FINANCING PRIVATE SECTOR TO BOOSTAGRICULTURE TRANSFORMATION IN AFRICA

The African Development Bank Group
Pre-TICAD7 Seminar – Investing in Africa
Tokyo, 29th of November, 2018

Africa is a continent of contrast, rich in natural
resources yet its people are among the poorest in theworld. The image of Africa that gets projected in theworld is that of a continent with disease, hunger,
corruption and the need for aid beyond a foreseeable
future. But, there is another story that is less often toldthat acknowledges the challenges faced by theMiddle-East
continent
but also recognizes the progress made in terms of morechildren going to school, less war, the growing quest for
better governance and an expanding middle class. The
African Development Bank is proudly part of thatstory.

1.

African Development Bank (AfDB)

2.

Focus on African Agriculture

3.

AfDB Solutions and Modus Operandi

4.

ContactAfrica’s Premier Development Financial Institution
The AfDB Group: three constituent institutions, separate legally and financially, with a common goal

African Development Bank (ADB)
•
•
•
•
•

Established in 1964
80 member countries
54 African/26 non-African countries
Authorized capital: USD 93 billion
Resources raised primarily from capital
markets

Board of Governors

African Development Fund (ADF)• Established in 1972
• Financed by 27 State participants
and 4 regional donors• Subscription: USD 41 billion• Focus on low income countries• Replenished every 3 years,
Concessional financing.

• Highest decision making body
• Composed of Ministers of Finance andMinisters of Cooperation of the Bank’s
member countries

Board of Directors

Nigeria Trust Fund (NTF)••••

Established in 1976 by Nigeria
Targeted at the Bank’s neediercountries
Maturing in 2023
Total resources: USD 242 million• 20 Executive Directors elected by the
Board of Governors• Oversees the general operations of
the Bank

As at 31st December 2017

Decisions by both
Boards require two
third majority or
70% should any
member require so…focused on combating poverty, and improving living conditions on the continent

Over 50 years of partnership for the development of Africa
EuropeAmericas
U.S.A.

6.623%

Canada3.876%

Brazil

0.332%

Argentina

0.090%

Germany
France
Italy
U.K.
SwedenSwitzerland
Denmark
NorwaySpain
Netherlands
Belgium
Finland
Austria
Portugal
Luxemboug

AfricaNigeria
Egypt
South Africa
Algeria
Côte d'Ivoire
Morocco
Libya
Ghana
Zimbabwe
Ethiopia
Kenya
Tunisia
D.R.Congo
ZambiaAngolaCameroon
Botswana
SenegalGabon
Tanzania
Mauritius
Madagascar
Mozambique
Congo
UgandaMali

9.332%
5.622%
5.055%
4.243%
3.738%
3.608%
2.652%
2.140%
1.965%
1.580%
1.440%
1.406%
1.293%
1.179%
1.168%
1.082%
1.077%
1.047%
0.997%
0.762%
0.653%
0.649%
0.622%
0.454%
0.450%
0.433%South Sudan
GuineaBurkina Faso
Namibia
Sudan
Sierra Leone
MalawiBurundiNiger
Benin
Liberia
Togo
Gambia,The
Equ.Guinea
RwandaSwaziland
Cape Verde
Sao Tome & P.
ChadLesotho
Mauritania
Cent.Afr. Rep
Eritrea
Somalia
Seychelles
Guinea Bissau(As at 31st December 2017)

0.412%
0.403%
0.399%
0.345%
0.309%
0.289%
0.244%
0.238%
0.237%
0.193%
0.192%
0.157%
0.152%
0.146%
0.132%
0.114%
0.070%
0.068%
0.066%
0.057%
0.057%
0.042%
0.031%
0.030%
0.028%
0.021%

4.157%
3.773%
2.438%
1.774%
1.578%
1.473%
1.182%
1.181%
1.070%
0.879%
0.642%
0.491%
0.449%
0.240%
0.202%

Middle-East

G-7 Shareholding: 28%

Kuwait0.451%

Turkey0.359%

Saudi Arabia

0.194%

Asia
Japan
China

5.518%
1.183%

Korea
India

0.483%
0.258%

Summary Financial information(in USD million)

2013

2014

2015

2016

2017

Assets32,33533,25135,152

39,963

46,392Loans

17,61918,105

17,832

20,295

25,113

Investments

9,372

10,637

11,62914,237

16,408Borrowings

19,93920,82822,79427,75333,005Equity

8,980

8,809

8,980

8,880

10,101

Paid-in Capital *

4,580

4,730

4,932

5,187

5,854

Reserves

4,400

4,079

4,048

3,693

4,247

278

220

129

161

368

100,424

94,36690,741

88,03593,278

Income before distributions
Subscribed Capital*Net of Cumulative Exchange Adjustment on Subscriptions

