Resourcing the African Development Bank for effective delivery - - PowerPoint PPT Presentation

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Resourcing the African Development Bank for effective delivery - - PowerPoint PPT Presentation

Oct 12, 2022 134 likes •325 views

1 Resourcing the African Development Bank for effective delivery Investing in Africas Future, Meeting Global Challenges Resourcing the African Development Bank for effective delivery Regular capital increases have supported the Banks

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Resourcing the African Development Bank for effective delivery

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Investing in Africa’s Future, Meeting Global Challenges

Resourcing the African Development Bank for effective delivery

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Resourcing the African Development Bank for effective delivery

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Regular capital increases have supported the Bank’s mandate

In USD million

Exchange rate as of 31 Dec 2017

Helped Africa effectively respond to the financial and economic crisis GCI-VI

GCI-I 1976 GCI-II 1979 GCI-III 1981 GCI-IV 1987 GCI-V 1998 GCI-VI 2010 541 5 739 1 588 15 381 8 075 62 291

1963: Initial capital USD 356 million 2017: Authorized capital USD 95.38 billion

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Challenging operating environment Amendment to credit policy Graduation from ADF

Arab spring - Downgrades

  • f the Bank’s main clients

Commodity price slump

Depreciation of local currencies

Côte d’Ivoire, Ethiopia, Rwanda, Senegal, Tanzania, Uganda

Approvals of USD 2.34 billion

Graduation to ADB Cape Verde (2011) Angola (2012), Congo (2014), Nigeria (2014)

Graduation to blend Cameroon (2014), Zambia (2014), Kenya (2015), Senegal (2018)

Increased demand for African Development Bank resources in an evolving environment

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0% 30% 60% 90% 2011 2012 2013 2014 2015 2016

Cost-to-income Ratio

AfDB Average of Multilateral Development Banks*

IFC IBRD EBRD IADB ASDB AFDB 6,20% 5,42% 3,11% 2,63% 2,33% 2,16%

Cost-to-equity Ratio

(*MDBs): IBRD, IFC, AsDB, EBRD and IADB

A solid Bank with a strong performance

Proven efficiency in the management of

  • perations

Source : S&P Supranational Report 2017 Administrative expenses/equity

200 400 600 800

2011 2012 2103 2014 2015 2016 2017

Bank Operating and Allocable income

Bank Allocable Income Bank Net operating income Bank Group Net operating income In USD million

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Aaa/AAA/AAA

A critical development mandate, a very strong public policy role, a preferred creditor Prudent governance and management Adequate capital position and earnings Strong and stable access to funding

Strong and stable support from shareholders Preferred creditor status Excellent liquidity position Diversified wholesale funding profile and market access Adequate capitalization Sound and solid financial risk management policies

A Very strong financial profile

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Africa Growing Together Fund, established with China to co-finance projects

AGTF

USD 2 billion China Enhanced Private Sector Agreement, sovereign co-financing facility with JICA and direct private sector lending facility

EPSA

USD 4.8 billion Japan Africa Investment Facility, a co-financing partnership with the EU

AFIF

EUR 2.2 billion European Union

Crowding-in resources through co-financing and Balance sheet

  • ptimization

Increase lending capacity by USD 1 billion for private sector projects in ADF countries To create additional lending headroom Provide additional lending headroom Crowd-in investments

  • f loans to external

investors to recycle capital for new loans

Syndication and partial guarantees Private Sector Credit Enhancement Facility Synthetic securitization Exposure Exchange Agreement Sale of loans

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ESKOM

A-Loan

  • USD 365m (in ZAR) sovereign loan
  • USD 10m private sector loan

B-Loan

  • Bank of China USD 150m
  • BTMU USD 150m
  • Caixa Bank USD 100m
  • Citi USD 50m
  • HSBC USD 100m
  • JPMorgan USD 115m
  • KFW-Ipex Bank USD 100m
  • Siemens Financial USD 50m
  • Standard Chartered Bank USD 150m

USD 965 million Preferred Creditor Status to benefit commercial lenders Largest syndicated loan in Africa AB/ Loan structures to crowd-in private sector investment

Positioning the Bank as the leading arranger of Africa’s syndicated co-financing

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No additional contingent liability to the country Facilitates privatizations and PPPs Project benefits from Bank’s safeguards Risk sharing with private sector Inability to repatriate

  • r convert currency

earned in the country Confiscation, expropriation, nationalization and deprivation Not honoring contractual obligations Changes in law and force majeure risks

To protect private lenders against… PRGs extended by the Bank for

Sovereign governments and sovereign-owned entities with the Bank signing a counter-guarantee with the respective governments

8

Partial Risk Guarantee, an innovative political risk mitigation instrument

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  • Eligible Regional Member

Countries

  • Sovereign owned entities
  • Private sector project

sponsors that meet the Bank’s due diligence criteria for loans

PCGs extended by AfDB for

Debt service defaults, including both

  • Political risk
  • Availability of foreign

exchange and convertibility into foreign exchange

  • Expropriation and

nationalization

  • Contractual obligations
  • Changes in law
  • Commercial risks such as

demand risk, market risks, etc.

