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Doing Business in Africa How can the AfDB help Norwegian investors? September 2011

Introduction… •

Historically Africa has been considered one of the riskiest continents for doing business and has therefore attracted a small share of world FDI.

Despite the crisis, in the last decade many African countries have made significant progress in improving their business climates and investors are taking notice of the significant investment opportunities.

The purpose of this presentation is to illustrate: – Some of the challenges/opportunities for doing business in Africa, – How the African Development Bank can assist Norwegian investors to achieve business success in Africa. 2

This presentation is organized in 3 parts…

Africa – challenges and opportunities

The AfDB – your preferred business partner

Operational Results – making things happen


There are many good reasons why Africa has been left behind… Africa’s Energy Footprint

Past Obstacles Poor infrastructure + Political instability + Weak laws + Red tape + Corruption = HIGH RISK


‌ but there are good reasons to be optimistic for the future African Mineral Deposits

Winds of Change Natural resources

Solar Geothermal Agr-energy


+ Reduced conflict + Better governance + Strong growth


+ Untapped markets = HIGH POTENTIAL


In the second part of this presentation…

Africa – challenges and opportunities

The AfDB – your preferred business partner

Operational Results


Being Africa’s own bank gives the AfDB unique comparative advantages Sources of Comparative Advantage •

Vast Experience – the AfDB has been active across the continent for almost 50 years.

Broad Knowledge – the AfDB started as a public sector partner but has built a strong private sector team.

Honest Broker – the AfDB has strong membership support from all 53 African countries.

Financial Muscle – the AfDB has strong support from the international community reflected in its AAA credit rating. 7

As a public institution the Bank has a unique business perspective AfDB’s Business Perspective •

Public Interest – consider what is best for all stakeholders i.e. investors, financiers, employees, suppliers, off-takers, governments, local communities, international community.

Long-term View – consider what is best in the long-term looking through market cycles, crises.

Risk Taker – ready to put capital at risk in countries and sectors to lead the way for private investors.

Development Maximizer Not Profit Maximizer – ready to spend resources to enhance overall development impact. 8

Poverty reduction comes from sustainable economic growth and wealth creation The Economic Growth System

Public Sector (sets the rules, regulates) Poverty Reduction

Private Sector (invests, creates wealth)

Sustainable Economic Growth and Wealth Creation 9

The AfDB addresses private sector development (PSD) at two primary levels The AfDB’s Private Sector Development Strategy •

Assist African governments to improve the business enabling environment: – Improve essential “hardware” (e.g. power, ICT, transportation) – Improve “software” (e.g. regulatory and legal frameworks, financial sector, trade liberalization, business development services)

Create strong demonstration effect by assisting entrepreneurs to achieve success with a select number of transactions: – Infrastructure (e.g. power, transportation, telecoms, water) – Industries and Services (e.g. mining, O&G, cement, agribus, hotels) – Financial Intermediation (e.g. banks, MFIs, insurance, leasing) 10

The AfDB can help entrepreneurs with its unique “value-added proposition” AfDB’s Unique Value-Added Proposition •

Project selection track record – low loss rate (<1%)

Local knowledge – experience on the ground

Dialogue with governments – mitigate political risks

Packaging resources – market, concessional, grants, LCY

Reliable – take long-term perspective to market cycles

Scale to handle most transactions – $0.5 to US$500 million

Competitive cost – LIBOR + 2-5% generally

Intrusive – examine all aspects of the projects

Demanding – insist on a fair deal


There are 4 main criteria for the Bank’s involvement in a project Criteria for the Bank’s Involvement in a Project

Strategic Alignment – Fit with various development priorities

Commercial Viability – Likelihood of sustainable financial success

Development Outcomes – Expected economic, environmental and social benefits

Additionality / Complementarity – The Bank’s “value added” and synergy with the efforts of other development partners 12

Projects with the best strategic fit tend to lie at the public-private interface Maximizing Strategic Fit (the â&#x20AC;&#x153;sweet spotâ&#x20AC;?)



