5 Questions to Victoria Chisala, Acting Director of the Policy and Strategy Department's on the African Development Bank's Non-Sovereign Operations policy.*
What is the objective of the Non-Sovereign Operations policy?
The objective of the NSO policy dissemination is to expand the Bank's engagement with the private sector to increase synergies between us. It is also an opportunity to provide information about the type of projects we finance or invest in as the African Development Bank.
Ultimately, our goal is to support the transformation of the continent and we cannot do this with government partners alone. The private sector is crucial and should be engaged in the development of the continent. We want to increase the number of bankable projects that the Bank can invest into engage and finance the private sector and to create jobs. The private sector is essential in job creation on the continent.
What is the rationale behind the policy and when did it come into force?
The rationale for the new NSO policy is rising demand for non-sovereign operations, recent internal developments, including the General Capital Increase in 2010 (GCI-VI) and the risk appetite statement, which resulted in an increase of the Bank's risk capital allocated to private sector operations, particularly in low income countries.
The Policy on Non-sovereign Operations came into force on September 12, 2018, following approval by the Boards of Executive Directors of the Bank Group.
Under what conditions may the Bank provide financing to NSOs?
Under this policy, the Bank may provide financing to non-sovereign operations subject to four conditions: i. The borrower is a private enterprise or an eligible public sector enterprise ii. The operations are financially sound iii. They should result in satisfactory development outcomes, including supporting or creating opportunities for private sector development; and iv. The Bank brings additionality, which could be either financial or non-financial.
Can you give some examples of operations which are covered by this policy?
Sovereign operations and sovereign-guaranteed operations which are extended to public entities or any other entity, repayment of which is an explicit, direct and irrevocable undertaking of a Regional Member Country, or guaranteed by the latter are not covered by the NSO Policy.
What has been the Bank's take-away from the breakaway sessions held with stakeholders after the unveiling of the policy in Abidjan?
The enthusiasm and the questions we have received so far make us realise that we need to do more in terms of communication and engagement with the private sector. There is a perception that the Bank is a bit distant, so we want to communicate that we are open for business and that we encourage the private sector to come to us.
We definitely see the real importance of these type of engagements. It fosters a more intimate relationship with the private sector. Our experts are always available to answer specific questions from our stakeholders, so that they can have clarity and that they can feel confident to come and engage with the Bank.
*The Policy, which was unveiled in Abidjan on Monday, 13 January 2020, spells out the modalities for Bank lending to entities that do not have government-backed guarantees, including the private sector.
