African Export-Import Bank

Banque Africaine D’Import-Export

Transforming Africa’s Trade

AFREXIMBANK PROJECT

PREPARATION FACILITY

(APPF)

Date: 21st November 2019

Theme: Accelerating Bankable PPP Project

Development in Nigeria

Venue: Transcorp Hilton Hotel, Abuja, Nigeria

Document Classification: Unclassified

Outline

1. Introduction & Background

2. Overview of the APPF

3. Afreximbank’s Value Proposition

4. Conclusion

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Introduction & Background

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Afreximbank’s Strategy: IMPACT 2021 – Africa Transformed

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▪ The Bank in January 2017, launched its Fifth Strategic Plan (“IMPACT 2021 – Africa Transformed”),

which covers the period 2017-2021.

▪ The five-year strategic plan reflects the Bank's intention to expand its credit (trade and project

finance), risk-bearing products and trade information/ advisory services into new markets.

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Key drivers and motivation for Afreximbank’s strategy:Key pillars of the Bank’s strategic plan:

▪ Solid Africa GDP growth & growing middle

class;

▪ Strong political will and improved governance;

▪ Rapid African industrialisation;

▪ Economic diversification away from

commodities exports & substitution of imports

into Africa;

▪ Growing intra-regional trading blocs creating

regional hubs that the Bank can tap into;

▪ Withdrawal of international correspondent

banking services from Africa;

▪ Huge demand for infrastructure financing

– in order to address the infrastructure

gap in Africa; and

▪ Africa’s strong Diaspora links.

Document Classification: Unclassified

21 November, 20195

Themes of Industrialization and Export Development Strategy

The Bank under its 5th strategic plan (2017-2021) has identified Industrialization and

Export Development as one of the pillars that would help it to deliver on its mandate.

Themes of the Industrialisation and Export Development Strategy

Document Classification: Unclassified

Africa Infrastructure Deficit & Impact on Trade

❑ AfDB: Africa infrastructure deficit –

US$ 130 – 170 billion per annum

❑ ICA: US$ 100 billion raised in 2018

to finance infrastructure

❑ AfCFTA trading to commence 1st

July 2020.

❑ Infrastructure deficit impedes 4% –

6 % of GDP growth

Document Classification: Unclassified

Nigeria Infrastructure Deficit & Impact on Trade

❑ McKinsey: Nigeria infrastructure

deficit estimated at US$ 31 billion

per annum.

❑ Government spending: US$ 2.6

billion

❑ Long term funds: US$ 26.8 billion

(SWF, Pension Funds &

Insurance Companies)

❑ Infrastructure deficit impedes 4%

– 5 % of GDP growth

Document Classification: Unclassified

Constraints to Private Sector Participation

1. “Perception” of Risk

o Default Rates

o Political Risk Insurance

o Partial Risk Guarantees

o PPP approach

2. Bureaucracy, Red Tape and Long Preparation Cycle

o Use of best – in – class consultants

o Transparent competitive bidding practices

o Public disclosure of bidding and award terms

Document Classification: Unclassified

Afreximbank

Project Preparation Facility

(APPF)

9Document Classification: Unclassified

Project Preparation Facility: What is it?

Project Preparation Facility is a fund provided to support an early

intervention in the project preparation process.

Project Preparation process is a set of activities undertaken to progress a

project from conceptualization to bankability, in order to achieve financial

close. The process therefore entails:

› project identification

› determining elements of the enabling environment necessary for de-

risking the project and

› determining elements necessary to attract and obtain financing

o feasibility studies (proof of concept)

o provision of detailed technical studies and

o provision of technical support and advisory services i.e. environmental,

market, financial, legal and regulatory; and advocacy services.Document Classification: Unclassified

Why did Afreximbank Launch a PPF?

1. Immediate need for project preparation activities in transactions

aligned to the Bank’s strategy.

2. PPF Opportunity

o Private sector interest – US$ 100 trillion globally (McKinsey

Research).

o Africa infrastructure deficit – US$ 130 – 170 billion annually (AfDB

Research).

o Project preparation financing required – US$ 6.5 – 8.5 billion

annually (assuming 5% project preparation cost).

o Project preparation financing available – US$ 500 million annually.

o Project preparation facility gap – at least US$ 6 billion annually.

Document Classification: Unclassified

APPF: Objectives

1. Focus: To enhance the financial sustainability of project preparation for

projects that promote Intra African Trade, Industrialization & Export

Development activities.

2. Partnership & Collaboration: To leverage off and partner with other

project preparation facilities in the continent and beyond to support

preparation of projects in Africa.