Strategic Fit


In the last part of this presentation…



Operational Results


New private sector operations reached USD 2.0 billion in 2010

2010 Operations by Sector Financial Intermed. 31% Infrastruct 43%

Industries & Services 27%

2010 Operations by Location

Middle Income Countries 50%

Low Income Countries 50%


The AfDB’s private sector operations cover a broad range of sectors Sector Coverage •

Power – hydro, wind, thermal, solar

Transport – ports, roads, airports, rail

Telecoms – fibre cable, satellite, telephony

Oil & Gas – exploration, extraction, refining, pipelines

Mining – extraction, refining, smelting

Manufacturing – cement, fertilizers

Agribusiness – sugar, oils, agro-energy, fishing

Hospitality – hotels

Health & Education – hospitals, schools

Financial sector – banks, insurance, leasing, microfinance 16

The Bujagali project is an excellent example of a public-private partnership Bujagali HydroPower Project • • • •

Uganda Investment USD 1.0 bn ADB loan USD 110 mn ADB roles – Economic analysis – Power & T-lines – ACFA co-financing

Benefits – Power, jobs – Environmental 17

Cabeolica in Cape Verde was the Bank’s first private wind project Cabeolica Wind Project • • • •

Cape Verde Investment EUR 65 mn ADB loan EUR 15 mn ADB roles – Long-term lender

Benefits – 30% increase of power – Renewable


At 300 MW, Turkana will be Africa’s largest wind energy project Turkana Wind Project • • • •

Kenya Investment USD 600 mn ADB loan USD 100 mn ADB roles – Long-term lender – Lead arranger – PRG provider

Benefits – 10% increase of power – Renewable – Leverage installed hydro 19

The Sahanivotry project is the Bank’s first micro-renewable energy project Sahanivotry Micro-Hydropower Project • • • •

Madagascar Investment USD 30 mn ADB loan USD 10 mn ADB roles – Long-term lender – Utility rehabilitation

Benefits – 10% increase of power – Lowest cost power – Power sector reforms 20

The Eskom project is the Bank’s largest non-sovereign loan Eskom Project • • • •

Southern Africa Investment USD 20 bn ADB loan USD 500 mn ADB roles – Long-term lender – Regional partner

Benefits – 100% power access – Jobs, growth – Regional expansion 21

The PAIDF project is the largest infrastructure equity fund in Africa Pan-African Infrastructure Development Fund (PAIDF) • • • •

Pan-Africa Investment USD 1 bn ADB equity USD 50 mn ADB roles – Regional sponsor – Fund mobilization

Benefits – Regional infrastructure – African pension funds 22

Transnet is the Bank’s first large scale syndicated financing Transnet Project • • • •

South Africa Investment USD 10 bn ADB loan USD 400 mn ADB roles – Anchor financier – Syndication lead

Benefits – Competitiveness – Tax revenues – Regional integration 23

The Dakar port is part of Senegal’s integrated infrastructure master plan Dakar Container Port Project • • • •

Senegal Investment EUR 210 mn ADB loan EUR 48 mn ADB roles – Anchor financier – Environmental review

Benefits – Competitiveness – Tax revenues – Regional integration 24

The Dakar airport is part of Senegal’s integrated infrastructure master plan Dakar Airport Project • • • •

Senegal Investment EUR 525 mn ADB loan EUR 70 mn ADB roles – Co-lead arranger – Environmental review

Benefits – – – –

Competitiveness Tax revenues Regional integration Safety


The Main One cable will connect the West Coast of Africa Main One Cable Project • • • •

West Africa / South Africa Investment USD 270 mn ADB loan USD 60 mn ADB roles – Project sponsor – Lead arranger

Benefits – Broadband access – 50% cost reduction 26

O3B will bring affordable satellite connectivity to 3 billion new consumers O3B Project • • • •

Global / Pan-African Investment USD 1.2 bn ADB loan USD 50 mn ADB roles – Co-lead arranger – Mezzanine financier Benefits – Rural telecommunication – 50% cost reductions 27

Nigeria liquefied natural gas is the Bank’s largest Oil & Gas project Nigeria Liquified Natural Gas Project • • • •

Nigeria Investment USD 1 bn ADB loan USD 100 mn ADB roles - Political risk mitigation - Environmental Standards

Benefits – Royalties – Jobs 28

The Ambatovy project was an opportunity to scale up public goods Ambatovy Nickel Project • • • •

Madagascar Investment USD 3.6 bn ADB loan USD 150 mn ADB roles – Economic analysis – Political risk mitigation

Benefits – Taxes, royalties, jobs – SME supply chain – Public power 30 MW 29

The Debra Midroc cement project will address a huge market constraint Derba Midroc Cement Project • • • •

Ethiopia Investment USD 350 mn ADB loan USD 69 mn ADB roles – Lead arranger

Benefits – Foreign exchange – Taxes, royalties, jobs – SME supply chain 30

Addax Bioenergy is an agribusiness project with high development impact Addax BioEnergy Project • • • •

