AFD and East Africa

Wheat fields © AFD – Yves Terracol

AFD AND EAST AFRICA

Partnering for regional development

Olkaria geothermal power plant © AFD – Yves Terracol

SCALING UP REGIONAL INTEGRATION AND SUPPORTING GROWTH AFD Group’s activities in East Africa date back to 1995 when PROPARCO, its private sector financing arm, opened an office in Nairobi. AFD subsequently opened an agency in Nairobi in 1997 with a regional remit for the five countries that have now become the East African Community (Burundi, Kenya, Rwanda, Tanzania and Uganda). AFD Group’s network in East Africa is today made up of offices in Bujumbura, Dar es Salaam and Kampala, which report to the Nairobi regional agency.

The regional agency covers an area with diverse characteristics: post-conflict countries, developing countries, “pre-emerging” countries… It consequently employs extremely varied intervention methods and a wide range of financial tools (grants, subsidized loans, direct or intermediated commercial loans, equity investments and guarantees) in order to provide a tailored response to local contexts and meet its partners’ needs.

The main beneficiaries of financing are States and State‑owned enterprises, sometimes NGOs, but they can also be credit establishments, private companies and investment funds.

AFD’s strategy in East Africa aims to scale up regional integration and support growth, while preserving the region’s exceptional natural capital.

Its activities are based on three priority areas: – Water and sanitation around Lake Victoria; – The development of a low-carbon energy sector and regional energy infrastructure; – Financing the economy.

Over the past ten years, the volume of AFD Group’s financing in East Africa has amounted to €1.36 billion, including €697 million for 2009 and 2010.

Evolution of AFD Group commitments in East Africa in millions of €

Promoting strong and sustainable growth In Kenya, the priority focus areas for AFD’s support are: – core infrastructure, particularly for energy and transport, with a specific focus on environmental issues (biodiversity, natural resources management and the fight against climate change); – urban dynamics by financing integrated urban programs and essential investments, with a focus on the water and sanitation sector; – economic growth by promoting the private sector, which is an engine for growth and job creation.

Over the past decade, the volume of AFD’s financing has reached some €800 million and PROPARCO’s €306 million.

Thanks to this financing, some 2.5 million people have benefited from improved water services, 400,000 have been hooked up to a power grid in rural areas, a million people have benefited from improved electricity services, 1,500 km of rural roads have been upgraded, reaching over 1.5 million people, 80,000 clients of microfinance institutions have received support and investments have been made in 4,000 km² of protected areas, reaching 300,000 people. PROPARCO’s investments have benefited 45 companies.

Support for infrastructure AFD operates in the road sector via the upgrading of the MaaiMahiu/Narok road, the main access route to the Maasai Mara National Reserve, and the “rural roads” project, which finances road infrastructure upgrading for the economic opening-up of Central Province.

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In the energy sector, AFD supports the development of a lowcarbon energy mix, particularly through geothermal energy. It helps provide access to electricity, especially in rural areas, while ensuring the country’s energy intensity is held in check and reinforcing the power transmission and distribution grids. Finally, another priority is also the regional integration of the electricity market in East Africa.

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AFD Kenya A FD Tanzania

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FD Uganda A AFD Burundi

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FD Rwanda A Proparco AFD Multi-country

AFD also contributes to the definition and planning of national policies for renewable energies under its mandate as lead donor in the energy sector. It mobilizes the private sector, with commercial banks and Kenya Association of Manufacturers,

Meru National Park © AFD – Yves Terracol

in order to promote sustainable growth, via specialized subsidized credit lines earmarked to finance renewable energy and energy efficiency projects.

Finally, AFD finances regional infrastructure, such as Nairobi International Airport, a regional airport hub, or the laying of an undersea fiber-optic cable in the Indian Ocean.

Water, sanitation and integrated urban

development

It also contributes to solid waste treatment and improving the way it is managed in the cities of Mombasa and Nakuru. It is supporting a major urban development project in the city of Kisumu and is preparing a national development program for Kenyan cities and a national slum upgrading program for roughly fifteen cities, co-financed with the World Bank. Finally, AFD is providing its support for resolving the major congestion problem in the city of Nairobi, with a reserved lane public transport project, and is supporting social housing by refinancing Shelter Afrique.

Environment and biodiversity AFD has been providing support for protecting ecosystems and biodiversity for several years now. A partnership with the NGO Green Belt Movement, founded by the Nobel Peace Prize Winner Professor Wangari Maathai, is helping to partially reforest the Aberdare Forest (2,000 ha).

AFD is also supporting the Kenyan Government to define its National Climate Change Plan, particularly by financing technical assistance to the Prime Minister’s and Minister for Environment’s departmental staff.

