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PRIVATE SECTOR DEPARTMENT
Working Together to Develop Africa
Investment and Business Opportunities in Africa
Youssef Arfaoui
Renewable Energy Expert,
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PRIVATE SECTOR DEPARTMENT
OUTLINE
1. The Private
Sector strategy
2. Our products
Our role
3. How to work
together
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PRIVATE SECTOR DEPARTMENT
1. The Private Sector strategy
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PRIVATE SECTOR DEPARTMENT
The bank supports private sector expansion as a strategic objective
Promote Private Sector in Private sector activities directly contribute to growth, which is
African Countries considered essential to poverty reduction
Enhance the role of the local This is achieved by strengthening financing systems, but also
private sector through special programmes
Attract foreign direct The bank contributes to various program and technical assistance to
investments promote best practices, corporate governance, capacity building in
host countries
Act as a catalyst Catalyse resources for technically, financially, economically and
environmentally sound projects
Create an enabling Help create an environment conducive for private business through
environment assistance to reform processes, policy recommendations and
special programmes
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PRIVATE SECTOR DEPARTMENT
Priority is given to non sovereign guaranteed transactions with high
development impact (Financial Instruments)
Lines of credit Direct loans Equity
Agency lines Guarantees
Financial
Direct Infrastructure
Market Lending PPP
Development
Tailor made Technical Assistance
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PRIVATE SECTOR DEPARTMENT
2. OUR PRODUCTS /OUR ROLE
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PRIVATE SECTOR DEPARTMENT
Loans and Guarantees are most commonly used for
infrastructure projects
Equity
Loans Guarantees
Quasi-Equity
Hard Currency of choice ( Euro, US$, Yen)
Local Currency (Currently only SA Rand)
Floating or Fixed interest rates
Flexible grace period and repayment profile
Maximum investment of 1/3 of total project cost
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PRIVATE SECTOR DEPARTMENT
Loans
Floating rates are proposed in 53% of cases
Lending Rate Computation (%)
Base Rate 6-month LIBOR, EURIBOR, JIBAR
+ Lending Spread Project Specific Spread
Lending Rate
– Maturity up to 15 years including 5-year grace period
– Principal amortization linked to the characteristics of the project
– No prepayment premium
– Reset and repayment dates are February, 1st and August, 1st
– Rate reset frequency other than 6 months and alternative repayment dates
can be considered
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PRIVATE SECTOR DEPARTMENT
Loans Fixed rates
Lending Rate Computation (%)
Base Rate Fixed swap rate corresponding to the
amortization structure of the original
repayment
Lending Spread Project Specific Spread
+ Lending Rate
– Maturity up to 15 years including 5-year grace period
– Principal amortization linked to the characteristics of the project
– Prepayment premium based on the cost of redeployment of prepaid funds
– Repayment dates are February, 1st and August, 1st
– The interest rate can be fixed (1) at each disbursement, (2) reset dates of
floating interest rates (1 Feb /1 Aug), or (3) when all the disbursements
are completed
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PRIVATE SECTOR DEPARTMENT
Guarantees are designed to help borrowers enhance
financing possibilities
Equity
Loans Guarantees
Quasi-Equity
Hard currency denominated
Available for both hard-currency and local-currency denominated
obligations
Available for
Loans
Debt instruments
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PRIVATE SECTOR DEPARTMENT
Guarantees Several types of Guarantees can be proposed
Full guarantee covers non–repayment of all maturities of an underlying debt
instrument for all risks
Partial credit guarantee covers only a portion of the underlying debt instrument against
all risks. Used to extend/reinforce credit on longer maturities
Partial risk guarantee offers protection against selected political risks. Typical risks
covered are monetary convertibility risk, currency transfer risk,
regulatory risk, expropriation risk, and the non-performance of
contractual commitments by government or government
agencies
Guarantee terms are similar to Loan terms
