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Tunis, 12 March 2008 – The Board of Directors of the African Development Bank (AfDB), through its private sector window, has approved a line of credit of US$ 50 million and an equity capital increase of US$ 6.8 million (payable) as well as US$ 40.8 million (callable) to support the Eastern and Southern African Trade and Development Bank, commonly known as the Preferential Trade Area or "PTA" Bank. In addition, a US$ 1 million grant for institutional capacity building of PTA Bank is being provided by the AfDB-managed Fund for African Private Sector Assistance (FAPA), a trust fund established by contributions from the Government of Japan.
This is the AfDB’s fourth intervention since 1991, comprising two equity capital participations, three lines of credit, and two technical assistance grants. The first intervention was in 1991 when it made a capital subscription in the PTA Bank of US$ 6.8 million and US$ 13.6 million as callable capital. The second intervention consisted of the first LOC of UA 15 million that was granted in 1994. The third intervention was a two-part financial package: (i) A LOC of US$ 30 million; and (ii) Technical Assistance of US$ 0.9 million approved in 2003.
The PTA Bank is a sub-regional Development Finance Institution (DFI) whose primary activity is to provide development financial services to clients in its member states, including trade and project financing. PTA Bank provides financial and technical assistance to projects that are financially viable, economically sound and contribute to the sub-region’s social and economic development. It also finances trade, both among COMESA members and with states outside the sub-region.
The objective of the equity capital investment is to strengthen the PTA Bank’s capital base, while the LOC is aimed at supporting the sub-region’s private sector. The LOC will be utilized to finance subprojects in productive sectors, including mining, manufacturing, agro-industry, floriculture, tourism and services that support productive activities. This financial support package will strengthen PTA Bank’s capacity to expand its development operations in the sub-region. Additionally, the financial support will be directed towards high-impact projects that boost employment, foreign exchange earnings, technology transfer and the acquisition of technical skills.
The project is consistent with AfDB’s updated private sector operations strategy, which emphasizes SME development using financial intermediaries as development partners. It is also in line with the Bank Group’s policy on regional and economic cooperation and with NEPAD objectives for regional integration and support to the private sector.
The first LOC financed 18 sub-projects, about two thirds of which were export-oriented projects, with most of still operating successfully and generating positive impacts in terms of foreign exchange earnings and employment generation. The second LOC helped to finance 20 subprojects in eight countries. The past two lines of credit financed projects that have generated more than US$ 500 million in foreign exchange and have created more than 40,000 jobs. Based on these evaluations, AfDB’s two previous lines of credit through PTA Bank are counted as successes that will be expanded upon by the new financing package approved on Wednesday.
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