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

Lines of credit

Direct loansGuarantees

Equity

Direct loansGuarantees

Equity Funds

LOC + TA

Leasing

Equity/Quasi-Equity

Trade Financing

SME Financing

Enabling Environment

Budget support

Private Sector Department

Public sector / Governance Departments

Institutional support

ESWs

Capacity Building

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.

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

Additionality• Deal structuring• Crowding in of commercial investors • Political risk mitigation• Financial risk mitigation Development outcome

• Employment• Local content • Social and environmental impacts• Tax revenues

AfDB uses 4 criteria to select its Private Sector investments

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

Mining8,7%

Infrastructure Funds8.2%

Infrastructure Oil & Gas

13.2%

Manufacturing0,9%

Tourism1,9%

Financial Intermediation55,3%

Infrastructure (Pow er, Shipyard)

16.6%Agribusiness

1,2%

Health0,2%

An active portfolio of over UA 2.23 bn (USD 3.57 bn) and poised for further growth

As at December 2010

Products for financial assistance

Loans

Equity and Quasi-Equity

Lines of Credit

Guarantees

Syndication

Underwriting New areas

Guarantee0.8%

LOC52.1%

Quasi-Equity0.4%

Equity Funds9.8%

Loans30.5%

Enclave P rojects6.0%P rivate Equity

0.39%

Ghana projects (some examples and indicative pipeline)Ghana Oil Palm Development Corporation Senior debt for expansion of processing facility

Amount committed: EUR 7.14 mDate approved: 12.12.2002

CAL Bank Limited Line of Credit for on-lending to SMEsAmount committed: USD 15 mDate approved: 24.07.2008

Tema Osono Power Plant Senior debt for the development of a power plantAmount committed: USD 30 mDate approved: 15.10.2008

Ghana Cocoa Board Trade Facility for 2010 Cocoa harvestAmount committed: USD 35 mDate approved: 16.09.2009

Kempinski Accra Hotel Senior debt for the construction of a 5-star hotelAmount committed: USD 18 mDate approved: 27.09.2010

Indicative Pipeline •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

Thank you