Africa: ADB Looking to Raise $8.4 Billion from Capital markets for Development Projects
Posted on :Thursday , 5th January 2017
Kampala — The African Development Bank (ADB) board of directors has approved the institution's borrowing programme for 2017, for an amount of $8.4 billion (Shsh30.4 trillion).
The money will be raised from capital markets in African countries by issuing bonds in local currency to finance development projects.
Due to existing large infrastructure deficits, African governments are in need of funds to finance various infrastructure projects to foster economic growth and development and as result they have resorted to borrowing on concessional or on non-concessional basis.
As per the programme, ADB says one of the main objectives of the programme is to raise resources from capital markets, in a cost effective manner, to finance development projects and programmes in Africa.
Speaking to Daily Monitor from ADB headquarters in Abidjan, about the new borrowing programme, Director Treasury department ADB, Ms Hassatou N'Sele said: "The ADB has issued in the past in the domestic markets of South Africa, Uganda and Nigeria. These bonds are listed in their respective markets. ADB African currency issuance is linked to local currency needs to fund projects in local currency."
In August 2012, the ADB listed $52 million (Shs188 billion) bond on Uganda Securities Exchange after doing the same thing in South Africa in 2007.
The bank's funding requirements have been increasing in line with its operations and footprint on the continent. Three years ago, its annual borrowing programme was $4.4 billion.
The ADB has accessed a wide array of capital markets across the globe, with the bulk of its issuance in US dollars, Euro, Australian dollars and South African rand.
It has also been growing its socially responsible investment programs, including green bonds and bonds around the five high priorities areas of the institution: A 'feed Africa' 'Improve the quality of the life for the people of Africa' bonds were issued in 2016 in addition to green bonds.
In line with its commitment to help develop the African capital markets, the Bank Group continues to explore the prospects for local currency bonds to facilitate the financing of its local currency operations and promote the development of domestic bond markets across Africa.
"The ADB's credit story and impact on the continent is very high, and investors in its bonds get not only a financial return, but the assurance that the funds will be used to combat poverty and promote social and economic growth", said Ms N'Sele.
The ADB is rated triple-A by the entire major international rating agencies and also enjoys a good ESG (Environmental Social and Governance) rating.
Critical funding
Filling the gap. According to AfDB, road access in Africa stands at 34% compared to 50% in the developed world. 5% of Africa's agriculture is irrigated while the continent's average national electrification rate is 43% compared to 81% for developing countries of Asia and 98% in Latin America. The bank says Africa needs to start looking at capital markets in order to fill the funding gap for infrastructure development.
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