Transcript Welcome! [www.sadc

southern african
development community
development finance
resource center
The Emerging Development
Finance System of SADC with
special focus on the PPDF
Dr. Rosalind H. Thomas
CEO
AfDB/ NEPAD Workshop
Midrand
29th March 2006
southern african
development community
development finance
resource center
The Development Finance System of SADC
Purpose of presentation?
To introduce the SADC-Development Finance
System & specifically the PPDF
Background & Establishment
• DFI Network
• DFRC
• Development Fund
Recommendations on PPDF (Phases 1, 2 & 3)
Structure & Workings of the PPDF &
3 pre-screened projects
17/07/2015
2
southern african
development community
development finance
resource center
Background & Establishment
COMFI 1998 -
Three EU funded studies Development Finance
Establishment of DF System
•
•
•
•
17/07/2015
Roll out began 2000 - DFI MOU
Trust August 2001 (interim arrangement)
DFRC established July 2003
Development Fund – feasibility study
3
southern african
development community
development finance
resource center
The DFS of SADC – Network’s Role?
DFI Network a virtual reality
Secretariat - DFRC
Aim of Network?
Collaborate on cross-border & in-country financing of projects in
SADC
Pool resources to mobilize intra- & extra-regional funds for
development projects
Share experiences
Where viable take equity in each other’s institutions
Invest jointly in new structures where necessary
Collaborate on appropriate institutional mechanisms to facilitate
cooperation and development finance in SADC
17/07/2015
4
southern african
development community
development finance
resource center
SADC-DFRC?
Role & Responsibility of DFRC
Secretariat of Network
Facilitator & Coordinator of
cooperation in Network
Right to identify most critical
issues affecting Network members
Right to propose solutions
including policy options &
regulatory changes
Initiate funds raising strategies,
both project oriented & across the
board
17/07/2015
Institutional strengthening,
Capacity building including
project-related secondments,
mentorship & training
programs, knowledge network
Product proposals, partnerships,
Technical Assistance
Monitoring of DFIs, peer
review & management support
5
southern african
development community
development finance
resource center
Priority Areas?
C.
Ensure conducive
Policy environment
and Govt. support
B.
Enhance DFI
s
delivery
A.
SMEs and
Infrastructure
D.
Efficient and
Effective Network
17/07/2015
6
southern african
development community
development finance
resource center
The SADC Development Fund?
Council Mandate to COMFI to investigate SADC
Development Fund
DFIs asked to carry out work and report to COMFI
Phases I –Oct 2002 – August 2003
• Presentation to COMFI & Council – PPDF accepted
Phase II - Oct 2003 – August 2005
• Project completed – Presented to COMFI August
• Result? In principle acceptance of Modus Operandi – further
work requested
PPDF provides the third “Pillar” of the DF System
17/07/2015
7
southern african
development community
development finance
resource center
Workings of Development Finance System
17/07/2015
8
southern african
development community
development finance
resource center
I - Is there need for a Development Fund?
Phase I: Investigated desirability of SADC Development Fund
Financial support from KfW
RFP – Sept 02; Bids close – Oct 02; Consultants appted – Dec 02;
Inception Report – Feb 03; Final Rpt – May 03;
Presentation to COMFI – June 03; Council Aug 03!
Findings
Adequate financing in market for funding good projects
Problem: Need for increased investment not being translated into
bankable projects – no deal flow!
New vehicle needed for pre-packaging of such projects
Facility - also serve as catalyst to improve investment environment
Conclusive Finding: Yes - Need for PPDF!
Recommendations accepted by COMFI & Council – proceed to
Phase II
Development Fund now called - PPDF!
17/07/2015
9
southern african
development community
development finance
resource center
II - How will PPDF be structured and how will it work?
Phase II: Investigate modus operandi of the SADC PPDF
Further support from KfW
RFP – Oct 03; Bids close – Jan 04; Consultants– Jan/Feb 04; Interim
Report – May 04; Final Rpt – June 04;
Presentation to COMFI one year later – Aug 05!
Deliverables:
Window 1: Project preparation and development facility
Window 2: Project finance component
Pre-screen 3 regional projects for the first activities of the PPDF
Findings of Study
Key stakeholders see real/urgent need for Window 1
Review of 30 models world-wide – no appropriate off-shelf model
Are Critical Risk Factors that inform recommendations
17/07/2015
10
southern african
development community
development finance
resource center
Findings? Resource Gap Analysis…
Development Finance Needs for PS Development
Variables (per annum)
SADC
SSA
Required GDP Growth Rates (%)
6.2
6.8
ICOR*
6.1
5.0
Domestic Savings Rate (%)
19.6
14.9
Required Investment/GDP Rate (%)
37.8
33.0
Required External Finance (% of GDP)
18.2
18.1
Current ODA Flows (% of GDP)
11.8
8.9
Residual Finance (% of GDP)
6.4
9.2
Source: ECA “Economic Report on Africa 1999”, Addis Ababa, 1999
* Incremental Capital/Output Ratio
17/07/2015
11
southern african
development community
development finance
resource center
Findings continued….?.
