African Development Bank Group

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Accessing the Private

Sector Window

TRADE AND INVESTMENT

SEMINAR MOZAMBIQUE

AND SOUTH AFRICA

29-30/09/2020

Internal and External Challenges to Finance Private Sector Project in Mozambique an South Africa

∎ Limited funding availability for Project Preparation

∎ Readiness of Projects

∎ LandTenure and other Environmental & Social issues

∎ Lack of appropriate Enabling Environments

∎ Collateral

∎ Average Project Size

∎ Technical Assistance and Capacity Building

∎ Net contributor to GDP

Financing Windows

AfDB is able to address part of the financing needs of the African continent. With the

exception of the African Development Fund (ADF), the institution uses the leverage

afforded by its AAA credit rating to on-lend to its borrowers, at favorable terms,

resources raised in international capital markets.

ADF Financing Window

ADB Financing Window

Internal Trust Funds

External Facilities

Sovereign Clients

Mobilizes and deploysfunding on behalf of

donors…

Non-Sovereign

Clients

AfDB provides the following financial instruments to

Middle-Income Countries and Private Sector Entities.

Financial Instruments

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How to Access the Private Sector

Window?Best projects selected based on four

key dimensions

• Is the project in line with relevant AfDB, country and sector strategies and Hi5 priorities?

Strategic Alignment (SA)

• Does the project generate enough cash to cover debt service? Are risks manageable? Is sponsor financially sound?

Commercial Viability (CV)

• Does the project generate significant economic benefits for the country (job creation, Government revenues, diversification and trade, environmental benefits)?

Development Outcomes (DO)

• Does the AfDB’s participation add value (risk mitigation, enhanced DO, risk taking)? Is the AfDB working in partnership?

Additionality and Complementarity (AC)

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Application Procedures

Description of the project (sector,

location, production volumes);

The sponsors, including financial and

managerial background;

Cost estimates, including foreign

exchange requirements;

Financing plan, indicating the amount

of AfDB financing desired;

Key technical and environmental

features;

Feasibility indicators;

Business climate, market prospect,

including proposed marketing

arrangements;

Implementation plan, including the

status of required licenses, permits,

certificates.

Preliminary Application:

If eligible

Full Application

Review

1. Feasibility study;

2. Business plan;

3. Environmental

impact assessment

(depending on the

nature of the

project).

~6 – 9 months

to reach approval

from the Board

Leveraging Resources

Africa Investment Forum

« Closing a deal is not an event, it’s a process »

A multi-stakeholder, multi-disciplinary platform dedicated to:

• advancing projects to bankable stages

• raising capital

• accelerating the financial closure of deals

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Project Pipeline

Better Project

Structuring

Deal

Monitoring

AIF (2018 + 2019)#9 projects from MozambiqueTotal Project’s Value – USD 3,5 billionSectors: Agriculture, Infrastructure, Manufacturing20 Projects from South Africa -USD 20 Billion

Better project structuring from the

Private Sector is the key for success

Lessons learnt:

AIF - Results and Lessons for

Mozambique

OPORTUNITIES -INFRASTRUTURES• PPP for Road Concessions: The Road Administration

has launched 3 times bids for road concessions: The concession is for 25 years

• The Government has already rehabilitated the roads

• The Role of the Private Sector is to have resources to maintain the roads and charge the tollgates

• There is an opportunity for Joint Venture between Mozambique and South African Companies

The African Development Bank Today

OPORTUNITIES- AGRICULTURE SECTOR

• The Pemba-Lichinga Agriculture Development corridor that is focus on Spatial Agriculture Processing Zones.

• The Bank and other donors will finance the development of a number of clusters for agro-processing.

• The focus is on private sector led interventions along the value chains.

The African Development Bank Today

Climate Funds

Innovative Mechanisms To Unlock Private Finance

Adaptation Levy: In Africa primary industries, play a massive role in aiding economic growth. Innovative climate funding opportunities are presented through their corporate social responsibility agendas.

The large number of raw materials exported from Africa should have adaptation fees paid for them not as royalties, but as part a common objective to address climate change on the African continent.

Adaptation Benefits Mechanism (ABM): The ABM is an innovative mechanism for mobilizing new and additional public and private sector finance for enhanced climate change adaptation action. It has the potential to speed up transformation to low-carbon, resilient and sustainable development of the host countries by giving value to resilience. The Bank launched the 5-year pilot phase of the ABM at the Africa Climate Week in March 2019

Greening sovereign wealth funds: The recent advent and increase in the amount of government investment funds operating on a worldwide scale is new, however its impact cannot be downplayed.

Greening Pension Funds: Pension funds are capable of having a positive impact in moving more funds towards low carbon, energy efficient assets.

Green Bonds: These are instruments whose profits are directed to be used on other pre-existing or new green projects through Securitization, Direct Project Exposure or specifying Use of Proceeds.

• The overall goal of the project is to enable Africa’s private sector participation in climate-related investments and support NDCs implementation in six pilot countries: Angola, Egypt, Morocco, Mozambique, Nigeria and South Africa. The project is divided into two assignments:

• The assignment is divided into two parts: • Assignment 1: Identification of NDC investment opportunities for the private sector: which

focuses on challenges and opportunities of private sector participation in climate change initiatives and how to strengthen private sector capacity to take advantage of the abundant opportunities for green investments on the continent.o Develop a climate change screening tool and toolkits for private sector and SMEs to mainstream climate

change in key sectors; o Develop a practical working material to support private sector and SMEs analyze climate change risks/

opportunities and generate strong adaptation strategies;o Raise awareness and strengthen the capacity of private sector and SMEs to identify incremental cost due to

climate change and identify climate finance and climate innovation opportunities;o Support the Bank to mainstream climate change through lines of credit and develop toolkits for Bank staff

and Investment Officers.

