating from the expected curves. Results, though displaying expected changes, are creating sweaty anxiety for boardroom decisions. The crisis has caused a fundamental change in human-human interactions and behavior. In the new world order, companies would necessarily need to review and redesign operational flow and operating models. These changes would impact greatly on design, communication, running expenses, remunerations, investments etc. The definitions of that people need and want has been reshaped and businesses need to blend into the new, emerging ecosystem so they can properly reposition for sustainability and profitability. The global pandemic has created uncertainties and forced companies to reevaluate and reinvent how business operations units are leveraged. It has redefined how digital platforms can be used in supporting and ensuring continuity in the business through and beyond the crisis.

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The state of the economy affects both people and businesses. How you spend your money (or save it) is a personal economic decision. Whether you continue in school and whether you work part-time are also economic decisions. Every business also operates within the economy. Based on their economic expectations, businesses decide what products to produce, how to price them, how many people to employ, how much to pay these employees, how much to expand the business, and so on.

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The crisis has fundamentally changed supply chain management economics and dynamics; we are in uncharted waters. Routes to market are evolving which would inevitably kick some companies off the market and make some others tether on balance. In response to the pandemic, leaders have been mandated to increase their adoption of value chain transformation to help outrun uncertainty. For those who are able to successfully navigate to the other side of this new normal, it becomes imperative to establish strategies for greater resilience and apply lessons learnt to create systems and models that would better prepare companies and stakeholders for further future disruptions.

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COVID-19 and intervention measures to keep MSMEs afloat in Nigeria

Globally, MSMEs are considered the critical engines of economic growth.

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CBN Entrepreneur loan, 7 Tips for Financing Your New Business, SMEDAN invests N103.5 million in Sokoto entrepreneurs  

News reports say the Minister of Industry, Trade, and Investment, Niyi Adebayo on Tuesday inaugurated a 10-man steering committee to drive the implementation of the various support schemes for small businesses especially Micro, Small and Medium Enterprises (MSMEs) in the country. The Minister of State for Industry, Trade & Investment, Mariam Katagum is the Chairman of the committee while the Chairman, First Bank of Nigeria Plc,
Ibukun Awosika is the Vice-Chairman.

In a bid to support the growth of MSMEs, the federal government has established a number of schemes geared towards providing finance at low-interest rates. These include a special intervention fund managed by the Bank of Industry (BOI) to provide subsidized loans to MSMEs at a rate of 9% per annum. Agri-Business/Small and Medium Enterprise Investment Scheme (AGSMEIS) is another intervention funding scheme anchored by the CBN
specifically for enhancing agricultural businesses of MSMEs. The latest of this move is the MSMEs Guaranteed Offtake Simulation Scheme which is aimed at providing bridge financing in supporting the payroll costs of MSMEs that are currently grappling with severe cash flow problems due to the disruptions induced by the global pandemic.

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The vulnerable Nigerian MSME sector has been one of the sectors that have been badly hit by the current economic weakness brought about by the COVID-19 pandemic. Several businesses have been affected by supply chain disruptions and low demand for their products and services due to the weakened consumer purchasing power, leading to substantial loss in revenue. In a survey carried out by FATE Foundation in conjunction with BudgiT, of the 1943 MSMEs surveyed, 94.3% reported being negatively impacted by the pandemic particularly in the areas of Cashflow (72.1%), Sales (67.7%) and Revenue (59.2%).

Despite the negative impacts of the pandemic, 47.1% of respondents were positive that their businesses will survive the pandemic with 22.8% being unsure while 30% indicated that their businesses will not survive the pandemic. Most of the businesses reported needing support with Cashflow (72.1%) and Sales (67.7%) and will like the Government to provide support in the area of funding (89.4%) and access to markets (33.8%).

Globally, MSMEs are considered the critical engines of economic growth due to their potential to create jobs, boost economic output, generate income, and reduce poverty. In Nigeria, MSMEs have always struggled to play these essential roles given tough challenges in the business environment. Prior to the onset of the pandemic, many MSMEs were still reeling under the impact of the recent recession and were still struggling to get back on their feet. With the onset of the pandemic, the situation appears to have worsened for many. Given the importance of these MSMEs to the country’s economic recovery post-pandemic, an effective support scheme should be a top priority. That said, it is essential that efforts should be deepened in improving accessibility and timely disbursement of such funds.

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CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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