Quick Guide to Capital Markets Activities
The African Development Bank is Africa’s premier development financial institution. Set up in 1964, the Bank is owned by 78 member countries – all 53 African countries and 25 non-African countries, including Turkey which became a member in October 2013. The Bank enjoys the highest possible triple-A credit ratings from the international credit rating agencies. The volatility in financial markets has further emphasized the robust health of the Bank and effectiveness of its sound risk management policies.
The Bank actively borrows in the capital markets to meet the development needs of African countries.
Its strategy for 2013–2022 reflects the aspirations of the entire African continent and is firmly rooted in a deep understanding and experience of how far Africa has come in the last decade, and where it wishes to go to in the next. This Ten-Year Strategy is built around two objectives to improve the quality of Africa’s growth: Inclusive growth, and the transition to green growth, and is supported by five operational priorities in which the Bank has unmatched advantage, expertise, access and trust.
Responsiveness and flexibility are the hallmarks of the Bank’s activities in the capital markets.
The Bank’s bonds are zero percent risk weighted. Products range from plain vanilla bonds to structured bonds to commercial paper, public issues to private placements, global bonds to African currency bonds to uridashi issues that cater to our Japanese investor base. In line with its Ten-Year Strategy, the Bank issued its first syndicated green bond for an amount of USD 500 million with a 3-year maturity in October 2013.
As the premier borrower from Africa, the Bank enjoys widespread name recognition in major international and domestic capital markets. Transactions include issuance in the US dollar global bond market, the domestic markets in Australia, Canada, New Zealand, Singapore, Switzerland, South Africa and Uganda, African currency linked transactions and private placement transactions in emerging market currencies like Turkish lira, Chilean peso, Mexican peso and Brazilian real. The Bank’s Global Debt Issuance Facility provides the platform for documentation across markets and currencies.
The Bank’s borrowing program is annually approved by the Board of Directors and provides the envelope for the amount that needs to be raised in the capital market to enable implementation of the Bank’s business plan for that year. The borrowing program is executed within the framework of the Bank’s asset and liability management guidelines, policies, debt limits, and the borrowing strategy. Its primary objective is to ensure that the Bank has sufficient funds to meet its commitments during the year while achieving the most attractive funding costs, as the latter is important for maintaining the competitiveness of the Bank’s lending activities. A key determinant of the size is the Bank’s ALM policy that requires the Bank to have adequate liquidity to cover its projected net cash-flow needs for a one-year rolling period even under the unlikely scenario where it is unable to obtain funding from the international capital markets.
As at 31 December 2013, the outstanding borrowing portfolio was around UA 13 billion in size (provisional). The total amount raised from capital markets in 2013 was UA 3.6 billon.
2014 Borrowing Program
The Bank plans to borrow UA 3.1 billion (about US dollar 4.7 billion) from the capital markets in 2014 to achieve the following objectives:
- Meet operational cash flow needs
- Provide cost-effective funding
- Further diversify investor base
- Access medium to long-term funding, subject to market conditions.
Our funding strategy in 2014 will continue to focus on maintaining a presence in all segments of the capital markets and regularly engaging the international investor community in a dialogue to remain responsive to their needs.