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Private Sector Operations
The AfDB as a Development and Business Partner
July 20, 2011
AfDB’s Position on Private sector development
• PSD is an institutional priority for the AfDB • It is a key component of the Bank’s Vision and Strategic Plan
The AfDB’s private sector development efforts, are anchored on three interrelated activities:
• Understanding the business environment through diagnostics and strategy development • Assisting African governments to improve the enabling environment for the private sector • Creating catalytic and demonstration effects by assisting entrepreneurs with specific transactions
Strategic Areas of Activities and Tools Financial Market Development Direct Lending Operations Infrastructure PPPs Enabling Environment Lines of credit LOC + TA Leasing Equity/Quasi-Equity Trade Financing SME Financing Direct loans Guarantees Equity Private Sector Department Direct loans Guarantees Equity Funds Budget support Institutional support Capacity Building ESWs Public sector / Governance Departments
AfDB Private Sector Instruments
•
Senior Debt
– Up to 20 years (5 yrs grace period), foreign or local currencies •
Guarantees
– partial risk, partial credit (long tenors) •
Subordinated Debt
– local currency •
Equity
– direct, equity funds, up to 25% •
Technical Assistance
– grants for studies, capacity building
Strategic Priorities
• • • • • Improving the Investment Climate - To encourage domestic and foreign investment. Supporting Private Enterprises – Promoting entrepreneurship will create sustainable growth.
Strengthening Financial Systems – A sound financial system and a vibrant banking sector are essential. Building Competitive Infrastructure – Participation of the private sector in infrastructure through PPPs.
Promoting Regional Integration and Trade – To assist African countries to become globally competitive.
AfDB uses 4 criteria to select its Private Sector investments Additionality
• Deal structuring • Crowding in of commercial investors • Political risk mitigation • Financial risk mitigation
Strategic alignment
• Country’s economic and social priorities • AfDB’s regional or country strategy
Commercial viability
•Market fundamentals •Financial structure • Sponsor’s experience and financial strength
Development outcome
• Employment • Local content • Social and environmental impacts • Tax revenues
The AfDB’s private sector operations cover a broad range of sectors:
• Power – IPPs, PPPs, hydro, thermal, wind, solar • Transport – airports, roads, ports • ICT – submarine cable, satellite, telephony • Oil & Gas – exploration, extraction, refining, pipelines • Mining – extraction, refining, smelting • Manufacturing – cement, fertilizers • Agribusiness – sugar, oils, timber, bio-fuels, fishing • Hospitality – hotels, resorts • Health & Education – hospitals, schools • Financial sector – banks, insurance, leasing, microfinance
An active portfolio of over UA 2.23 bn (USD 3.57 bn) and poised for further growth As at December 2010 Infrastructure (Pow er, Shipyard) 16.6% Manufacturing 0,9% Agribusiness 1,2% Health 0,2% Tourism 1,9% Infrastructure Funds 8.2% Infrastructure Oil & Gas 13.2% Mining 8,7% Financial Intermediation 55,3%
Products for financial assistance
Loans Equity and Quasi-Equity Lines of Credit Guarantees Lo ans 30.5% Syndication Underwriting Guarantee 0.8% Quasi-Equity 0.4% Equity Funds 9.8%
New areas
P rivate Equity 0.39% Enclave P ro jects 6.0% LOC 52.1%
Ghana projects (some examples and indicative pipeline)
Ghana Oil Palm Development Corporation CAL Bank Limited Tema Osono Power Plant Ghana Cocoa Board Kempinski Accra Hotel Indicative Pipeline
Senior debt for expansion of processing facility Amount committed: EUR 7.14 m Date approved: 12.12.2002
Line of Credit for on-lending to SMEs Amount committed: USD 15 m Date approved: 24.07.2008
Senior debt for the development of a power plant Amount committed: USD 30 m Date approved: 15.10.2008
Trade Facility for 2010 Cocoa harvest Amount committed: USD 35 m Date approved: 16.09.2009
Senior debt for the construction of a 5-star hotel Amount committed: USD 18 m Date approved: 27.09.2010
• Power Plant Expansion • Gas infrastructure • SME Funds • SME Guarantee Scheme • Line of Credit
Future Orientations ( Policy Orientations in Support of Private Sector Development):
• Improving Business Environments and Strengthening RMCs’ International Competitiveness – Reforming policies and building critical institutions – Infrastructure development and infrastructure services delivery – Financial Intermediaries and Capital Markets – Economic Diversification – Transformation of the production base • Broadening Participation and Inclusion in Private Sector led economic growth – Promoting Entrepreneurship and Entrepreneurs in Africa – Micro, Small and Medium Enterprises (MSMEs). – Empowering Women to Participate • Embedding Social and Environmental Responsibility in Private Sector Development
Future Orientations (Transactions):
• • • • • Financial Services Diversification (leasing, microfinance) Syndications Private infrastructure projects/Public-Private Partnerships (PPPs) Renewable energy (wind, solar, hydro) Assistance to SMEs