“Africa is now the new frontier, an important growth pole for the economic recovery and an attractive business destination for capital. The perception gap is closing, and there are serious investors who are seriously interested in Africa. It is now Africa’s time!” Ngozi Okonjo-Iweala Finance Minister of Nigeria, 2011 1 African Economic Outlook 3
The continent remains on a dynamic growth path Africa rising despite headwinds With GDP growth at 6.6 % in 2012, Africa demonstrated strong resilience Africa Eurozone USA Developing Asia* 14% to regional and external shocks 12% 10% High commodity prices and export 8% volumes, domestic demand and 6% 4% improved macroeconomic 2% management have helped lift GDP 0% 2005 2006 2007 2008 2009 2010 2011 2012 -2% During 2002-2012, six of the world’s -4% fifteen fastest-growing economies -6% were in Africa *Excludes Australia, Hong Kong, Japan, Korea, New Zealand, Singapore, Taiwan Source: AfDB and World Economic Outlook April 2013 10% 10% 10% 10% 10% 8% 8% 8% 8% 8% 6% 6% 6% 6% 6% 4% 4% 4% 4% 4% Southern Africa 2% Central Africa East Africa North Africa West Africa 2% 2% 2% 2% 0% 0% 0% 0% 0% -2% -2% -2% -2% -2% 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 4
Better macroeconomic management though disparities remain Inflationary pressures remain contained External flows reached a record high in 2012 12% USD billion 70 10% 60 8% 50 6% 40 30 4% 20 2% Remittances ODA FDI 10 0 0% 2002 2004 2006 2008 2010 2012 2000 2002 2004 2006 2008 2010 2012 % of GDP Fiscal balance % of GDP Current account 20 10 15 5 10 0 5 2000 2003 2006 2009 2012 0 -5 2000 2003 2006 2009 2012 -5 -10 -10 Oil-exporters Oil-importers Oil-exporters Oil-importers Oil-exporting countries grew by 8.7% in 2012 while net oil-importers recorded a growth of 3.9% 5
Africa’s economic growth is more than a resource boom 2012 GDP by sector 22% Mining and quarrying 17% Agriculture “Africa is once again being seen as a continent of opportunity — the last emerging investment frontier. 15% Wholesale & retail, restaurants, hotels We see this optimism in the number and diversity of businesses and countries flocking to invest in the 11% Finance, insurance, real estate, etc continent. It is an optimism based on strong economic growth that even the global financial crisis 9% Manufacturing was only able to reverse briefly. And increasingly, this growth is being used to diversify economies and invest in the bedrock of successful societies — in 9% Public administration and defense education, in health and in vital infrastructure.” 7% Transport and communications Kofi Annan Former Secretary-General 5% Construction of the United Nations, 2011 1% Electricity, gas & water 4% Other services 6
Mixed scorecard on progress towards Millennium Development Goals OFF ON TRACK TRACK Eradicate extreme poverty and hunger Achieve universal primary education Annual poverty declined by only 0.5% compared to Tremendous progress in net primary enrolment with average over 80%. 17 among 35 African 2.3% in East Asia and 1% in South Asia – insufficient countries had ratios above 90% rate despite Africa’s rapid economic growth in Issues of quality of education remain past decade Promote gender equality and empower women Reduce child mortality Good progress at primary level but weak parity at Declining, but slowly secondary and tertiary levels of education Of the 26 countries worldwide with under-five mortality High representation in parliament rates above 100 deaths per 1,000 live births in 2010, 24 Women’s empowerment shows a dynamic are in Africa. Nevertheless, Africa doubled its average rate of reduction in child mortality in the last decade relationship with most other MDGs Ensure environmental sustainability Combat HIV/AIDS, malaria and other diseases Emissions minimal for most countries HIV/AIDS on the decline, especially due to behavioral Most countries reduced usage of ozone-depleting change and access to antiretroviral therapy Funding cuts threaten progress on the HIV/ AIDS front substances by more than 50% Develop a global partnership for development Improve maternal health ODA is at historic highs but still short of commitments Improving, but slowly HIPC initiative continued to reduce the debt burden Maternal mortality is a result of a multitude of factors, of countries including too few health services and providers, poor Access to affordable essential drugs still remains infrastructure and transport, and low empowerment a challenge of women Access to information and communications technology (ICT) is increasing Source: MDG report 2012 31 Dec 2015 Sep 2000 29 May 2013 7 UN Millennium Summit 946 Days of Action to accelerate momentum
