The African Development Bank

Private Sector Operations

E n g i n e o f g r o w t h … P l a t f o r m f o r d e v e l o p m e n t …

Prepared for

2012 Business Opportunities in Canada

Montreal –March 19-20

Halifax – March 21

Saskatoon – March 23

Calgary – March 26

Your Partner in Africa‟s

Emerging Economies

2

Introduction

• Historically, Africa has been considered one of the riskiest

regions for doing business and has therefore attracted a small

share of world FDIs

• 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

business opportunities

• The purpose of this presentation is to illustrate:

– Some of the opportunities for doing business in Africa

– How the African Development Bank and Canadian companies can

partner to achieve business success in Africa

3

This presentation is organized in

three parts

I. Africa – Seizing Business Opportunities

II. The African Development Bank – Your Preferred Business

Partner

III. Operational Results – Making Things Happen

4

In the first part of this presentation

I. Africa – Seizing Business Opportunities

II. The African Development Bank – Your Preferred Business

Partner

III. Operational Results – Making Things Happen

5

Africa’s growth: more than a

resource boom

• Africa‟s economic pulse has quickened

– Real GDP grew by 4.9% per year during the last decade

– Africa‟s aggregate GDP of US$ 1.7 trillion in 2010 is now roughly

equal to Brazil‟s or Russia‟s

• The continent has largely benefited from the surge in

commodity prices over the past decade

– Yet two-thirds of GDP growth from 2000 through 2008 came from

other sectors such as wholesale and retail, transportation,

telecommunications and manufacturing

– Political and macroeconomic stability coupled with structural

reforms have fueled a productivity revolution

6

Promising long-term growth

prospects

• Evolving global economic

ties

– Sustained demand for

commodities

– Increased access to capital

markets

• The rise of the African urban

consumer

– Urbanization

– Expanding workforce

– Growing middle-class

Source: McKinsey Global Institute

7

A $2.6 trillion business opportunity

• Growing consumer markets – Consumer goods, telecom and

banking present the largest opportunity, with potential

combined revenue of US$ 1.4 trillion by 2020

• Continued opportunities in resources – Outlook for resource

sectors remains positive, with potential of US$ 540 billion

• Agriculture‟s brightening prospects – With 60% of the world‟s

uncultivated arable land and low crop yields, Africa is ripe for a

green revolution, with potential output of US$ 500 billion

• Huge unmet needs in infrastructure – Provision of power, water

and transportation in particular will require at least US$ 46

billion more in spending per year, which in turn will require

innovative modes of financing

8

In the second part of this

presentation

I. Africa – Seizing Business Opportunities

II. The African Development Bank – Your Preferred Business

Partner

III. Operational Results – Making Things Happen

9

Africa’s premier development finance

institution

• Mission – Spur sustainable

economic development and

social progress in its

regional member countries

(RMCs), thus contributing to

poverty reduction by

– mobilizing and allocating resources for investment in Africa; and

– providing policy advice and technical assistance to support development efforts

African Development Bank (“AfDB”)

Established in 1964

53 African and 24 non-African countries

Authorised capital: $ 104 billion

African Development Fund (“ADF”)

Established in 1972

Subscription: $ 28 billion

Primarily financed by donors

Nigeria Trust Fund („‟NTF‟‟)

Established in 1976 by Nigeria

Maturity 2018

Total resources: $ 246 million NTF

10

A global partnership for Africa

Europe

Asia

China (1.1%)

India (0.2%)

Japan (5.5%)

Korea (0.4%)

Middle East

Kuwait (0.4%)

Saudi Arabia (0.2%)

Americas

Argentina (0.3%)

Brazil (0.4%)

Canada (3.7%)

USA (6.6%)

Africa

Algeria (4.0%)

Angola (1.2%)

Benin (0.2%)

Botswana (2.1%)

Burkina Faso (0.4%)

Burundi (0.2%)

Cameroon (1.0%)

Cape Verde (0.08%)

Central African Rep. (0.05%)

Chad (0.08%)

Comoros (0.02%)

Congo (0.5%)

Côte d’Ivoire (3.7%)

D. R. Congo (1.0%)

Djibouti (0.06%)

Egypt (5.1%)

Equatorial Guinea (0.2%)

Eritrea (0.09%)

Ethiopia (1.6%)

Gabon (1.2%)

Gambia (0.2%)

Ghana (2.3%)

Guinea (0.4%)

Guinea Bissau (0.03%)

Kenya (1.5%)

Lesotho (0.2%)

Liberia (0.2%)

Libya (3.8%)

Madagascar (0.6%)

Malawi (0.3%)

Mali (0.4%)

Mauritania (0.1%)

Mauritius (0.6%)

Morocco (3.3%)

Mozambique (0.6%)

Namibia (0.3%)

Niger (0.3%)

Nigeria (8.9%)

Rwanda (0.1%)

S. Tome & Principe (0.07%)

Senegal (1.0%)

Seychelles (0.06%)

Sierra Leone (0.2%)

Somalia (0.09%)

South Africa (4.6%)

Sudan (0.4%)

Swaziland (0.3%)

Tanzania (0.8%)

Togo (0.16%)

Tunisia (1.4%)

Uganda (0.5%)

Zambia (1.3%)

Zimbabwe (2.1%)

