AfDB Signs MOU for African Financing Partnership
“The African Financing Partnership (AFP) is a major pillar in the partnership strategy of African Development Bank. In 2009, DFIs worked collaboratively on projects in Africa, to jointly finance over US$ 1 billion in projects under a partnership model. This year, the target for collaborative co-financing is manifold, including financing projects in sectors such as infrastructure, power, renewable energy and agribusiness”, AfDB President, Donald Kaberuka, said, on Tuesday, January 26, 2010 in Tunis, as he signed the Memorandum of Understanding (MOU) for the African Financing Partnership (AFP).
The AFP is a collaborative, co-financing platform and comprises eight major Development Finance Institutions (DFIs), which are focused on private sector financing in Africa. As a key partnership for channeling finance in Africa, it includes the AfDB, Development Bank of Southern Africa (DBSA), DEG (KFW Banking Group), European Investment Bank (EIB), Development Bank of the Netherlands (FMO), Industrial Development of Southern Africa Ltd (IDC), International Finance Corporation (IFC) and Proparco. These DFIs are collectively referred to as the AFP Promoting Partners.
The MOU embodies the principles under which one partner DFI would lead the project financing process, acting as the focal contact point with the sponsor, organizing common due diligence and appraisal missions, in addition to the selection of common external advisors. Under this framework, the DFI partners co-financing the project follow the lead of the coordinating DFI partner.
Speaking during the MOU signing ceremony, Bank Group President, Donald Kaberuka, applauded the Private sector department for the initiative and explained that “In 2009, the DFIs worked collaboratively on projects in Africa, including Main One Cable in Nigeria, to jointly finance over US$ 1 billion in projects under a partnership model”. He added that “This year, the target for collaborative co-financing is manifold, including financing private sector projects in African countries, in sectors such as infrastructure, power, renewable energy and agribusiness”. “Last year, the AFP was a coordinating platform for the Joint IFI/DFI Action Plan to respond to the financial crisis in Africa and it mobilized US$ 15 billion,” Mr. Kaberuka further explained.
Several consultations were held since 2008 to reach a consensus and an agreement on the need for collaboration to take forward the AFP concept into implementation. The AFP Promoting Partners have a common goal to work together on a mission of poverty alleviation and private sector development.
The partnership will target the financing of large-scale projects in infrastructure and industrial sectors, leading to economic growth and job creation. In this regard, the AfDB’s Private Sector department played a key role in the partnership. “The MOU is a major achievement in the harmonization and coordination process amongst AFP partners”, says AfDB AFP Coordinator, Preeti Sinha, adding that “There is an evident need for partnerships amongst development finance institutions, as a vital component for enhanced co-financing of Private Sector projects in Africa”. “This partnership would leverage private sector capital for investment in Africa”, AfDB Private Sector Director, Tim Turner added, explaining that “it would also drive growth in the continent.”
In 2009, these DFIs collaboratively financed projects such as the Enfidha Airport in Tunisia; Main One Cable in Nigeria; Helios Towers in Nigeria and private equity funds. In 2010, the partner DFIs will target several projects with collaborative financing creative investments of multiple billions. The pipeline of projects under the AFP comprises commercially viable private sector projects with substantial development outcomes. Such projects would be feasible vehicles for long-term institutional investments looking for returns in Africa’s emerging markets. The AFP Secretariat is hosted by the AfDB and it is supported by the Canadian International Development Agency (CIDA).