In early 2011, PROPARCO and Grameen Crédit Agricole Microfinance Foundation (GCAMF) lent the equivalent in local currency of €7 million to Kenya Women Finance Trust (KWFT), Kenya’s main microfinance institution.

It is PROPARCO’s first microfinance operation in East Africa, the first operation in local currency via the TCX Fund and the first partnership with GCAMF. KWFT, which has 500,000 direct clients, benefits from an excellent level of profitability. It focuses its activity on rural areas neglected by other institutions and has a sound endogenous growth model, which serves as a model for the sector. Its mission is to empower women and improve living conditions in their homes by promoting basic equipment.

In the 1990s, Kenya’s Government set out to give a new boost to the tourism industry – a vehicle for incoming foreign currency and major job creator – in all its national parks. The Meru Protected Area, Kenya’s second largest protected area by its surface area and a former national showpiece, had suffered from the consequences of political instability in the North of the country: rise in insecurity, population exodus, massacre of wildlife and tourism brought to a standstill. At the turn of the century, Kenya Wildlife Service, a parapublic agency in charge of wildlife management, asked AFD to help it rehabilitate the Meru Protected Area. This rehabilitation has been exemplary (particularly thanks to the reintroduction of over 4,000 animals) and has served as a model for other similar projects, notably for the rehabilitation of protected areas around Marsabit in Northern Kenya.

Support for private dynamics AFD supports microfinance institutions, SMEs and banks, with its ARIZ guarantees and its specialized long-term credit lines.

The main beneficiaries of PROPARCO’s financing have been the agro-industry (tea, sugar), tourist industry and energy sectors. It has allocated €142.6 million to Kenyan SMEs over the past ten years.

Signing of PROPARCO’s financing agreement / KWFT © Rights reserved

In the water and sanitation sector, AFD supports the implementation of the sector reform at the decentralized level. It finances the upgrading and extension of drinking water supply and sanitation facilities in three of Kenya’s main cities, Nairobi, Mombasa and Kisumu, by building the management and planning capacities of regional water agencies and local public water companies.

AFD contributes to improving the quality of primary education, under the French Debt Reduction-Development Contract (C2D), by speeding up the teacher recruitment program. C2D is conditioned on monitoring the impact that these new recruitments have on the nationwide distribution of teachers with the aim of making it more equitable.

BURUNDI Focusing solidarity on education

AFD finances a few projects led by civil society, particularly the Red Cross, which is implementing a project to develop paramedical training, or Handicap International, which is implementing a pilot project that aims to improve educational integration for disabled children.

AFD resumed its activities in Burundi in 2002, after a ten-year conflict in the country, with budget support on behalf of the French Government. AFD was able to resume its direct financing in 2006 following the return of political stability.

A total of €31.3 million has been mobilized by AFD in the form of grants, the only financial instrument to have been used in Burundi over the last decade. AFD’s financing today focuses on the education sector.

UGANDA

The first grant was allocated in 2006 under the Government’s Emergency Program and has helped provide each primary school pupil with one textbook per subject.

Meeting essential infrastructure needs

A class in Gitega province © AFD – Clémence Vidal de la Blache

AFD’s first operations in Uganda provided grant financing for water and sanitation programs in Kampala, Jinja and ten secondary cities.

In 2009, AFD was the first donor to lend directly to NWSC, the national public operator, for the upgrading of the Gaba water intake.

AFD also supports the implementation of the National Education and Training Sector Development Plan by cofinancing the Education Basket Fund.

This Fund, to which AFD is the largest contributor, catalyzes external financing to support the national education strategy and has been replenished with a €10 million grant. AFD supports the national policy by mobilizing international technical experts, who have a specific mission to develop a pilot learning assessment mechanism.

AFD was able to resume allocating highly-concessional sovereign loans in Uganda in 2009. These loans, combined with its instruments for the public and private sectors, mainly finance the country’s essential infrastructure needs.

In the coming years, AFD will, alongside EIB and KfW, finance the far-reaching program to extend Greater Kampala’s drinking water supply system, which has a total cost of over €200 million.

In Uganda, AFD and PROPARCO combine their financial tools in order to scale up their operations for essential services (water/ sanitation, energy, housing).

Over the next years, AFD will focus on the energy sector by giving priority to financing sub-regional interconnection power lines.

A number of projects are consequently currently being identified in the energy sector, notably financing for a domestic line and an interconnection with Tanzania, which will contribute to the creation of a 220 kv power system around Lake Victoria.

Financing will be earmarked for bankable energy efficiency and renewable energy projects in partnership with a few local banks.

AFD manages the Debt Reduction-Development Contract (C2D) on behalf of the French Government. It is earmarked for the health sector in the form of sector budget support.

