AfDB to become top shareholder in Africa guarantee platform to boost derisking push

The African Development Bank will inject $125 million into African ‌Trade and Investment Development Insurance (ATIDI) to become its biggest shareholder and ramp up the use of guarantees to attract private capital, the bank’s president told Reuters.

Sidi Ould Tah, who took the helm of Africa’s largest development lender last September, is pushing a ​new financing model as development aid from rich countries dropped nearly a quarter last year to $174.3 billion. The ​United States led the cuts, including to the AfDB’s concessional arm.

The investment is part of ⁠his drive, known as the New African Financial Architecture for Development (NAFAD), to tap an estimated $4 trillion in Africa’s ​institutional capital, like pensions, sovereign wealth funds and savings schemes that are currently fragmented and uncoordinated, to plug an ​estimated $400 billion annual development financing gap.

“Our target is to bring the level of guarantees provided by ATIDI to 10 billion (dollars) annually and reach a target that will really unlock huge potential for financing infrastructure at scale,” said Tah after the bank’s annual ​meeting in Brazzaville last week.

The cash injection will take AfDB’s shareholding in the agency to 14% from 3%, ​he said. It has covered an average of $3 billion worth of investments annually in the past.

PUSH TO EXPAND SHAREHOLDER BASE

Nairobi-headquartered ATIDI ‌was set ⁠up 25 years ago to de-risk investment in Africa through insurance and guarantees that help channel private capital into riskier markets. It is owned by 24 African states and institutional investors, including African financial firms and Germany’s KfW Development Bank, which joined in April.

The AfDB move marks a shift away from ATIDI’s traditionally dispersed ownership ​structure, with stakes spread across ​member states — led by ⁠countries such as Togo and Benin holding high single-digit shares.

AfDB is urging more African countries and investors to take stakes to boost ATIDI’s capital and expand its firepower, ​Tah said.

“We are also talking to various financial institutions and many countries to increase ​their contribution ⁠or to contribute if they are not yet shareholders,” he said.

France is considering increasing its shareholding, with more details expected at a G7 meeting in Evian later this month.

Some analysts, however, argue African countries should focus on raising savings ⁠to build ​domestic capital pools. Sub-Saharan Africa’s savings rate is about 18%, less ​than half the global average, World Bank data shows, reflecting low incomes and a young population.

Tah said the bank could meet the region’s ​financing challenges.

“Africa can mobilise African resources to finance African development,” he said.

المصدر: MyJoyOnline (GH)