Sierra Leone Investment EUR 250 mn ADB loan EUR 25 mn ADB roles – Long-term lender – Economic analysis

Benefits – Outgrower enhancement – Renewable energy 31

The Sheraton hotel is a business enabler in the heart of Kampala Sheraton Hotel Kampala • • • •

Uganda Investment USD 18 mn ADB loan USD 8 mn ADB roles – Long term lender

Benefits – Taxes, royalties, jobs – SME supply chain


The AfDB’s covers a broad range of operations in the financial sector Financial Sector Coverage •

National Banks – Banque de Kigali

Development Finance Institutions – BOAD

Commercial Banks (Equity) – UBA

Commercial Banks (Line of Credit) – Access Bank

Commercial Banks (Subordinated Debt) – Nedbank

Microfinance Banks – Advans Banque Congo

Microfinance Banks – (Programs)

Capital Market Development - TCX

Leasing Companies – Tunisie Leasing

Insurance – Africa Reinsurance


The line of credit to BK will promote small to medium scale enterprises Banque de Kigali (BK) Project • • • •

Rwanda ADB LOC USD 8 mn ADB Sub-debt USD 4 mn ADB roles – Technical assistance

Benefits – SMEs, industry – Jobs, growth – Institutional reforms 34

Subregional DFIs like BOAD are considered as development partners Banque Ouest Africaine de Développement (BOAD) • • • •

Togo (West Africa) ADB equity EUR 4 mn ADB loan EUR 40 mn ADB roles – Board member – Technical assistance

Benefits – SMEs – Institutional reforms 35

The UBA recapitalization project is a PPP in the financial sector United Bank for Africa (UBA) Project • • • •

Nigeria Investment USD 600 mn ADB equity USD 50 mn ADB roles – Assist gov’t plan – Strengthen relationship

Benefits – Strengthen fin. Sector – International listing – Rural & regional expansion 36

UBA recruitment notice in The Economist magazine

The line of credit to Access Bank provides long term financing for SMEs Access Bank Project • • •

Nigeria ADB LOC USD 50 mn ADB roles – Technical assistance

Benefits – SME development – Capacity building


The Nedbank bond is the Bank’s first marketable subordinated debt facility Nedbank Subordinated Bond • • • •

South Africa Investment USD 280 mn ADB bond USD 140 mn ADB roles – Long-term ZAR lender – Strengthen relationship – Knowledge acquisition

Benefits – Low income housing – Black economic empower’t 38

Advans Banque Congo is a successful start-up micro-finance bank Advans Banque Congo Project • • • •

Rep. of Congo Investment USD 8 mn ADB equity USD 2 mn ADB roles – Board member

Benefits – Jobs, micro-enterprises


Access Bank Tanzania is the AfDB’s first micro-finance program Access Bank Tanzania Project • • • •

Tanzania Investment USD 4 mn ADB equity USD 1 mn ADB roles – Board member – LCY lender later – LFS technical partner

Benefits – Jobs, micro-enterprises – Roll out to other countries 40

TCX will pave the way for increased local currency lending The Currency Exchange (TCX) Project Schematic Flow of Funds at Inception TCX

USD Bond Market

Client LCY

Global (Pan-African) Investment USD 500 mn ADB equity USD 50 mn ADB roles – Swap user – Regional partner



• • • •

Benefits – Risk reduction – Capital market development 41

Tunisie Leasing was the AfDB’s first leasing project Tunisie Leasing Project • • •

Tunisia ADB LOC USD 8 mn ADB roles – Lender

Benefits – SME financing


Africa-Re was the AfDB’s first reinsurance project Africa-Re Project • • •

Nigeria (Pan-African) ADB Equity USD 4.7 mn ADB roles – Board member – Rating enhancement

Benefits – Insurance market – Catastrophic risk


The ICF is the AfDB’s first PS project for the enabling environment Investment Climate Facility • • • •

Pan-African Investment USD 500 mn ADB grant USD 15 mn ADB roles – Regional partner – Treasury manager

Benefits – Enabling environment – Encourage investment 44

In summary...

Although Africa has been left behind for many decades, huge opportunities for long-term investors are opening up.

The AfDB is scaling up its efforts for private sector development and is looking to strengthen its partnership investors, bankers and “world class” corporations.

The AfDB can: (i) help Norwegian investors achieve business success in Africa, and (ii) ensure that this commercial success helps Africa achieve sustainable and inclusive development. 45


Mr Tim Turner - Doing Business in Africa  

Director Tim Turner, African Development Bank