East Africa: EAC pushes to align regional bank with bloc's structure

The East African Development Bank (EADB) could soon be answerable to the East Africa Community (EAC) if a report on the bank’s governance and structure is passed.

The report, to be submitted to the EAC’s Council of Ministers on February 27, was commissioned by the EAC Heads of State in 2016. They also directed the council “to review the EADB Charter to streamline it into the EAC main structure.”

The review team was tasked with finding ways to streamline the EADB into the EAC main structure in a meeting in Kampala in September 2019. The group was made up of experts from finance ministries, attorney-generals’ chambers, central banks, the EADB itself and ministries responsible for EAC Affairs.

Among the recommendations is for the Council of Ministers to develop a collaborative framework between the EADB and the Community to align the bank’s priorities with those of the Community.

EADB, which was retained following the collapse of the first EAC in 1977, has been the subject of a tussle between the EAC Secretariat which wants to control it and the bank’s board of directors, who want it to remain a semi-autonomous institution.

The bank provides loans to projects directly, through syndicates and other forms of co-financing. While the EAC Treaty recognises EADB as one of the institutions of the Community, the current EADB Treaty and Charter do not explicitly recognise the existence of the Community.

Unlike other institutions of the Community, EADB, whose headquarters is in Kampala, is an independent financial institution that operates purely on business terms and has other shareholders who are non-EAC members.

“The issue at stake is accountability of the management of member firms. To make sure it is efficient,” said Manasseh Nshuti, Rwanda’s Minister of State for the EAC Affairs and chairperson of the Council of Ministers.

“Out of the six EAC partner states, Burundi and South Sudan are yet to buy shares in the EADB and the report recommends that they do so,” said Prof Nshuti.

EADB’s other shareholders include commercial banks and international and national development finance institutions.

It is this shareholding structure that has made it difficult for the EAC to control the operations, governance and financial structure of the bank.

“It has been operating as an autonomous institution. Autonomous is good but sometimes if you have been financing it, you need to have a say on how it operates,” said Prof Nshuti.

Other areas of contention include the bank's audit function. The EAC Treaty gives powers to the EAC Audit Commission to audit the EAC and all its institutions, yet the EADB has never been audited by the Audit Commission as required by the Treaty.

The EAC also wants a term limit for the bank’s director-general, like other EAC institutions and regional development banks.