To protect against

  • Private lenders to both private

sector clients and/or sovereign clients

  • Bondholders of both public

and corporate debt

For the benefit of

Partial Credit Guarantees, to attract financing for Africa’s transformation

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10 Business and regulatory environment Access to medium and long term finance Inadequate infrastructure

Challenges

Our Private Sector Strategy

  • 1. Improving the investment climate
  • 2. Improving access to social and economic infrastructure
  • 3. Promoting enterprise development including SMEs

Private Sector Investment in ADF Countries

The Bank has been taking a greater role in promoting investment in ADF Countries

Outstanding Private Sector Portfolio in ADF Countries (USD million) *

* Excluding Blend

500 1000 1500 2000 2500 2011 2012 2013 2014 2015 2016 2017

  • More than 458 companies financed
  • Results and Impact:
  • Accessibility to social infrastructure
  • Financing of SMEs
  • Government revenues generated
  • Positive environment and social impact
  • Job creation
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Threats to the bank’s rating: no protection today against significant shocks

Downgrade of major AAA shareholders Default of the Bank’s largest borrower Significant deterioration of operating environment Fitch Ratio expected to be breached in 2019 with the current lending trajectory

  • 2018 lending targets reduced to UA 4 billion
  • No capital increase
  • 2018 lending targets set to UA 5.5 billion
  • Start of capital increase negotiations

(Governors Consultative Committee)

  • Negative Outlook
  • Downgrade
  • Downgrade
  • If no formal GCI discussions started

with Shareholders

  • No Rating action
  • Fitch Ratio expected to be breached in 2019
  • BUT mitigated by commencement of formal

GCI discussions with shareholders

  • Negative Outlook or Downgrade
  • Fitch Ratio expected to be breached in 2019
  • Perception of weakness of the Shareholders

support

Potential Event Rating Impact

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GCI-VII affordability will be addressed

Affordability to ADF countries  Issue: Overlapping GCI-VI & GCI-VII payments  Solution: Step up payments for ADF-only countries with payments effectively starting in 2023-2024, notwithstanding, 10% of the first instalment will be due during the 2019-2020 period. Longer payment period vs GCI-VI to reduce annual payment amounts  12-years (2019-2020 to 2030) for Middle Income countries and Non- regional shareholders  15-years (2019-2020 to 2033-2034) for ADF-only countries

Payment terms

6% Paid-up capital 94% Callable capital

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Next steps in GCI-VII conversation

February 2018 Technical session with the Board of Directors Q3 2018 GCC meeting March 2018 Board of Directors request to Board of Governors to convene Governors Consultative Committee (GCC) May 2018 Board of Governors approval of GCC meeting Q4 2018 GCC meeting May 2019 Board of Governors decision on GCI-VII

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(in USD million) 2 243 2 812 2 905 3 495 2 308 2 100 2 045 1 372 2 519 1 000 1 750 3 000 7 000 5 500 1 477 7 846 1000 2000 3000 4000 5000 6000 7000 8000 2010 2011 2012 2013 2014 2015 2016 2017 ADF resources committed Eurobond issuance* * Eurobond issuance by: Angola, Cameroon, Ethiopia, Ghana, Cote d’Ivoire, Kenya, Mozambique, Nigeria, Rwanda, Senegal, Tanzania, Zambia

We need a stronger African Development Fund

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3 565 3 431 6 738 8 785 9 359 8 063 7 058 2 000 4 000 6 000 8 000 10 000 12 000 14 000 ADF-VIII [1999- 2001] ADF-IX [2002- 2004] ADF-X [2005- 2007] ADF-11 [2008- 2010] ADF-12 [2011- 2013] ADF-13 [2014- 2016] ADF-14 [2017- 2019]

ADF Resources

12 000

Market Access

(in USD million)

  • ADF to borrow from

international capital markets

Global constraints call for new sources of financing for ADF

Provide additional lending of USD 4-6 billion per ADF cycle

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Fit for purpose for the continent’s transformation

Sharpened strategic focus for Africa’s transformation Catalytic and transformative role for Africa Strong policy advice and intellectual leadership Continually adapt to meet changing conditions Efficient and effective delivery of services in line with mandate Strong business model to scale up development support Closer to clients with decentralization

At the service of Africa's development

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A totally transactional opportunity for investors

  • Bringing together AfDB and global multilateral financial institutions to

de-risk investments at scale

  • Leverage investments strategically in Africa
  • Catalyze investments into projects to help the High 5s agenda
  • Scaling up project preparation facilities and tools
  • Addressing policy and regulatory issues
  • Promoting projects for co-investments and blended finance
  • Providing effective risk-mitigation instruments (creation of a co-

guarantee platform)

November 7-9, 2018 Johannesburg, South Africa

  • Private sector: banks, insurance

companies, private equity and venture capital firms, impact investors, pension funds, project developers

  • Government officials: Heads of State

and Government, Ministers of Finance, Central Bank Governors, Sovereign Wealth Funds

  • Multilateral development finance

institutions

Investisseurs ciblés

AfDB estimates investment needs for infrastructure in the range of USD 130–170 billion a year

Africa’s premier investment market place

Principales thématiques a aborder

 Global pension funds  Sovereign Wealth Funds  Institutional investors  Develop and structure deals  Promote deals  Close deals and execute deals