• Assignment 2: Scaling climate Action through Climate technology and Innovation by SMEs• The objective of this assignment is to design and develop climate change assessment tools for green

investment for both private sectors and SMEs with the overall objective to: o Support the Mozambique private sector and SMEs to assess climate risks and opportunities for green

investment.o Identify, assess and prioritize upstream opportunities based on country and sector strategies and the

potential to create markets;o “Select bankable projects based on criteria and scope for integrating climate change and green growth

strategies, identify potential development impacts and align with national needso Out of the pipeline of 20 projects identified in each country, it is expected to package prepare and submit 5

compelling proposals to pursue GCF funding. o “Organize a 1-day investment networking and deal-making forum to pitch the 20 selected projects and to

explore potential co-financing from development finance institutions active in the target countries such as GCF ”

ON-GOING PRIVATE SECTOR INVESTMENT INITIATIVE FOR NDCS

Programs in Pipeline

Project 1 - The LinKar Program: Creating Sustainable SME Supply Chain in the Oil and Gas Sector

Vision: Contribute to economic transformation in Mozambique by stimulating productive SME linkages with the evolving the Oil and Gas sector to multiply the broader national benefits from the country’s large sector investments and companies.

Goal: Provide technical assistance and in dept advisory services to 150 SMEs, resulting in 80 SME’s reaching the required levels of competitiveness, 30 contracts worth $3 m will be facilitated, up to 40 SME’s are expected to access to finance of US$ 3.2 m from Financial Institutions and 120 jobs are expected to be created over a period of 3 years

Implementing Partner: Empresa Nacional de Hidrocarbonetos (ENH) Budget/Contributions: Total: US $1.534 - FAPA: $999,000 , AFAWA:$500,000, ENH – $25,000 (in Kind) , Beneficiaries (SME’s): $10,000

Expected Results (50% Women Led): The create a minimum of 120 new Jobs for SME’s in the Oil and Gas Value Chain; Identify 150 SME appropriate contract opportunities, including 25 partnership

and/or JV opportunities, with a total of US$12 m; Support 30 SMEs to win US$ 3 m worth of contracts in the oil & gas value chain. Facilitate to 40 SME’s Access to finance of US$ 3.2 m from Financial Institutions. Provide technical assistance and in dept advisory services for at least 150 SMEs,

resulting in 75 SMEs reaching the required levels of competitiveness; Develop a Demand/Supply versus opportunities Matching framework in the oil

and gas sector. Establish a competitiveness framework to define the capacity requirements for

SMEs to access target contracts in the oil & gas value chain. Provide Institutional support to ENH to enable the Institution to engage with all

stakeholders, manage and implement a high-quality program in the country.

Main Components: Component 4 – Contract Connector LinkComponent 3 – SME Competitiveness Link Component 2 –Opportunity Aggregator LinkComponent 1 –Institutional Support Component 0 – Project Management

Technical Assistance Funds for MSME

and PSD Development

Trust Funds for Technical Assistance for SME’s Focus Amounts

Fund for African Private Sector Assistance

(FAPA)

Capacity Building, Linkages Programs, Trade

and Investment Promotion for SME’s for Job

Creation.

Up to 1 Million USD,

approved by the

Steering Committee/

/Technical Review

Committee, above to

be approved by the

Board.

Affirmative Finance Action for Women in

Africa (AFAWA)

Access to Finance, Technical Assistance and

Business Enabling Environment (BEE) for

Women led SME – Job Creation.

Youth and Entrepreneurship and Innovation

Multidonor Trust Fund (YEI MDTF)

Capacity Building for Youth Start UP”s ,

Micro, Women Led (MSME’s) - Job Creation.

Project 2 - Local Content Development Program for Youth and Women-led Start Ups and Micro

Vision: Contribute to economic transformation in Mozambique by stimulating productive Youth and Women-led Start UP’s and Micro (MSME) linkages with a multi sector approach with aim to multiply the broader national benefits from the country’s large multi sector investments and companies (Including government entities, public companies and NGO’s).

Goal: 100 Youth and Women-led Start UPS’ and Micro (MSME’s) are expected to create 50 jobs (50% women), and US$100,000 worth of contracts and US$100,000 in finance over a period of 3 years. .

Implementing Partner: Institute for the Promotion of Small and Medium

Enterprises (IPEME)

Budget/Contributions: Total: USD $964,000, YEI MDTF: $950,000IPEME: $9,500 (In Kind), Beneficiaries (MSME’s) Contribution (Cost Recovery): $5,000

Expected Results (50% Women Led): The create a minimum of 50 new Jobs for MSME’s; Identify 50 MSME appropriate contract opportunities, including 25

partnership and/or JV opportunities, with a total of US$750,000; Support 10 MSMEs to win US$ 100,000 worth in contracts large companies

and government entities; Facilitate to 10 MSME’s Access to finance of US$ 100,000 from Financial

Institutions. Provide technical assistance and in dept advisory services for at least 100

MSMEs, resulting in 50 MSMEs reaching the required levels of competitiveness;

Develop a Demand/Supply versus opportunities Matching framework. Establish a competitiveness framework to define the capacity requirements

for MSMEs to access target contracts with large multisector private and public companies, government entities, as well Non-Governmental Organizations (NGO’s).

Provide Institutional support to IPEME to enable the Institution to engage with all stakeholders, manage and implement a high-quality program in the country.

Main Components: Component 4 – Contract Connector LinkComponent 3 – SME Competitiveness Link Component 2 –Opportunity Aggregator LinkComponent 1 –Institutional Support Component 0 – Project Management

Programs in Pipeline

African Development Bank Group

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