Economic prospects remain promising Moderate to high commodity prices Investments in energy, transport infrastructure, telecom and social services 5.3% in Expanding domestic demand 2014 4.8% in Increasing South-South trade 2013 & investment Inflation is expected to remain in single digits ….but could be constrained by political and economic challenges Protracted Domestic political Postponement of Adverse weather Sluggish global industrial instability fiscal reforms conditions recovery disputes 8
The financial position of the AfDB is very strong. Thanks to its solid capitalization, ample liquidity buffers and prudent risk-management framework the institution has the capacity to absorb potential shocks emanating from the turbulent operating environment. The Bank has substantial headroom in risk- bearing capacity to further expand its lending. Continued financial and operational prudence will remain key. Financial Profile and Capital Market Activities 2 9
Africa’s own triple A rated institution AAA/Stable/A-1+ Aaa/Stable/P-1 AAA ratings affirmed under the new rating criteria We expect AFDB's liquidity to remain very strong and Very strong business profile reflects AfDB’s role and public its high franchise value to increase, given the attention Africa is receiving from the international policy mandate in lending to African governments and to public and private-sector entities in African countries. donor community. 11 January 2013 21 September 2012 Aaa/Stable AAA/Stable/F1+ The ratings mainly reflect the strong support the Bank entails The bank’s equity-to-asset ratio is one of the strongest from its regional and non-regional member countries; its solid among regional Multilateral Development Banks. financial base; its prudent financial and risk management policies; and its status as a "preferred creditor". 6 September 2012 3 September 2012 10
Expanded capacity to withstand shocks and assume core business risks Growing capital base … …allowing for greater support to Africa In USD million In USD million 17,418 14,947 4,193 8,207 7,179 7,433 7,424 7,494 12,983 12,447 3,219 13,225 2,769 2,519 4,100 4,002 8,896 11,728 4,047 3,814 3,893 10,213 9,928 Target rating of 3 to 4 * 3,365 3,431 4,108 3,377 3,600 2.8 2.6 2.7 2.7 2.3 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Sovereign Portfolio Non-Sovereign Portfolio Paid-in capital Reserves *Equivalent to Moody’s Ba1 to B2 Weighted Average Risk Rating Capital usage focused on development activities In USD million 8,207 1,986 1,612 853 255 65 3,436 Risk Capital Sovereign Loan Non-Sovereign Equity Risk Treasury Risk Operational Risk Available Risk Risk Loan Risk Capital 11
Safeguarding stakeholders interests Strong capitalization Conservative leverage Prudential Limit (100%) Prudential Limit (100%) 86% 84% 60% 60% 58% 41% 60% 55% 58% 50% 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 Risk Capital Utilization Rate Debt to Usable Capital Risk Capital Utilization Rate = Σ ((Exposure) x (Risk Usable Capital = Σ ( Paid-in capital, Reserves, Callable capital allocation)) / Total risk capital capital of non-borrowing countries rated A- and above) Annual paid-in capital from GCI-6 will range from USD 467 million to USD 72 million from 2013 to 2023 12
Prudence and performance in the midst of financial turmoil Liquid assets to meet operational needs of the Bank Prudent investment strategy 60% Our investment philosophy: capital preservation, liquidity and 44% reasonable returns 40% 34% Investment strategy adapted to market conditions to strengthen 15% 20% credit quality and improve liquidity profile of investment portfolio 4% 3% 0% while limiting volatility of returns Strong performance in 2012 both in absolute and relative terms As at 31 st December 2012 Fair value portfolio: USD 5.5 billion Defensive asset mix targeting top quality investments Longer term assets to stabilize Net Interest Margin 100% 100% 81% 80% 80% 62% 60% 60% 40% 40% 31% 20% 9% 20% 7% 7% 4% 0% 0% AAA AA A or lower As at 31 st December 2012 Amortized cost portfolio: USD 4.4 billion Investment portfolio by rating 13
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