PROPARCO invests in the mobile phone, hotel and agro-industry sectors. It also allocates financing to private credit establishments, thus providing them with long-term resources, which AFD can complete with partial guarantees on the loans that these banks allocate to SMEs.

TANZANIA Bujagali dam construction site © Magloire Kindoki

Supporting growth

The Bujagali hydropower plant is located at the source of the Nile and will raise Uganda’s power generation capacity by 50%. AFD and PROPARCO are providing USD73 million of financing (10% of the project cost), including a USD13 million AFD subsidized loan for additional measures to mitigate social and environmental impacts.

AFD Group began its operations in Tanzania in 1993 with its subsidiary PROPARCO. AFD developed a diversified portfolio in the country from 1997 onwards, which has amounted to €62 million of financing over the past ten years, entirely made up of grants. In February 2007, AFD signed the Memorandum of Understanding on harmonization in the drinking water and sanitation sector, alongside national authorities and other donors in the sector.

AFD has focused its operations on the sectors of water and sanitation, education and vocational training (construction of the national tourism school, the country’s first hotel school, which will train some 200 students a year over a two-year course).

Tanzania has been eligible for AFD’s subsidized sovereign loans since 2009, which primarily benefit infrastructure in the sectors of water (with priority given to villages bordering Lake Victoria) and energy (with priority given to regional power interconnection lines).

PROPARCO’s financing in Tanzania has reached €81 million.

AFD also supports private sector financing via its ARIZ guarantee mechanism.

RWANDA Developing the energy sector and supporting local banks

AFD is consequently supporting the National Energy Access Program and is proving assistance for an experimental household waste management project for urban areas.

AFD also mobilizes long-term credit lines for Stateowned Rwandan banks in order to provide them with the resources they require for their development.

In addition, it guarantees the loans that these banks allocate to SMEs via the ARIZ mechanism.

Just one year after it resumed its activities in Rwanda, AFD’s financial support had topped the €28 million mark.

C2D signing ceremony © Rights reserved

AFD resumed its activities in Rwanda at the beginning of 2010 from its Nairobi regional agency. The first financing, notably via the Debt Reduction-Development Contract (C2D), focused on the basic economic infrastructure sector, primarily for energy.

Sasumua Dam/Kenya © AFD – Olivier Delefosse

Through offices in more than fifty countries and nine French Overseas Provinces, AFD provides financing and support for projects that improve people’s living conditions, promote economic growth and protect the planet: schooling, maternal healthcare, help for farmers and small business owners, clean water supply, tropical forest preservation, and fighting climate change, among other concerns.

In 2010, AFD approved more than €6.8 billion for financing aid activities in developing countries and the French Overseas Provinces. The funds will help 13 million children go to school, improve drinking water access for 33 million people and provide €428 million in microloans benefiting more than 700,000 people. Energy efficiency projects financed by AFD in 2010 will save nearly 5 million tons of carbon dioxide emissions annually. www.afd.fr

www.proparco.fr

PROPARCO, AFD’s subsidiary dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote sustainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

This brochure respects the environment and was printed using vegetal ink on PEFC™ certified paper (sustainable forest management).

AFD Regional Office Royal Ngao House – Hospital Road PO Box 45955 – 00100 Nairobi – Kenya Tel.: 254 20 271 84 52/57 – Fax: +254 20 271 79 88 AFDNairobi@afd.fr PROPARCO Regional Office Royal Ngao House – Hospital Road PO Box 45955 – 00100 Nairobi – Kenya Tel.: +254 20 271 84 52/57 – Fax : +254 20 271 79 88 AFDNairobi@afd.fr Bujumbura Office Immeuble Old East – Place de l’Indépendance BP 2740 – Bujumbura – Burundi Tel.: +257 22 25 59 31 – Fax: +257 22 25 59 32 AFDBujumbura@afd.fr Dar es Salaam Office French Embassy – Ali Hassan Mwinyi Road PO box 2349 – Dar es Salaam – Tanzania Tel.: +255 22 219 88 66/69 – Fax: +255 22 219 88 68 AFDDaressalam@afd.fr Kampala Office French Embassy – 16 Lumumba Avenue – Nakasero PO box 7212 – Kampala – Uganda Tel.: +256 414 304 533 – Fax: +256 414 314 548 AFDKampala@afd.fr

Photo credits: AFD unless mentioned otherwise – Creation: Planet 7 – May 2011

AFD, the Agence Française de Développement, is a public development finance institution that has worked to fight poverty and support economic growth in developing countries and the French Overseas Provinces for 70 years. AFD executes the French government’s development aid policies.

AGENCE FRANÇAISE DE DÉVELOPPEMENT (AFD) 5 rue Roland Barthes – 75598 Paris Cedex 12 – France Tel.: +33 1 53 44 31 31 – Fax: +33 1 44 87 99 39 www.afd.fr