PPDF Market Niche?
Primary Role: Intermediation between public/private
partners for development of projects to take to market
- partake in direct financing of selected projects
Provide Project Advisory Services to Project
developers & Clearing House to identify existing
facilities: TA for project identification and feasibility
Enhance business environment for regional projects –
identify & help to remove specific barriers to
successful conclusion of projects
17/07/2015
12
southern african
development community
development finance
resource center
Findings? Three Institutional Options …
Stand-alone SADC institution, full set of inhouse expertise -   […too expensive too
slow start]
Stand-alone SADC institution contracting out
key skilled expertise -  ? [OK… But slow start
& immediate costs]
Stand-alone SADC institution – but in initial
stages as a facility hosted by reputable DFI
with bulk of technical services provided by
Host or (if needed) sourced from skills pool via
DFRC -   [… quick start option – cost
effective!]
17/07/2015
13
southern african
development community
development finance
resource center
Recommended Model for PPDF (Phase II)
Placement within SADC Framework
Stand-alone institution - initially as a facility hosted by
reputable DFI
Management Contract with Host
Own governance structure
Established under SADC legal framework with SADC
Finance & Investment Protocol as founding
instrument
Operationally implemented under Subsidiarity – but
aligned with best international practice
17/07/2015
14
southern african
development community
development finance
resource center
Recap on Recommendation? …
 Stand-alone SADC institution – but in initial
stages as a facility hosted by reputable DFI
with bulk of technical services provided by
Host or (if needed) sourced from skills pool via
DFRC
***************************************
In principle approval from COMFI but
request for further investigation into
outstanding concerns = Phase III
17/07/2015
15
southern african
development community
development finance
resource center
PPDF Institutional Framework…
Institutional Structure
CEO/Manager; In-house Development Team
& Administration (out-sourced initially to
reputable DFI)
Result: Lean, skilled, quick disbursing
institution
In-house essential staff only, complemented
by technical & policy support from Host DFI
(or DFRC and DFI Network)
17/07/2015
16
southern african
development community
development finance
resource center
PPDF Organizational Structure ..…
17/07/2015
17
PPDF…..
southern african
development community
development finance
resource center
Organizational Structure
Corporate Governance: Non-Executive
Board/ Technical Credit Committee; reporting
to a SADC Oversight Body (Senior Treasury
Officials)
17/07/2015
18
southern african
development community
development finance
resource center
Corporate Governance of PPDF ..…
17/07/2015
19
southern african
development community
development finance
resource center
PPDF…..
Operations
Provide Grant funding for project preparation &
development immediately - PPDF (Window 1)
Project Financing – PF (Window 2) deferred to later
when demand arises
PPDF Project cycle:
• project origination & screening;
• project evaluation; and
• Project marketing, negotiation & financing
Management Information System & IT, Business
Development, & Funds Mobilization are imperative
(hence outsourcing to reputable DFI)
17/07/2015
20
southern african
development community
development finance
resource center
How the PPDF would operate….
17/07/2015
21
PPDF..…
southern african
development community
development finance
resource center
Financing Model
To be financed by Grants (cash transfers/ or in kind, i.e.
TA)
Life of the PPDF is 20 years
US$15 million as target to be raised – US$7.5 million in
first year (€4 million earmarked by GTZ)
Contributions (% of total Capital raised):
• SADC Member States – 10%;
• ODA – 60%
• Others (including private finance) – 30%
17/07/2015
22
PPDF ..…
southern african
development community
development finance
resource center
Financing:
Host DFI? - recurrent costs = management fee of 1.5%
of disbursed funds proposed (NEPAD charges differently
on similar arrangement with DBSA)
To re-capitalize fund -- PPDF - operate as revolving
fund & earn success fees on projects (minimum of 3% in
model on disbursement per project)
Start-up costs assumed at 5% of Capital raised
Average size of disbursement = US$1.5 m/project
Tax rate = 0% as SADC institution
Later, if stand alone institution required - Member States
to contribute recurrent costs of PPDF & second staff as
and when required
17/07/2015
23
southern african
development community
development finance
resource center
Pre-Screened Projects for PPDF….
Three projects pre-screened for first activities
of PPDF:
Pafuri-Vilankulo Development Corridor, Mozambique
Namibia-Angola Agro-Industry Project on Okavango
River
Mtwara Development Corridor – Heavy Duty Ferry
linking Nkhata Bay – Mbamba Bay on Lake
Nyasa/Malawi;
17/07/2015
24
southern african
development community
development finance
resource center
THANK YOU
Dr. Ros Thomas (CEO)
SADC-DFRC
P. Bag 0034
Gaborone
[email protected]
Website: Still under construction
www.sadc-dfrc.org
17/07/2015
25