Local Governance Reforms Are Critical to Improving the Effectiveness of IMF/World Bank Lending to Africa

Julius Agbor and Olumide Taiwo

In the wake of the global financial crisis and the persistent global food and fuel price shocks, international development institutions — notably the International Monetary Fund (IMF) and the World Bank — have increased their concessional lending to low-income countries, particularly those in sub-Saharan Africa. In 2009 and 2010, the IMF committed new concessional lending to sub-Saharan Africa of about $4 billion, compared to $1.1 billion in 2008 and only about $0.2 billion in 2007. The IMF’s concessional lending is expected to reach $17 billion in 2014.

With higher amounts of aid from the IMF flowing to sub-Saharan Africa, issues of governance and accountability become crucially important. There is a need to ensure that the resources acquired from concessional lending translates into poverty reduction, lower infant mortality and malnutrition rates, increased rural infrastructure, higher school enrollment, and better education and learning outcomes.
However, with a few exceptions, most sub-Saharan African countries that stand to benefit from IMF concessional lending are the poorest performing in terms of governance indicators. For instance, only Ghana and Lesotho were highly ranked on the 2010 Mo Ibrahim Index of African Governance, while only Ghana received a favorable global ranking as the least corrupt country in the 2010 Transparency International Corruption Perception Index (CPI).

In recognition of the governance deficiency in Africa, the IMF is currently upgrading the focus of its concessional loan’s conditionality from broad public participation and country ownership to issues of transparency in the management of public resources. In addition, the World Bank’s Extractive Industries Transparency Initiative (EITI) aims to strengthen governance in natural resource-rich countries through the full publication and verification of company payments and government revenues from oil, gas and mining. While these initiatives could have the potential to improve governance at the national level, it is unclear whether such a top-down accountability model would improve governance at local and council levels, where accountability in service delivery is most needed.

The gradual shift in emphasis among development partners toward local accountability and inclusiveness, in order to ensure prudent management of public resources and service delivery, comes as no surprise. Strategies to achieve these objectives have been mainly placed on decentralization efforts, such as the transfer of political, financial and administrative authority and responsibilities to local councils and entrenching competitive multiparty elections at the council level. The idea here is that free and fair elections give constituents the opportunity to demand accountability from elected local council officials. Unfortunately, in practice, decentralization and multiparty elections do not always guarantee local accountability and effective service delivery. This is not even in the case in some of Africa’s most established democracies.

Typically, candidates running for local council are chosen through primaries held by each political party. In most cases, party “kingmakers” provide financial and organizational support to candidates on the condition of their party allegiance. Therefore, in the use of local council funds, elected local authorities tend to prioritize political party interest at the expense of constituents’ needs. In other instances, candidates would borrow from financial institutions to finance their electoral campaigns and would pay back with council funds. Either way, the consequence is that funds allocated for basic services are captured by local officials. The World Bank Expenditure Tracking and Service Delivery Surveys, which cover 15 countries in sub-Saharan Africa, show that in the absence of interventions, large amounts of funding for education and health services are diverted by local officials and politicians.

In many African countries, institutional frameworks that balance the interests of politicians and political parties with the needs of local constituent are weak or nonexistent. Therefore, there is a general lack of accountability for local politicians and officials. Constituents often do not have a way for redress if services are not delivered other than to wait for the next election in four to six years. Therefore, free and fair elections cannot be used as the sole mechanism for ensuring political accountability, as many African politicians tend to renege on their electoral promises soon after they are elected.

The current consensus that more information guarantees transparency ignores the fact that having information is one thing but being able to act on it is another. Constituents’ ability to critically scrutinize local officials depends on the extent of their supervisory power within the local governance framework. In many cases, this supervisory power is weak or non-existent.

To address the underlying institutional weakness, we suggest the following two reforms in the governance of local councils in sub-Saharan Africa: The framework of local governance should be restructured to provide constituents with the power to recall non-performing or corrupt officials. Additionally, political party involvement should be de-emphasized in local governance. The latter is not entirely new to Africa. In Ghana political parties are banned from participating in local elections, which allows constituents to supervise their elected officials. Indeed, the World Bank Expenditure Tracking and Service Delivery Surveys show public resource leakage rarely occurs between the district government and the recipient facilities in Ghana, demonstrating that accountability is better enforced by empowered constituents.

Local accountability will remain elusive as long as it is inhibited by decentralization and elections. Currently, the election process does not control the quality of political kingmakers, or the institutions that restrain the behavior of elected leaders.