Facing Challenges in Modern Africa: Insights from Center for Comparative and International Studies
Explore the readiness of the African Development Bank in navigating the shifting landscape of Africa through non-concessional lending challenges and growth dynamics. Gain valuable insights into the changing African economy and the role of external finance players.
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Center for Comparative and International Studies (CIS) The African Development Bank: Ready to Face the Challenges of a Changing Africa? EBA Seminar Stockholm 23 March 2015
Center for Comparative and International Studies (CIS) Overview of Presentation 1. Context: Africa Rising? 2. AfDB Overview 3. Key Challenge: Non-Concessional Lending a. Business Practices b. Financial Policies 4. Conclusions
Africa Rising? Real GDP Growth GDP Per Capita (PPP) (SSA)
Africa Stagnating? Human Development Index 2013
Africa Changing Growth is accelerating how will it play out? Population boom how will it be channeled? New External Finance Players New Attitudes
AfDB vs. Other MDBs 2013 Lending Commitments World Bank 15.2 16.3 IADB 15.3 0.2 AsDB 10.4 3.9 CAF 12.1 Market-based Concessional EBRD 10.8 2.8 3.5 AfDB IsDB 3.5 0 5 10 15 20 25 30 35 US$ Billions
AfDB vs. Other MDBs in Africa 2013 Lending Commitments WBG 1.7 8.2 2.8 3.5 AfDB IsDB 2 BOAD 0.8 0.2 Market-based Concessional EBRD 0.4 PTA Bank 0.3 EADB 0.09 0 2 4 6 8 10 12 US$ Billions
Non-Concessional Lending: Falling Short Project vs. Actual Lending Commitments, 2010-2013 2010 (Proj) 2010 2011 (Proj) 2011 2012 (Proj) 2012 2013 (Proj) 2013 Sovereign 1.88 2.40 3.82 4.39 3.57 2.24 3.44 1.22 Non- Sovereign 1.86 1.57 1.70 1.26 1.97 0.95 2.04 1.60 Total 3.74 3.97 5.53 5.67 5.53 3.20 5.47 2.82
ADB Capital is Not Being Put to Use Equity as % of Outstanding Loan Portfolio 60% 50.3% 50% 43.4% 39.4% 40% 33.3% 32.3% 27.9% 30% 20% 17.4% 14.7% 14.6% 13.7% 10% 0% IBRD AsDB IADB EBRD CAF AfDB Barclays Deutsche HSBC UBS
Why Does Non-Concessional Window Matter? Not serving its members Some can borrow but don t want to Others want to, but can t Link between ADB and ADF Finance Knowledge Future of AfDB and Africa Financial strength of MDB model Decline in concessional donations
Business Practices: Bureaucracy Average Sovereign Loan Approval Times World Bank (2013) 14 IADB (2013) 5.8 AsDB (2012) 11 AfDB (2012) 13 0 2 4 6 8 10 12 14 16 Months, Avg.
Business Practices: Instruments and Knowledge Public sector loan mentality; minimal financial innovation Knowledge value-added is insufficient
Financial Policies: Credit Policy Recent Sovereign Bond Issues, Concessional Countries Country Issue Year Yield (%) US$ Amount Maturity Zambia 2012 5.625 750 mln 10 yr Ghana 2013 7.875 750 mln 10 yr Nigeria 2013 6.625 500 mln 10 yr Rwanda 2013 6.875 400 mln 10 yr Tanzania 2013 6.46 600 mln 7 yr Kenya 2014 6.875/5.875 1.5 bln/500 mln 10 yr/5 yr Ghana 2014 8.25 1 bln 12 yr Senegal 2014 6.25 500 mln 10 yr Ivory Coast 2014 5.625 750 mln 10 yr Zambia 2014 8.625 1 bln 10 yr
Financial Policies: Credit Rating Is AAA necessary? Limits flexibility Portfolio and Country Risk Opening to ADF borrowers Private sector lending Consider 1 or 2 step downgrade as part of strategy to expand operational relevance Would increase spread, but not huge CAF: AA-, and business is booming in LatAm
Adapt for the Future To have an impact on Africa s future, AfDB needs to develop a culture of: Risk-taking Financial innovation Demand-driven Underneath everything: GOVERNANCE
Center for Comparative and International Studies (CIS) Thank You! Chris Humphrey christopher.humphrey@pw.uzh.ch
