AFRICAN DEVELOPMENT BANK

Introduction to the Development of the Bank’s Public Private Partnerships (PPP) Operational Framework

Presentation of an Overview and Rationale

8 September, 2020

PPPs globally and in Africa

2

African governments under pressure to maintain

adequate levels of infrastructure investment

Infrastructure investment need of USD 130-170

Billion by 2025

Financing gap of USD 68-108 Billion

PPPs can help bridge a part of the financing gap by leveraging private finance

Plus…

Help improve efficiency of service delivery

Efficiency savings can resolve part of the financing gap

Investments in infrastructure with private

participation total USD 1.12 Trillion during 2009-19

in Low- and Middle-Income Countries

Asia, Europe and the Pacific accounted for just over

60% of this financing, whilst Latin America alone

attracted 32%.

Africa attracted less than 7%

But PPPs in Africa need substantial support

3

Low levels of PPPs in Africa as compared to other regions (value of PPP

deals)

Source: PPI Database, World Bank

Many reasons for stagnation

Limited government capacity to identify and develop

PPP;

Absence of pipeline of bankable PPPs;

Lack of financing choices in the domestic financial

markets

High risk perception of investors

Potential role of AFDB to use its competitive

strengths to support PPP development

Unmatched knowledge and presence across Africa

Ability to meet the financing requirements of even the

most complex PPPs

Ability to mobilise and lead other financiers

Relationship with Regional Member Countries

Experience across infrastructure sectors

0

5000

10000

15000

20000

25000

30000

So

uth

Afr

ica

Mo

rocc

o

Nig

eri

a

Eg

yp

t, A

rab

Rep

.

Ghan

a

Alg

eri

a

Ken

ya

Tun

isia

Sen

eg

al

Zam

bia

Cô

te d

'Ivo

ire

Mo

zam

biq

ue

Cam

ero

on

Gab

on

Ug

an

da

To

go

Lib

eri

a

Co

ng

o, R

ep

.

Benin

Su

dan

Tan

zania

Guin

ea

Mauri

tan

ia

Mauri

tiu

s

Burk

ina F

aso

Rw

an

da

Zim

bab

we

Gam

bia

, The

Mali

Ang

ola

Djib

ou

ti

So

malia

Mad

ag

asc

ar

Chad

Sie

rra L

eo

ne

Nam

ibia

Mala

wi

Cap

e V

erd

e

Eth

iop

ia

Bo

tsw

an

a

Co

mo

ros

Seych

elles

São

To

mé a

nd

Pri

nci

pe

Leso

tho

Co

ng

o, D

em

. R

ep

.

Nig

er

Sw

azi

land

Centr

al A

fric

an

Rep

ub

lic

0

20

40

60

80

100

120

140

Invest

men

t V

alu

e (

US

D M

illi

on

)

Nu

mb

er

of

pro

ject

s

Sum of investment value Number of projects

50% PPPs in Africa, by value,

concentrated in just 5 countries

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Africa East Asia and Pacific Latin America and the Caribbean

PPPs -Integral part of Bank’s strategy, proven by the independent

evaluation

4

The AFDB Strategy for 2013-2022 emphasizes that the Bank will be an increasingly active

partner and facilitator for private investment

The Bank’s other sectoral strategies also show a clear intent for a wider use of PPPs

An Independent (IDEV) evaluation was initiated in 2017 to take stock of Bank experience

of PPPs and inform future strategy

IDEV evaluation of Bank’s PPP portfolio

5

65 operations – total commitment of UA 2.7 Billion (over 10 years to 2017)

Upstream support

Support for enabling policy and regulatory framework

General budgetary support

Technical and advisory support

Downstream operations

Loans

Guarantees

-

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

900.00

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Downstream Operations Upstream Operations

Bank’s commitments in upstream and downstream operations

(Million USD)

Key conclusion of the evaluation… The Bank has made a

Positive Impact

6

Demonstrated use of PPP in key sectors (energy, renewables, roads & highways, ports)

Established successful PPP precedents (Dakar Toll Highway, Lake Turkana Wind Power, Ourzazate

NOORo I and II)

Improved capacity of governments through experience

Leveraged private investment for critical infrastructure (mobilized private

investment worth 158% of Bank’s commitment)

Made implementation possible by providing long tenors and competitive prices,

not possible by commercial banks

Strengthened management of environment and social impacts

Demonstrated strategies for managing impacts in large projects

Enhanced the development impact

However, there are clear areas for improvement in the

Banks PPP Operations

7

There is a need for improved internal coordination in providing support for PPPs across Bank’s operations

There is a need to have a consistent direction and approach for support to PPPs in the development of country and sector strategies

There is a need to ensure clear messaging on Bank’s intentions for PPPs, to RMCs and partners

There is a need to better define institutional roles for PPP activities and support within the Bank

There is a need to strengthen internal capacity for PPPs within the Bank

There is an opportunity to deploy resources more effectively

The evaluation also found that

8

All operational elements and resources are already present

but dispersed across the Bank…

Enabling framework

Developing and

structuring projects

Financing projects

Institutional Support Projects

Policy Based Operations

Project Preparation Facilities

Sector complexes’ support for

structuring transactions

Sovereign loans/ ADF Grants

Project Finance

Risk mitigation (PRGs)

…with a clear need for an overarching PPP

framework of the Bank, to facilitate

Common understanding within the Bank’s operations of

what constitutes a PPP

Consistent direction for country and sector strategies

Basis for coordination across Bank’s operations

Clear messaging on Bank’s intentions for PPPs, to RMCs

and partners

Defining the institutional roles within the Bank

Strengthening capacity of Bank staff

Effective deployment of resources

Approach taken in Developing the Bank PPP Framework

9

Comprehensive – covering an analysis of current approaches and identification of opportunities for

all forms of Bank support to PPPs across the PPP lifecycle

Consultative – based on both internal and external stakeholder dialogues and feedback

Dynamic – taking into consideration the mix of RMCs PPP maturities, stage of PPP development and

institutional capacity across Africa

Collaborative – based on lessons & experiences of peers, and anchored around collaboration across

the PPP lifecycle

Stakeholder

conversations Working Papers Workshop Framework

We are here

Overview of what the Framework will entail..

10

PPP enabling

framework

Pilot projects/ project

pipeline

Market ready PPP

transactions

Institutions capable of

identifying &

developing PPPs

Pillar 1:

Strengthening

PPP enabling

framework

and

institutional

capacity

Pillar 2:

Project

preparation

& transaction

advisory

Pillar 3:

Financing of

PPPs

Pillars of Bank

Support

Private investment

leveraged to meet

infrastructure

requirements

Our Expectations from this Workshop

11

From Session 1

• Challenges that Regional Member Countries are facing in implementing PPP enabling frameworks;

• Factors hampering the flow of PPP transactions even in countries with established PPP frameworks;

• Feedback on the main areas of support for enabling environment that the Bank should prioritize.

From Session 2

• Feedback on what role the Bank should prioritize to improve the flow of bankable PPP projects in Africa;

• Feedback on the gaps in PPP project Structuring and Advisory Services in Africa and how can they be

closed;

• Feedback on the need for the Bank to actively advise on PPP transactions.

From Session 3

• Feedback on what the Bank needs to prioritize to be more effective in financing PPPs;

• Feedback on whether the present instruments are deemed adequate in financing PPPs;

• What innovation the Bank can build into its PPP Framework to achieve an increase in financial closure PPP

projects.

We look Forward To Your Comments, Feedback and Advice

THANKS FOR JOINING THE CONSULTATIVE WORKSHOP

12

Hoping for an insightful and productive event!