Tunis — The African Development Bank (AfDB) Group has made over a billion dollars in annual private sector investments in Africa for the first time since its founding in 1964. The Bank reached that highpoint following the approval on Thursday by its Board of Directors of two new financing transactions: a Euro 6 million loan to establish the Sahanivotry micro-hydro power station in Madagascar and a Euro 0.6 million equity investment in the microenterprise-oriented Access Bank of Tanzania. With both approvals, the AfDB's total investments without sovereign guarantees thus far in 2007 amount to $1.01 billion.
The AfDB provides a range of financial products without sovereign guarantees to complement its traditional lending operations to governments with sovereign guarantees. Private sector operations of the Bank Group promote strong environmental, social, and corporate governance standards as well as help African companies achieve international best practices, making them more competitive at home and in the international marketplace.
"Supporting private sector development on the continent is a top priority for the AfDB," said AfDB President, Donald Kaberuka. "AfDB's rapid expansion of its non-sovereign operations is demonstrating how the public and private sectors can work together to create opportunities and improve people's lives. Our position as Africa's premier financial institution provides us with an opportunity to work with development partners in areas such as infrastructure and access to finance and help lead development in lower income and post-conflict countries."
The Bank began to undertake private sector operations in 1991 and currently pursues an institution-wide strategy that seeks to identify weaknesses in the investment climate and business-enabling environment in Africa and finance programs to address them, and selectively finance non-sovereign guaranteed projects that can have a strong catalytic and demonstration effect.
"Government commitment to improving the investment climate will largely determine Africa's future growth and investment opportunities," according to Mr. Mandla Gantsho, the Bank's Vice President for Infrastructure, Private Sector, and Regional Integration. "There are still significant challenges ahead, and we are working closely with governments and other development partners to improve the business-enabling environment and to create public-private project structures that attract investment capital, especially in the infrastructure sector."
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In this regard, the AfDB is working to ensure that African governments uphold contractual obligations to private investors, that African governments and communities substantially benefit from private investment, and that all parties respect international standards on environmental sustainability and open and transparent procurement.
"The sharp increase in the AfDB's non-sovereign operations reflects the burgeoning level of opportunities for financially attractive public-private partnerships in a broad range of sectors. The development impact that increased private investment can have in Africa is stronger than ever," said Tim Turner, AfDB Director for Private Sector Operations.
For future non-sovereign guaranteed investments in Africa, the AfDB will focus on public-private partnerships in the financial sector including microfinance, infrastructure, extractive industries, manufacturing, agribusiness and services, with special emphasis on projects that promote regional integration. The AfDB works in close collaboration with other development partners and its private sector operations are presently benefiting from special financial assistance from the government of Japan, which has joined the AfDB to establish the Enhanced Private Sector for Africa (EPSA) Initiative.