African countries: 60%

G-7 countries: 28%

Austria (0.4%)

Belgium (0.6%)

Denmark (1.2%)

Finland (0.5%)

France (3.7%)

Germany (4.1%)

Italy (2.4%)

Netherlands (0.9%)

Norway (1.2%)

Portugal (0.2%)

Spain (1.1%)

Sweden (1.5%)

Switzerland (1.5%)

UK (1.7%)

11

Being Africa’s own bank gives the

AfDB unique comparative advantages

• Vast experience – Active across the continent for more than 40

years

• Broad knowledge – Started as a public sector partner but has

built a strong private sector team

• Honest broker – Strong membership support from all 53 African

countries

• Financial muscle – Strong support from the international

community reflected in its “AAA” credit rating

12

As a public institution the AfDB has a

unique 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 business cycles; counter-cyclical

• 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

13

The AfDB addresses private sector

development at two levels

• Assist African governments to improve the business enabling

environment

– Improve essential “hardware” (e.g. power, ICT, transportation)

– Enhance “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 selected number of

transactions

– Infrastructure (e.g. power, transportation, telecoms, water)

– Industries and Services (e.g. mining, oil & gas, cement,

agribusiness, hotels)

– Financial Institutions (e.g. banks, MFIs, insurance, leasing)

14

Focal priorities of the AfDB’s Private

Sector Strategy

• Supporting private enterprises – From micro-enterprises to

large companies in all sectors

• Strengthening financial systems – Sound and efficient financial

systems are a prerequisite for private sector development

• Building competitive infrastructure – A major development

challenge in the continent is the lack of economic and social

infrastructure

• Promoting regional integration and trade – The AfDB finances

regional infrastructure and advocates trade and financial

liberalization

• Improving the investment climate – An enabling investment

climate is key in catalysing domestic and foreign investment

15

The AfDB can help entrepreneurs with

its 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, local

currency

• Reliable – “Through the cycle” investment perspective

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

• Competitive cost – LIBOR + 2%-5% on average

• Intrusive – Examine all aspects of the projects

• Demanding – Insist on a fair deal

16

There are 5 key impact criteria for the

AfDB’s involvement in a project

• Strong development effect – Projects that contribute to

economic and social development, catalyze other investments

and create a positive demonstration effect

• Robust Commercial Viability – Projects that are represent good

value for money and lie within the AfDB‟s risk tolerance

• Environmental and Social Sustainability – Projects that

minimize potential negative environmental externalities, are

socially responsible and gender-sensitive

• Legal Compliance – Projects that comply with the AfDB‟s

policies and rules and minimize the risk of money laundering

• Additionality and Complementarity – Projects where the AfDB

can bring value-added that other investors or commercial

financiers cannot or will not provide

17

The AfDB adapts its instruments to

meet its clients’ needs

• Loans – Lines of credit, corporate loans, trade finance facilities

etc. in foreign or local currency

• Equity and quasi-equity – Direct investment, private equity

funds, subordinated loans, mezzanine financing

• Guarantees – Partial credit and risk guarantees

• Loan syndication – A and B loan structures

• Technical assistance – Grants for capacity building and studies

18

In the last part of this presentation

I. Africa – Seizing Business Opportunities

II. The African Development Bank – Your Preferred Business

Partner

III. Operational Results – Making Things Happen

19

Total approvals since inception: $ 97 billion

Total Bank Group Approvals

2008: US$ 5.4 billion

2009: US$ 12.6 billion

2010: US$ 6.3 billion

Reinforced strategic relationship with

partners

Supplement bank group lending and human

resources capacities

Pooling of efforts by multilateral and bilateral

agencies to jointly cope with impact of crisis

Infrastructure68.4%

Agriculture1.9%

Industry7.8%

Multisector12.1%

Finance8.7%

Social1.1%

Reflects countries‟ strategies (2010)

External Partners

83%

Governments and other domestic partners

4%

Bank Group 13%

Co-financing operations in 2010: US$ 8.4 billion

Overall well diversified portfolio and

strong co-financing operations

20

New private sector operations reached

US$ 1.9 billion in 2010

Sectoral distribution (2010) Deepening Private Sector development

Communication

Transport28%

Power Supply3%

Financial services

42%

Communication3%

Industry22%

Agriculture2%

Approvals (in US$ million)

418

1,580 1,388

1,819 1,863

0

500

1000

1500

2000

2006 2007 2008 2009 2010

21

The AfDB’s private sector operations

cover a broad range of sectors

• 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

48

In summary

• If recent trends continue, Africa will play an increasingly

important role in the global economy. By 2040, the continent

will be home to the world‟s largest working-age population

• Investors cannot afford to ignore Africa‟s huge potential and

early entry provides competitive edges. Canadian companies

should pay heed to this

• The AfDB is scaling up its efforts for private sector

development and is looking to strengthen its partnership with

investors, bankers and “world class” corporations

• The AfDB can partner with Canadian companies to achieve

business success in Africa. Business can help build the Africa

of the future

49

Contacts

African Development Bank

Private sector and Microfinance Department

BP 323, 1002 – Tunis Belvedere, Tunis

Tunisia

Tel: +216 7110 3227

Fax: +216 7183 4178

Email: private-sector@afdb.org

Website: www.afdb.org