3. Linkages: To enhance linkages between project stakeholders and project

financiers to facilitate the identification and mobilization of project preparation

financing.Document Classification: Unclassified

Nature of transactions financed by APPF

1. To put in place logistical platforms that support export

development and diversification;

2. To enable assimilation of African value added commodities into

global value chains; and

3. To increase the volume of tradeable goods and services that

flow along Africa’s trade corridors.

Document Classification: Unclassified

Project Preparation Process: Value Chain

Enabling

Environment

•Designing legislation, defining regulatory approach, identifying institutional

reform, capacity and consensus building.

Project

Definition

• Identifying desired outputs and project parameters, comparison with alternative

projects, planning implementation tasks, undertaking pre-feasibility studies.

Feasibility

•Technical options analysis, financial appraisal, socio-economic appraisal,

environmental impact assessment, other specialist studies.

Structuring

•Assessing project finance options (Public, Private, PPP etc.), legal structuring,

developing technical / engineering designs.

Transaction

Support

•Finalizing project finance structure and legal structure, finalizing technical designs,

procuring goods and services (after financial close).

Early Stage

Mid

Stage

Late Stage

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APPF: Eligible Entities & Sectors

21 November, 2019 15

Eligible Entities

• African governments, PPPs, Private

corporates

Eligible Sectors

• Trade Enabling Infrastructure

o Energy

o Transport & Logistics

• Manufacturing & Service Exports

o Industrial Parks / Export Processing

Zones

o Tradeable Services – Healthcare,

hospitality & tourism, ICTDocument Classification: Unclassified

APPF: Structure & Financing Terms

➢ Business Model: Full cost recovery facility operated on

commercial terms.

➢ APPF Overview:

o Type of Instrument: Term Loan;

o Investment Cost: minimum investment cost of US$ 30 million;

o Stage of Intervention: Mid and Late Stage. Pre-feasibility study

should be in place;

o Sponsor Support / Capacity:

• Demonstrable track record;

• Ability to inject at least 30% of the project preparation cost;

Document Classification: Unclassified

APPF: Structure & Financing Terms

High Level Financing Terms

o Amount: upto US$ 2 million;

o Maturity Profile: upto 3 years;

o Repayment Profile: Bullet;

o Currency: US$, EURO or as approved;

o Pricing: Fixed or Floating;

o Source of Repayment:

• Incoming Equity Investors;

• Debt Financiers; or

• Any other source agreed upon between the Bank and the Sponsor.

Document Classification: Unclassified

Value Proposition

18Document Classification: Unclassified

APPF: What is Afreximbank Offering?

1. Afreximbank Local Knowledge & Convening Power

▪ Over 25 years experience financing transactions across the continent

▪ Federal Government of Nigeria is a shareholder in the Bank

▪ Deep relationships with both public and private sector

2. Execution

▪ Over 500 Consultants – Legal, Technical, Financial, Environmental

▪ End to End Intervention - Other PPFs & DFIs to co-finance

3. Concessionaires

▪ Ability to attract leading infrastructure developers to prepared projects

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APPF: Value Proposition

1. Federal Government of Nigeria (FGN) & Ministries,

Agencies and Departments (MDAs)

▪ Complement ongoing initiatives

▪ Fast track implementation of projects

▪ Enhance credibility of prepared projects

▪ Increased competition from bidders therefore more competitive offers

▪ Capacity building & knowledge transfer

2. ICRC

▪ Ensure a steady supply of bankable projects that will crowd in the private

sector and debt financiers

▪ Enhance the “attractiveness” of the social and economic infrastructure

sector in Nigeria

Document Classification: Unclassified

Project Preparation At Scale

Renewable Energy Independent Power Producer Programme

(REIPPP) – South Africa

1. Collaboration between Government and Project Preparation

2. Achievements within 8 years (2011 – 2019):

▪ Developed over 6,300MW of renewable power

▪ Attracted US$ 13 billion in investments out of which US$ 4 billion

was foreign investors and financiers

▪ As projects were well de-risked, tariff regime reduced by 50% –

70%

▪ Created over 19,000 jobs

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APPF: Key Takeaways

› There is no silver bullet.

› Project preparation is a long and arduous journey and

partnerships are key.

› Afreximbank is open to support innovative approaches that

will structurally transform the continent.

Document Classification: Unclassified

African Export-Import Bank

Banque Africaine D’Import-Export

Transforming Africa’s Trade

Thank You

Document Classification: Unclassified