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 Feed Integrate Industrialise Improve the quality of power Africa Africa Africa life Africa for the people of Africa 1
Financing Africa’s Needs In USD World Africa SDG Financing Cost 3-4.5 trillion 600-650 billion • Investments needs for the ODA 135 billion 54 billion Sustainable Development o/w Multilaterals 80 billion 20 billion Goals are estimated at FDI 1.25 trillion 54 billion USD 600-650 billion p.a. Remittances 582 billion 66 billion Private Sector ** ** Government ** ** Finance Gap 2.5 trillion 210 billion High 5s Financing Needs over the next 10Y In USD Average p.a. • Financing needs for the Light Up and Power Africa 65 - 90 billion High 5s Agenda are estimated at about USD Feed Africa 32 - 40 billion USD 153 to 170 billion p.a 186 billion Industrialize Africa 10 billion Integrate Africa 40 billion 2 Improve the Quality of Life 5.5 billion
Africa’s Local Currency Bond Markets Landscape 140 • Total amount Outstanding Amounts (2016) 120 100 outstanding of African USD bn 80 LCY Bonds and Bills (as 60 40 of End 2016): 20 USD 368 Billion - 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 80 Amount Issued in 2016 • 60 Total Amount Issued in USD bn 40 2016 on African LCY 20 Bond Markets: - USD 222 Billion Egypt Nigeria Angola Morocco Ethiopia Mauritius Tanzania Cote DIvoire Mozambique Mauritania Senegal Madagascar Malawi Togo Gabon Swaziland Burundi Cameroon Cabo Verde Guinea-Bissau Zambia 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 The first enhanced multinational provide updated, reliable and ETF investing in African local complete information on African currency sovereign bonds domestic bond markets • Reducing African countries • Improving the availability and dependency on foreign currency transparency of African fixed denominated debt income markets-related data • Encouraging the deepening of • Reconciling, standardizing and domestic bond markets through enhancing the quality of data investments in longer dated debt produced 4 www.africanbondmarkets.org
Holistic Approach to Financial System Development since 2014 Financial Sector Development Department Vision Enabling a vibrant, innovative, robust and competitive financial systems Pillar I Pillar II Increasing access to the underserved, Broadening and deepening, Africa’s particularly women and youth 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 Bond Markets Issue Trends BRVM Market Valuation 6
Supporting Access to Capital Markets Cameroun Partial Credit Guarantee for Currency Risk Hedging Support • Fully aligned with Country Strategy Paper 2015-2020 Cameroon’s Emergence Strategy Private • Strength of Bank’s AAA to attract Sector private sector participation Crowding In Cameroun PCGRH Knowledge • Treasury and Capital Markets teams Transfer • African Legal Support Facility Be at the • At the time, similar 1 operation only done (MIGA for Cutting Senegal in 2011) 7 Edge • 1 st Transaction of that kind by AfDB
Borrowing Strategy Contributing to Capital Markets Development Provision of Local Currency Financing RATIONALE: The Bank currently has 10 approved African lending • Reduce clients foreign exchange risk / currencies: overall economic risk exposure South African Rand, Egyptian Pounds, Uganda Shilling, Nigerian Naira, Kenya Shilling, Zambia Kwacha, • Provide long term funding in local Tanzania Shilling, Ghana Cedi, Botswana Pula, CEMAC currencies region CFA and WAMU region CFA. • Introduce benchmark issuances and role model transactions ZMW BWP EGP • Introduce a new asset class and allow for diversification • Promote domestic capital market XAF UGX XOF development FUNDING METHODS*: TZS NGN KES • Domestic bond issue • Synthetic Local Currency Loans (non- deliverable forwards or “NDF”) GHS 8 • Cross currency swap
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 The Benefits of Supranational Issuance To the Country To the Investor Develop Fixed Income Offers opportunity to invest in local markets Supranational bonds Support Institutional & The Benefits of Operational Provides a benchmark Supranational Infrastructure Issuance Provides a unique diversified vehicle for Higher liquidity, performance, maturities & yield local SSA bonds Promotes capital transformation Lowered borrowing costs 9 by increasing appetite
Thank you Danke Schön 10
Recommend
More recommend
