EAC imposes limits on regional bank’s autonomy

Arusha. Limits have been imposed on the autonomy enjoyed by the East African Development Bank (EADB) over the years.

The regional bank, owned by the East African Community (EAC) partner states, has been directed to submit its audited financial reports to the EAC.

Additionally, it has been tasked with informing the Summit of EAC Heads of State – the supreme organ of the community – on its performance annually.

Although the financial institution does not receive any funding from the EAC, it has been directed to fully align its operations with the EAC development plans.

EAC Council of Ministers chairperson Deng Alor Kuol said the autonomy enjoyed by the bank due to its unique nature must have some limits.

Unlike other institutions of the community, EADB operates purely on business terms with its autonomy safeguarded based on economic considerations.

But the council, the policy organ of the community, has recently directed that it was mandatory for the bank’s performance reports to be sent to the EAC.

Mr Kuol revealed this in Nairobi when responding to a question from a lawmaker at the ongoing sitting of the East African Legislative Assembly (Eala).

An Eala member from Kenya, Mr Kennedy Kalonzo, asked before the House the status of EADB in the structure of the community.

He said the EADB and the East African Civil Aviation Academy, commonly known as Sorti Flying School, were not very clear.

Both institutions are among the surviving bodies of the community, having been established during the tenure of the first EAC which collapsed in 1977.

While EADB is based in Uganda capital Kampala, the flying school was set up at Soroti in eastern Uganda and little is known about its operations.

Responding to the question, Mr Kuol, who is also South Sudanese minister for EAC Affairs, told the House that the EADB Charter gave the bank “a high level of autonomy”.

This, he said, made it possible for the bank to survive when the community collapsed in 1977 at the height of differences between the three partner states then.

The bank was re-constituted under the current Charter in 1980 and has since the revival of the community in the 1990s regained its status as one of the EAC institutions.

Currently only four countries out of eight EAC member states – Tanzania, Uganda, Kenya and Rwanda – are shareholders in the 57-year-old bank.

Non-EAC shareholders include the African Development Bank (AfDB), Netherlands Development Finance Company and German Investment Corporation.

Others are the Commercial Bank of Africa, Nordea Bank (Sweden), Barclays Bank and Standard Chartered Bank.

Nonetheless, EADB is headed by the Governing Council which currently comprises the ministers of Finance from the four partner states.

However, the minister told the House measures to streamline EADB operations into the mainstream EAC would not interfere with the bank’s autonomy.

“EADB is unique compared to other EAC institutions as it operates on commercial terms and has non-EAC shareholders/members,” Mr Kuol said.

He added that despite the uniqueness of the bank that gave it special status compared with other EAC institutions, it has been decided to bring it into the mainstream EAC operations.

“The bank must from now use the EAC development plans to set its priorities. It should as well inform the Summit (of Heads of State) on its performance,” he said.

Other EAC partner states who were not members of the bank have been urged to formally seek admission by acquiring shares.

Additionally, the lender has been directed to constantly submit the financial reports or its internal audit reports for consideration by the EAC Audit Commission.

With an expanded capital base, EADB in 2022 recorded a net profit of $ 6.6 million last year, according to a report presented to the EAC.

As of December 2017, the institution’s total assets were valued at about $ 390.4 million with shareholders’ equity of approximately $ 261.3 million.

The bank is currently financing major development projects in the EAC partner states, including the standard gauge railway (SGR) in Tanzania.

In Kenya and Uganda, it has partnered with KfW Development Bank of Germany to extend credit to the farmers and small and medium enterprises (SMEs) in the agricultural value chain.

The number of current beneficiaries in both countries is 9,250 and, according to the report, the number is growing.