Note: Data converted from UA (Special Drawing Rights of the IMF) to USD at period-end exchange rates
Source: AfDB Financial Statements

A profitable institution operating in a challenging environment
A solid Bank with a strong performance(in USD million)
759
364

2010

715

295

2011

Allocable Income

948
817

339

2012

680

234

2013

667
287

2014

721

632

190

2015

Income from loans and investments

273

311

2016

2017

2010-2017

Higher volume
of loans andinvestments
Disbursements at
historical levels in2017

Reinvesting for greater development impact

Borrowing expenses

Highest transfer to reserves in 2017
to support business growthDistributions

USD 2.2
billion inincomeearnedsince 2010

African Development
Fund to support theneeds of low-income
countries

Democratic Republicof Congo Debt Relief
Mechanism – an arrears
clearance plan to assist
DRC in its reconstruction
efforts

Special Relief Fundto provide
humanitarianassistance to countries
affected byunpredictable disasters

Middle Income
Countries Technical
Assistance Fund to
make resources
available for the
preparation of projects
and building thepipeline

2017

To reserves

USD 1,050 million

USD 189 million(proposed)

To keydevelopment
initiatives

USD 1,169 million

USD 121 million(proposed)

The High 5s – accelerate Africa's transformation
Delivering on the Bank's Ten Year Strategy to achieve inclusive
growth and help Africa gradually transition to green growth

Priority areas
High 5s
Investment
Needs
USD 170 bn

Light up andPower Africa

3 4 5 7 9 13

Feed Africa

2 5 13

Industrialize
AfricaIntegrate
Africa

5 7 8 9 12

6 9 17

The High 5s will help Africa achieve close
to90% of the United Nation’s Sustainable
Development Goals (SDGs) and are
intrinsically linked to the African Union’s
Agenda 2063

Improve thequality of life forthe people of
Africa

3 4 5 6 8 1011

Public and Private Investments Covering Africa

1.

African Development Bank (AfDB)

2.

Focus on African Agriculture

3.

AfDB Solutions and Modus Operandi

4.

Contact

Focus on Agriculture: Address the Potential• Despite its vast agricultural potential, Africa remains a
net importer of agricultural products: Africa’s annual
food import bill is $35 billion, estimated to rise to$110 billion by 2025.
• In 2017, over 60% of people in Africa live in rural
areas and rely on agriculture for their livelihoods;
women in rural Africa made up at least half of the
agricultural labor force.
• Development of agriculture as a business can create
opportunities for those in rural areas, women andyouth across the continent. It can drive inclusive
growth, helping to reduce poverty and build
wealth.
African Savannah spans 400 millions Ha across 25 Africancountries, but just 10% is utilized, and often sub-optimally

Agricultural Finance and Rural Development: A Major
Strategic Priority for the AfDB
The Agricultural Finance and Rural Development Department has the mandate to achieve theFeed Africa Initiative’s goals by working with and providing financing to the public and private
sector to improve agricultural efficiency, output, and access to markets throughout value chains.

Feed Africa: a new way forward for food and agriculture•

Contribute to eliminating extreme poverty in Africa by2025•

End hunger and malnutrition in Africa by 2025•

Make Africa a net food exporter•

Move Africa to the top of export-orientated global value
chains where it has comparative advantage

The Private Sector as a Key Component of Commodity
Value Chain Development
Investment in the Public Sector and Developing Public Goods

Improving Agricultural Value Chains
Driving Transformation of Commodities into Products

Farmers, Agro-dealers, Input Providers, Agro-processors,
Industrial Manufacturers, Traders, Exporters, etc.

Facilitate Capital investments for Agribusinessprivate entities

Scale for Impact and Returns

Focus on Key Value Chains

Extension Services, Roads, Financing R&D, Storage,
Market Platforms, Quality Standards, etc.

Focus Within Agricultural Value Chains

Potential Crops (1/2)•

Investments in integrated industrial processing, branding, and packaging for both local/regional
consumption and export, in areas with high cashew production density, particularly if close to ports•

Investments in regional cotton corridors and Agro-processing Zones (APZs), and particularly
industrial production of yarns and fabrics to be used for domestic manufacturing of apparel andhome textiles••

Agribusinesses with large-scale partners (such as marketing outlets, processing units, sourcing
agents, etc.)
Investments to develop cold and fresh chains to reduce post-harvest loss

AQUACULTURE•••

Capital investments to upgrade fish ponds to modern facilities
Agribusiness development to support modern input/feed operations
Capital investments to develop cold and fresh chains for regional trade and distribution

PALM OIL•••

Investments in input suppliers to support the improvement of productivity
Investments in SMEs to improving the efficiency of milling, packaging, and other palm oil activities
Long-term financing for tree revitalization

