Bank’s Promise Overwhelmed by Reality : Finance: Today the bloated bureaucracy of the African Development Bank is accused of waste, nepotism and corruption. It also serves as a metaphor for the dire straits of the continent it was meant to save.

ABIDJAN, Ivory Coast â€”  Twenty-nine years ago, in a pioneering spirit fueled by the end of colonial rule, African leaders built a bank for Africa, run by Africans with African money.

Today, the African Development Bank is a bloated bureaucracy accused of waste, nepotism and corruption, a metaphor for the dire straits of the continent it was meant to save.

While high-paid executives attack each other across conference tables, the United States and other outsiders are accused of trying to seize control.

“It is similar to the internal power struggles that have destabilized many African countries,� said Ignatius Peprah, an economist from Ghana who has written a book on the subject.

It is difficult to see how the bank will meet Africa’s needs in the 21st Century, he said.

Although the problems are not new, they have taken on a new urgency because of Africa’s economic struggles and its need for outside help.

The continent already spends more than 35% of its export earnings paying interest on its debt, which grew from $251.4 billion in 1993 to $269.5 billion in 1994.

The economies of the bank’s 52 African member nations are in such bad shape that only 14 are eligible for new loans.

Borrowers are $600 million behind in their payments. The bank’s declining resources have forced it to reduce new loans, from $2.5 billion in 1993 to $1.4 billion last year.

The bank has a top-grade credit rating, but Standard & Poor’s Corp. recently said it is monitoring the bank’s problems.

The main problem is getting more capital from member nations so the bank can keep lending money.

This is where African and non-African shareholders disagree.

The 24 non-African shareholders, led by the United States, do not want to pump in any more money until borrowing rules are tightened and supervision of outstanding loans improves.

Some African shareholders, led by Nigeria, the biggest shareholder with a 10% stake in the bank, accuse the non-Africans of trying to seize control and destroy the bank’s African heritage.

Critics say the bank is lax in keeping track of money that it lends for roads, hospitals, dams and other projects.

“It’s a serious problem when something screws up,� said Daniel Duesterberg, adviser to Alice Dear, the U.S. representative on the bank’s board.

“You find out a loan was made 10 years ago for a water project, that no wells had been built, and it’s hard to pin the blame on anybody.�

The problem was highlighted last year in a stinging report by a former World Bank president, David Knox.

He described a chaotic, overstaffed organization with too many chiefs, too many departments and too few professionals willing to take responsibility.

Although noting that many staff members were excellent, Knox said they were “surrounded by much deadwood.�

The target of much recent criticism is bank president Babacar N’Diaye of Senegal, whose 10-year tenure has coincided with the bank’s downturn.

N’Diaye, who commissioned the Knox report, is praised for bringing in professionals and launching reforms based on the report.

However, critics say he has let problems such as nepotism flourish, and he has been under pressure to get his wife out of an influential bank job.

N’Diaye fired back with his own report in May, accusing some bank directors, whom he did not name, of squandering bank money on lavish overseas trips and personal affairs.

He contended some even stole bank china and exaggerated the size of their families to take advantage of the bank’s generous education allowances for employees’ children.

N’Diaye decided not to run for a third five-year term and was to have been replaced during a meeting in Abuja, Nigeria’s capital. However, no one got the required majority despite four rounds of voting.

The voting logjam was blamed on Nigeria, which refused to withdraw its candidate even though he placed a distant third.

Nigeria accused the United States and other Western countries of ganging up against it because of their opposition to Nigeria’s military dictator, Gen. Sani Abacha.

Abacha’s government has vowed to field its candidate again when directors meet Aug. 25 in the bank’s Abidjan headquarters for another election.

Another deadlock would further delay replenishing the bank’s capital.

Hardest hit would be the poorest countries, which receive no-interest loans from a special fund that has been depleted.

Some say that is not such a bad thing.

“The fact that there’s no money gives us a chance to think about not just dishing out dollars, but seeing that they’re put to some use,� said Duesterberg.

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African Development Bank

History: Opened July 1, 1966, to provide development aid to African countries. Initially, only independent African states could be shareholders; membership opened to non-African states in 1982. Started with staff of 10; now has 1,300 employees.

Record: Loaned about $28 billion for 1,583 projects, of which 630 are complete. About 25% of loans go for farm projects and 22% for public utilities. Also lends money to build schools, hospitals and hotels.

Composition: Includes 76 shareholding nations--52 African and 24 non-African. Biggest shareholder is Nigeria, which owns 10%. United States owns 6%.

Problems: Economic woes have left most African nations too poor to pay back loans or get new ones. Western shareholders, led by United States, want tighter controls before replenishing bank’s capital. Special fund for no-interest loans to poorest members has been empty for two years.

Source: Associated Press