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PRIVATE SECTOR DEPARTMENT
Equity is considered the primary responsibility of the sponsor
but can be also proposed
Equity
Loans Guarantees
Quasi-Equity
Never the largest shareholder
Maximum of 25% of issued capital
Exit scheme required
Mostly through dedicated investment funds
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PRIVATE SECTOR DEPARTMENT
Technical assistance - Grants for project preparation
Draft Project request
The Bank can assist with tailor-
made consulting services for: Reporting Preliminary Approval
(Donor)
Feasibility studies Invoice Approval
Diagnostic Official Proposal
Restructuring studies Project launch
Training Official Approval
Environmental standards Contract
(Donor)
compliance
Procurement docs
The technical assistance is
financed through Trust Funds
Example:
are administered in
Portfolio Management Training
accordance with a donor 15 people for 2-3 weeks
agreement and the ADB Amen Bank, CAL, Merchant Bank
procurement procedures
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PRIVATE SECTOR DEPARTMENT
3. HOW TO WORK TOGETHER
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PRIVATE SECTOR DEPARTMENT
Preparation of Project documents to be submitted to the ADB
A comprehensive business plan is necessary for application
Project’s objectives and rationale
BACKGROUND
Review the sector and how the project fits in the country’s
development objectives
MARKET Detail marketing strategy, analyse competition
TECHNICAL
ASPECTS Describe technical aspects, related risks
Describe procurement process
PROCUREMENT The bank has specific procurement guidelines
Supplies must come from member countries
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PRIVATE SECTOR DEPARTMENT
A comprehensive business plan is necessary for application
Describe the environmental impact, including the possible
ENVIRONMENTAL
ASPECTS
resettlement of communities
Describe mitigation strategies
CAPITAL Describe the proposed or existing company, its capital structure
STRUCTURE AND Give information on management background, project supervision
MANAGEMENT
processes and schedule
Provide details on cost estimates, financing needs from different
partners
FINANCIAL AND
ECONOMIC Provide a complete financial evaluation, detailing the set of
EVALUATION assumptions
Carry out an economic evaluation, stating the assumptions used
RISK ANALYSIS Discuss risks involved as well as mitigation strategies
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PRIVATE SECTOR DEPARTMENT
Project Processing
Concept review
• Review of information
memorandum
• Analysis of project
context
Letter of Interest Project Appraisal
• Detailed review of
project
• Technical review
• Risk assessment
Investment proposal Negotiation
• Legal review (advisor)
• Term – sheet
negotiation:
Operations Committee milestones, security
package
Approval
Term sheet
• Final presentation
to the board
Investment Committee Board
approval
Loan
agreement
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PRIVATE SECTOR DEPARTMENT
Renewable Energy Focus areas
Wind Energy:
A. The wind energy study for Africa
- To determine the wind energy potential
in Africa and investment criteria
B. Project in Pipeline:
a. Kenya: 30 MW – 60 MW and 90 MW
b. Madagascar : 10 MW under development
c. Mali: 1 MW
d. Ethiopia: 50 MW
e. Senegal: 15 MW
f. South Africa: 40 MW
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PRIVATE SECTOR DEPARTMENT
Renewable Energy focus area
Micro Hydro:
• Small size hydro power project to accelerate the
electrification and development of rural areas
• Potential areas has been identified in Madagascar,
Kenya, Tanzania, Uganda
Project Pipeline:
Madagascar: 4 and 15 MW
Kenya: 2 MW
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PRIVATE SECTOR DEPARTMENT
Renewable Energy Focus Area
Solar water Energy for water treatment
• Solar Pasteurisation • Solar Water Desalination
• Used to pasteurise potable • By combining the solar
water and wind technology to
• Projects: electrify costal villages
• The pilot projec t of and treat water
Mauritania
• Planed replication in
Madagascar and Cameroun
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PRIVATE SECTOR DEPARTMENT
Thank you
Contact us:
Infrastructure and PPP Division
Private Sector Department
African Development Bank
BP 323
1002 Tunis Belvédère TUNISIA
y.arfaoui@afdb.org
r.gaillard@afdb.org
Tel : + 216 71 10 23 08 –
http://www.afdb.org
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