Capital Markets Development Frankfurt, Germany. 12 th April 2018
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 1
Financing Africa s Needs In USD World Africa SDG Financing Cost 3-4.5 trillion 600-650 billion ODA 135 billion 54 billion o/w Multilaterals 80 billion 20 billion FDI 1.25 trillion 54 billion Remittances 582 billion 66 billion Private Sector ** ** Government ** ** Investments needs for the Sustainable Development Goals are estimated at USD 600-650 billion p.a. Finance Gap 2.5 trillion 210 billion High 5s Financing Needs over the next 10Y In USD Light Up and Power Africa Feed Africa Industrialize Africa Average p.a. 65-90 billion 32-40 billion 10 billion USD 153 to 186 billion Financing needs for the High 5s Agenda are estimated at about USD 170 billion p.a Integrate Africa Improve the Quality of Life 40 billion 5.5 billion 2
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 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 Africa s Local Currency Bond Markets Landscape Total amount outstanding of African LCY Bonds and Bills (as of End 2016): USD 368 Billion 140 120 100 80 60 40 20 - Outstanding Amounts (2016) Total Amount Issued in 2016 on African LCY Bond Markets: USD 222 Billion 80 60 40 20 - Amount Issued in 2016 3
Strengthening African Local Currency Bond Markets since 2008 African Financial Markets Initiative (AFMI) Two Pillar Initiative African Financial Markets Database African Domestic Bond Fund 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 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 4
Holistic Approach to Financial System Development since 2014 Financial Sector Development Department Vision Enabling a vibrant, innovative, robust and competitive financial systems 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 Capital Markets Development: - Debt, Guarantees and Equity Investments - Credit enhancement on structured products - Risk Management products (PCG, PRGs) - Bond issuances, innovative instruments 5 - Grant / Technical Assistance - Advisory Services and Knowledge Work
Supporting the Development of an Enabling Environment PADMAFIR Regulatory Reform Capital Markets Stakeholders capacity building Project Management Support BRVM Market Valuation Bond Markets Issue Trends 6
Supporting Access to Capital Markets Cameroun Partial Credit Guarantee for Currency Risk Hedging Support Cameroon s Emergence Strategy Fully aligned with Country Strategy Paper 2015-2020 Private Sector Crowding In Strength of Bank s AAA to attract private sector participation Cameroun PCGRH Knowledge Transfer Treasury and Capital Markets teams African Legal Support Facility Be at the Cutting Edge At the time, similar 1 operation only done (MIGA for Senegal in 2011) 1 st Transaction of that kind by AfDB 7
Borrowing Strategy Contributing to Capital Markets Development Provision of Local Currency Financing RATIONALE: Reduce clients foreign exchange risk / overall 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 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. BWP ZMW EGP XOF XAF UGX FUNDING METHODS*: Domestic bond issue TZS NGN KES Synthetic Local Currency Loans (non-deliverable forwards or NDF ) Cross currency swap GHS 8
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 To the Country The Benefits of Supranational Issuance To the Investor Develop Fixed Income markets Offers opportunity to invest in local Supranational bonds The Benefits of Supranational Issuance Support Institutional & Operational Infrastructure Higher liquidity, performance, maturities & yield Provides a benchmark Provides a unique diversified vehicle for local SSA bonds Lowered borrowing costs Promotes capital transformation by increasing appetite 9
Thank you Danke Schön 10