Enhancing Private Sector Assistance for Africa: EPSA Initiative

Introduction

The Enhanced Private Sector Assistance (EPSA) Initiative is an innovative, multi-component, multi-donor framework for resource mobilization and development partnership to support implementation of the AfDB’s Strategy for Private Sector Development. Drawing on successful development experience in Asia and around the globe, EPSA was conceived in partnership with the Government of Japan (GOJ), which provided generous financial support to its launch in 2005.

According to the original EPSA announcement and pledge by the Japanese Government at the Gleneagles Summit, during 2006 to 2010 JICA will provide a total of $1 billion in concessional loans through a combination of direct lending to the Bank under the EPSA Non-sovereign Loan component, and cofinancing under the Accelerated Cofinancing Facility (ACFA). In addition, the GOJ will contribute grant resources to the Fund for African Private Sector Assistance (FAPA), beginning with an initial contribution of $20 million. These three EPSA components and their present status of implementation during 2008 are summarized below.

The EPSA Loan for Non-Sovereign Operations (NSL)

The Non-Sovereign Loan component helps finance the Bank’s private sector operations through a line of credit from JICA to the Bank on concessional terms. The first loan was signed on 20 February 2007 in the amount of JPY 11.5 billion (equivalent to USD 100 million). Disbursement of the first loan was completed during 2008 and the loan was closed in October.

At the Tokyo International Conference on African Development (TICAD) end-May 2008, Japan pledged the "Second Private Sector Assistance Loan Under the Joint Initiative Titled EPSA for Africa" in an amount of JPY 32.1 billion (equivalent to USD 300 million), again on highly concessional terms. The bilateral Exchange of Notes and Loan Agreement were signed at the Bank on September 11, 2008, and a first disbursement of JPY 30 billion was drawn immediately thereafter.

In principle, although the resources are pooled with the other financial resources of the Bank and subject to normal Bank processes (including eligibility and pricing), the Bank shall attribute the utilization of NSL proceeds to specific operations. Thus far, the EPSA Non-Sovereign Loans have supported investment and financing of a number of regional infrastructure and financial sector projects as well as clean energy projects in Uganda and Madagascar and SME/Microfinance projects in Nigeria and Tanzania.

Accelerated Cofinancing Facility for Africa (ACFA)

The Accelerated Cofinancing Facility for Africa (ACFA) provides joint financing on concessional terms from JICA for AfDB-led public investment projects.

Five projects totalling UA 109 million in JICA cofinancing have been approved since 2005, including the following project approved during 2008:

ACFA Project Approvals During 2008

The UA 109 million cofinanced by JICA to date translates to about USD 170 million. Added to the USD 100 million First EPSA Non-Sovereign Loan from 2007 and the USD 300 million Second EPSA Loan signed in 2008, total commitment has reached $570 million, more than half of the original $1 billion pledge to be achieved during 2006 through 2010.

Fund for African Private Sector Assistance (FAPA)

The Fund for African Private Sector Assistance (FAPA) provides grant funding for technical assistance and capacity building for the Bank’s public and private sector clients. The Board approved the Fund for African Private Sector Assistance (FAPA) on 12 October 2005 and the related documentation was executed on 24 January 2006.

Japan has committed and disbursed $20 million to launch FAPA, initially as a bilateral fund, and has indicated interest in continued support to FAPA as a multi-donor fund. At the 2008 AfDB Annual Assembly in Maputo, the Board of Governors provided a resounding endorsement of FAPA by allocating UA 5 million to the Fund from the net income of the Bank, bringing total available resources to approximately $27.5 million. The following twelve grants were approved during 2008 bringing total FAPA commitments (counting prior years) to over $15 million and leaving an available balance at year-end of approximately $12.5 million.