CASHEW

COTTONHORTICULTUREPotential Crops (2/2)
•

RICE

WHEAT

•

Investments in modern milling facilities to make high-quality rice for the fastest-growing market
segment, which is also driving import growth
Supplying mechanized tools for weeding and soil preparation, and sustainable irrigation for areas
with more variable rainfall or flooding•••

Commercialization at large-scale of drought-resistant, high-quality wheat varieties
Supplying of mechanized equipment for field preparation and harvest
Investment in integrated corridor-based production and milling (wheat-centric processing zones)
to cover new milling capacity needs•

Investments in post-harvest equipment for improving the storage of fresh cassava with off-farm
technologies (such as refrigeration, deep freezing, waxing, chemical treatment, and othermethods)
Investments in large-scale, industrial processing corridors to increase capacity for creating cassava
value-added products

CASSAVA
•

COCOA

•
•

Investments in input suppliers to support the improvement of productivity
Investments in local SME and / or large-scale cocoa processing and transformation

COFFEE••

Investments in input suppliers to support the improvement of productivity
Investments in local SME and / or large-scale coffee processing and packaging

1.

African Development Bank (AfDB)

2.

Focus on African Agriculture

3.

AfDB Solutions and Modus Operandi

4.

Contact

AfDB: Blending Clout with Unique Additionality
Sector Expertise••

We have extensive knowledge gained from long-term sector engagement
Our staff includes in-house agricultural experts and regulatory experts, all with years of experience inAfrica, who provide technical advisory assistance and assess regulatory risk in order to structure deals
accordinglyCountry Risk
Mitigation•••

We have very strong government relations throughout Africa and beyond
We play an honest broker role
We actively pursue synergies with other divisions, departments, and regional offices of the African
Development Bank Group so that we can address risks holisticallyUnparalleled
Networks•

With an unparalleled network of stakeholders throughout the region and across the globe, we canintroduce companies to co-investors, potential clients, and other strategic partners

Access to Full
Cycle Capital•As the African Development Bank’s private-sector agricultural finance division, we can leverage AfDB
funds and seamlessly deliver financial products according to a company’s maturity or a project’s
stage

•
•

Long-term investment horizons do not scare us
We use capital to make both impact and returns

Patient Capital

AfDB’s Approaches and targeted entities
Support Non-Sovereign Operations
Targeting Large Agro-Companies,
Private Equity Funds and Impact
Funds

Support as enabling environment
for private sector development forde-risking investment andlending to the agricultural value
chainsLead strategic partnerships with key
private sector clients, financial
institutions and commercial banks tofinance value chain stakeholders alongpriority agriculture value chains
Large International
Corporates

WORK/
INVEST WITH
THE PRIVATESECTOR

Provide high-quality and innovativedebt/equity/ quasi-equity/
guarantee investments for private
sector development for value chain
development and transformation

Catalyze capital flows, especiallycommercial lending and private
investment to scale agribusinessTO
TRANSFORM
AGRIC VALUECHAINS

Large and Mid-Sized
Africa-BasedCompanies

Mobilize resources and blended financeinitiatives to close the financing gap for
private sector led development ofagricultural value chains

Agriculture SME andOperators Engaged inAgriculture Support
Services

Agriculture Sector
Specific Private
Equity Funds

Large Menu of Financial Instruments
1

2

LENDINGINSTRUMENTS• Non Sovereignguaranteed loans• Local currency• Syndicated loans

43

GUARANTEESEQUITY

Mitigating the risks
attached toinvestments in Africa

Bringing scarce risk
capital totransformative
projects

TRADE FINANCE
Bridging the gap intrade financing in
AfricaAllowing our borrowers
to hedge and manage
their debt responsibly

7

6

5

RISK MANAGEMENTPRODUCTSTECHNICALASSISTANCE FUNDS

AFFILIATEDPARTNERS

Financing the completionof feasibility studies,training and project
preparation

Africa 50
Africa Guarantee Fund
Afrexim BankTDB Bank…

Working with AfDB – Bank’s Investment Criteria (1/2)
Only those non-sovereign operations adequately satisfying the investment criteria outlined below may
qualify for Bank investments:Strategic fit on development priorities


Aligned with strategic orientations and priorities of the Bank Group outlined in its Ten Year Strategy, 2013-2022 or

successor corporate strategiesCreditworthyCapacity to meet their repayment obligations to the Bank and other financiers supporting their investments

Operate under competent management and good corporate governanceTrack record or demonstrable capacity for environmental and social responsibilityGood standing, financially solvent, with realistic business strategies.

Commercially viable

Solid prospects of being financially profitable, generating adequate cash flow to service debt repayment and interest
charge obligations in the case of loans.

In the case of equity investments, operations should have good prospects to support dividend payments and/or
retained earnings, yielding satisfactory expected internal rates of economic and financial return.

