Capital Markets Development Frankfurt, Germany. 12 th April 2018 The - - PowerPoint PPT Presentation

Capital Markets Development

Frankfurt, Germany. 12th April 2018

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The African Development Bank

Transforming Africa since 1964

• Our mission is to promote sustainable economic development and

social progress

• Achieving inclusive growth and transition to green growth through the

Ten Year Strategy 2013-2022

• Implementing 90% of Sustainable Development Goals through the

Bank’s High Five Agenda

Light up and power Africa Feed Africa Industrialise Africa Integrate Africa Improve the quality of life for the people of Africa

• Investments needs for the

Sustainable Development Goals are estimated at USD 600-650 billion p.a.

• Financing needs for the

High 5s Agenda are estimated at about USD 170 billion p.a

Financing Africa’s Needs

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In USD World Africa SDG Financing Cost 3-4.5 trillion 600-650 billion ODA 135 billion 54 billion

• /w Multilaterals

80 billion 20 billion FDI 1.25 trillion 54 billion Remittances 582 billion 66 billion Private Sector ** ** Government ** ** Finance Gap 2.5 trillion 210 billion In USD Average p.a. Light Up and Power Africa 65 - 90 billion Feed Africa 32 - 40 billion Industrialize Africa 10 billion Integrate Africa 40 billion Improve the Quality of Life 5.5 billion High 5s Financing Needs over the next 10Y USD 153 to 186 billion

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Africa’s Local Currency Bond Markets Landscape

• Total amount
• utstanding of African

LCY Bonds and Bills (as

• f End 2016):

USD 368 Billion

• Total Amount Issued in

2016 on African LCY Bond Markets: USD 222 Billion

• 20

40 60 80 100 120 140

South Africa Egypt Morocco Nigeria Kenya Angola Ghana Algeria Mauritius Tunisia Equatorial Guinea Cote DIvoire Tanzania Uganda Namibia Senegal Benin Mali Burkina Faso Togo Chad Botswana Mozambique Niger Cameroon

USD bn

Outstanding Amounts (2016)

• 20

40 60 80

Egypt Nigeria Angola Morocco Ethiopia Mauritius Tanzania Cote DIvoire Mozambique Mauritania Senegal Madagascar Malawi Togo Gabon Swaziland Burundi Cameroon Cabo Verde Guinea-Bissau Zambia

USD bn

Amount Issued in 2016

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Strengthening African Local Currency Bond Markets since 2008

African Financial Markets Initiative (AFMI)

Two Pillar Initiative

African Domestic Bond Fund

• The first enhanced multinational

ETF investing in African local currency sovereign bonds

• Reducing African countries

dependency on foreign currency denominated debt

• Encouraging the deepening of

domestic bond markets through investments in longer dated debt

African Financial Markets Database

• Comprehensive database to

provide updated, reliable and complete information on African domestic bond markets

• Improving the availability and

transparency of African fixed income markets-related data

• Reconciling, standardizing and

enhancing the quality of data produced

www.africanbondmarkets.org

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Holistic Approach to Financial System Development since 2014

Financial Sector Development Department

Capital Markets Development:

• Debt, Guarantees and Equity Investments
• Credit enhancement on structured products
• Risk Management products (PCG, PRGs)
• Bond issuances, innovative instruments
• Grant / Technical Assistance
• Advisory Services and Knowledge Work

Pillar I Increasing access to the underserved, particularly women and youth Pillar II Broadening and deepening, Africa’s financial systems Financial Stability & Governance Innovation Partnership

Vision

Enabling a vibrant, innovative, robust and competitive financial systems

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Supporting the Development of an Enabling Environment

PADMAFIR

BRVM Market Valuation Bond Markets Issue Trends

• Regulatory Reform
• Capital Markets Stakeholders

capacity building

• Project Management Support

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Supporting Access to Capital Markets

Cameroun Partial Credit Guarantee for Currency Risk Hedging

• Strength of Bank’s AAA to attract

private sector participation

Cameroun PCGRH

Private Sector Crowding In

Knowledge Transfer

Be at the Cutting Edge

• Treasury and Capital Markets teams
• African Legal Support Facility
• At the time, similar 1 operation only done (MIGA for

Senegal in 2011)

• 1st Transaction of that kind by AfDB

Support Cameroon’s Emergence Strategy

• Fully aligned with Country Strategy Paper 2015-2020

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Borrowing Strategy Contributing to Capital Markets Development

Provision of Local Currency Financing

The Bank currently has 10 approved African lending currencies: South African Rand, Egyptian Pounds, Uganda Shilling, Nigerian Naira, Kenya Shilling, Zambia Kwacha, Tanzania Shilling, Ghana Cedi, Botswana Pula, CEMAC region CFA and WAMU region CFA.

NGN XOF XAF UGX ZMW TZS EGP KES BWP GHS

RATIONALE:

• Reduce clients foreign exchange risk /
• verall economic risk exposure
• Provide long term funding in local

currencies

• Introduce benchmark issuances and

role model transactions

• Introduce a new asset class and allow

for diversification

• Promote domestic capital market

development FUNDING METHODS*:

• Domestic bond issue
• Synthetic Local Currency Loans

(non-deliverable forwards or “NDF”)

• Cross currency swap

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Borrowing Strategy Contributing to Capital Markets Development

Provision of Local Currency Financing

The Bank can currently provide local currency through a bond issuance in selected RMCs where all relevant approvals have been obtained to access domestic capital markets.

Through bond issuances the Bank contributes to the promotion of African capital markets by: ✓ stretching the yield curve ✓ setting new benchmarks ✓ providing role model transactions in terms of documentation and execution

Support Institutional & Operational Infrastructure Higher liquidity, performance, maturities & yield Lowered borrowing costs Develop Fixed Income markets

To the Investor

Provides a benchmark Offers opportunity to invest in local Supranational bonds Provides a unique diversified vehicle for local SSA bonds Promotes capital transformation by increasing appetite

To the Country The Benefits of Supranational Issuance

The Benefits of Supranational Issuance

Thank you Danke Schön

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