Working with AfDB – Bank’s Investment Criteria (2/2)
Development Outcomes and the Bank’s additionality


The Bank will strive to bring a unique value added to its NSOs and ensure that they generate satisfactory

development outcomes in the RMCs where they are implemented.

Additionality and expected Development Outcomes address whether DFI’s intervention will:

bring additional value to the transaction that the market alone cannot provide, and

articulate whether the project will provide satisfactory development outcomes:
Household benefits and job creation

Infrastructure

Governance/fiscal effects

Regional integration and economic resilience

Environmental effects and contribution to green growth

Gender and social effects

Private sector development and demonstration effects.

Working with AfDB – Bank’s Eligibility CriteriaProject/ Enterprise must be majority-owned (more than 50 per cent) by private-sector investors; orpublicly owned (ADB / ADF – Enclave Policy) with strong financial standing and proven managerial

autonomy;Projects for establishment, expansion, diversification and modernization of productive enterprises (i.e.
CAPEX);



Project/ Enterprise that have a Transformational impact on key commodity value chains to:Contribute reducing food importation,Present potential geographical or product diversification,

Capture more value domestically by processing on the African continent;

Financing plan of at least 70:30 debt to equity Ratio, of which AfDB participation cannot exceed 33
per cent of total project cost. The balance of debt could be raised from local or international

financial institutions, other DFIs;

For corporate transactions, the Bank’s financing component will not exceed 50% of the company’s
shareholding equity base;“Sweet spot” transactions of size is greater than USD 10 million.

Working with AfDB – Preliminary Information Request
Feasibility study/ Market study;Business Plan / Information Memorandum; which contains:Description of the project (sector, location, production volumes, etc.);Project cost estimates, including FX requirements, AfDB participation

Financing Plan, with debt to equity ratio, equity commitment, debt financiers involved;

Key technical and environmental features;Business climate, market prospect, including proposed marketing arrangements;

Implementation plan, including the status of required licenses, permits, certificates, etc;

Overview of development impact (jobs created, community SME business linkages,

Gender equality, etc);
Sponsors information, including Financial Statements of the last 3 years, and managerial background;

Excel based project financial model - audited;

Environmental and Social Impact Assessment (ESIA) in line with the AfDB’s Integrated Safeguard
Systems (ISS) or IFC Performance Standards;

Timeline for financial close and project implementation.

IDENTIFICATION PHASE

Origination• Business Development• Eligibility assessment
Exploratory review• Early-stage review; signature of Non-Disclosure Agreement, and reception of questionnaire from client• Departmental and complex clearance of Preliminary Evaluation Note (PEN)
Concept review• Preliminary analysis• Preparation of Project Concept Note (PCN) at Credit Risk Committee (CRC), Additionality and Development
Outcomes Assessment (ADOA) rating, Environmental and Social rating

PREPARATION PHASE

3 TO 6 MONTHS

Working with AfDB – Investment Cycle

Final review• Project Appraisal: Due Diligence mission (DD) with Credit Risk Officer, Lawyer, ADOA Officer, Modeler, E&S
Officer and Procurement Officer• Clearance of Project Appraisal Report (PAR) at Credit Risk Committee (CRC), Operations Committee (OpsCom)
and Country Team (CT)Documentation, Closing, and First Disbursement• Conclude negotiations• Finalize Term Sheet• Conclude legal documentation• First disbursement and Handover to Portfolio Management

Case Study: Export Trading Group
Direct loan to Export Trading Group (ETG)2016•

US$ 100 million senior loan to finance part of ETG’s Agricultural Investment Program (AIP)in Africa to promote employment for youth and women, and to adopt an integrated
value-chain approach that emphasizes access to regional and global markets•

AIP consist of investments in: (i) Fertilizer projects; (ii) Processing Plants; (iii) Multicommodity warehouses; and (iv) Silos•

Enhancing the efficiency of agricultural value chains by increasing the infrastructurebase and capacity for value addition•

Contributing to industrialization with new processing plants•

Contribution to smallholders access to inputs (seeds and fertilizers), mechanization andaccess to international markets thereby ensuring significant revenues to farmers

1.

African Development Bank (AfDB)

2.

Focus on African Agriculture

3.

AfDB Solutions and Modus Operandi

4.

Contact

Contact
Eren Kelekci
Agriculture and Rural Finance Divisione.kelekci@afdb.org+225 75 75 07 02

Disclaimer

This presentation has been prepared by the African Development Bank (“AfDB”) for information purposes only. Any opinions expressed in thispresentation reflect the judgment of AfDB at the date and time hereof and are subject to change without notice and AfDB has no obligation to
inform any recipient when opinions or information in this presentation change.
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does not take into account the particular investment objectives, financial situations, or needs of individual investors. The price and value of theinvestments referred to in this presentation may fluctuate. Past performance is not a guide to future performance and future returns are notguaranteed.
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