African Development Bank Early Response to the Financial crisis

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1 African Development Bank Early Response to the Financial crisis Mr. G. MBESHERUBUSA Director, Infrastructure Department African Development Bank Group INFRA Partners Forum Brussels, 9-10 July

2 Presentation Outline 1. Introduction: Africa s Infrastructure Deficit 2. Impact of the Financial Crisis 3. Bank s Early Response to the Financial Crisis 4. Major Financing Gaps in Bank Infrastructure Projects, Pipeline 5. Conclusion 2

3 Africa s Infrastructure Deficit The Africa Infrastructure Country Diagnostic Study (AICD) estimates that across the range of African economies, some $77 billion of spending is needed each year to cover investments in all the major infrastructure sectors, with over 80% of this amount needed in the energy and transportation sectors specifically. Spending Needs for African Infrastructure Type of African Country Total Investment USD Billion per year GDP Share Water Supply & Sanitation Energy ICT Transport Total Shares (%) MIC % 4.89% 80.93% 0.95% 13.23% 100% Oil Exporting % 16.84% 41.97% 3.14% 38.05% 100% LIC-Non Fragile % 16.7% 48.42% 3.54% 31.17% 100% LIC Fragile % 10.96% 56.99% 2.34% 29.71% 100% Africa Total & Averages % 13.39% 56.90% 2.57% 27.14% 100% 3

4 Africa s Infrastructure Deficit Because of the immense infrastructure deficit, the limited coverage and the poor quality of the existing infrastructure in many RMCs have resulted in excessively high costs for services. Africa s High-Cost Infrastructure (Source: Africa Infrastructure Country Diagnostic Study 2008) Sub- Saharan Africa Other Developing Regions Power tariffs (US$/kWh) Water tariffs (US$/cubic meter) Road freight tariffs (US$/ton/km) Mobile telephony (US$/basket/mo) International telephony (US$/3 min. call to US) Internet dial-up service (US$/mo)

5 Impact of the Financial Crisis The current crisis is threatening Africa s recent positive growth rates. The continent s projected growth rate for 2009 will stagnate real per capita incomes. Africa is already suffering the consequences of falling commodity prices, export revenues, tourism earnings as well as declining remittances. Lower trade revenues for exporting countries will translate into higher unemployment. Depressed economic conditions will cause increased poverty among the most vulnerable. Lower flows of public and private aid will mean reduced investments and reduced protection to the needy. 5

6 Impact of the Financial Crisis Many infrastructure projects are at risk of being cancelled or scaled down at a time when a quantum jump in investment is as urgent as ever. Financial closure for private sector infrastructure projects is seriously threatened. What was Bank s initial response? 6

7 Bank s Response to the Financial Crisis in the infrastructure sectors Immediate Actions An African Finance Ministers Conference was held in Tunis in November 2008: It recommended, among other measures, an early GCI to enable the Bank expand its capacity Establishment of an Emergency Liquidity Facility: A provisional US$1.5 billion Facility to enable the Bank to disburse resources for eligible countries to meet urgent liquidity needs. Establishment of a Trade Finance Initiative: To support trade finance through a US$1 billion. Restructure Portfolios and Review Pipelines: Country Teams have carried out immediate portfolio reviews for possible restructuring and adjustment of ADF-11 pipelines; specific circumstances would require using faster disbursing instruments. Seek Additional Funding: We are seeking supplementary resources, co-financing from development partners for multinational investments in infrastructure. 7

8 Bank s Response to the Financial Crisis in the infrastructure sectors Short-term Actions Re-allocate Cancelled ADF Resources to New Projects: Examine the reprogramming of the 588m UA in cancelable project balances to countries in need. Utilize Front Loading of ADF-11 resources. Shorten Board Circulation Times: To meet the needs of individual RMC s, documents for both ADF and ADB projects circulated in a 2-week lead time instead of 3-weeks. Advance Procurement Action: to accelerate project implementation Use of Post qualification to speed up procurement of goods and services. 8

9 Bank s Response to the Financial Crisis in the infrastructure sectors Medium-term Actions Seek Additional ADF Resources at MTR: Bank Management considering ways to meet growing financing needs such as a session with ADF deputies to bring them up to date on the use of ADF funds; request exceptional increase in ADF resources. Provide ADF Guarantee Products: The Bank is considering the introduction of guarantee products to create additional leverage of limited ADF resources. Despite all the bove initiatives, important financing gaps still remain. 9

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline THE ORGANIZATION FOR THE DEVELOPMENT OF THE GAMBIA RIVER (OMVG) ENERGY PROJECT Purpose: To improve the quality of electricity

10 Major Financing Gaps in Bank Infrastructure Projects, Pipeline THE ORGANIZATION FOR THE DEVELOPMENT OF THE GAMBIA RIVER (OMVG) ENERGY PROJECT Purpose: To improve the quality of electricity supply in OMVG member countries through the provision of clean and renewable energy at a low cost. Countries: Senegal, The Gambia, Guinea Bissau, and Guinea. Status: Studies have been completed. Total Project Cost: USD 1,5 billion The project will be implemented in phases. There are financing gaps for both Phases I and II. Co-financiers: Pending confirmation. Financing Gap: USD 1,4 billion 10

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline NACALA ROAD CORRIDOR PROJECT Purpose: To provide Malawi, Zambia and the interior of Mozambique with an improved road transport

11 Major Financing Gaps in Bank Infrastructure Projects, Pipeline NACALA ROAD CORRIDOR PROJECT Purpose: To provide Malawi, Zambia and the interior of Mozambique with an improved road transport linkage to the port of Nacala and improve transport services. The project will be implemented in 3 phases. Phase I ( Mozambique and part of Malawi) Status :financed. Co-financiers : Japan International Cooperation Agency and the Export-Import Bank of Korea, and AfDB Financing gaps exist for Phases II and III. Phase II (Zambia) Status (Phase II): Studies will be completed in August Total Cost (Phase II): USD 269 million Financing Gap (Phase II): USD 84 million Phase III (Mozambique & Malawi) Status (Phase III): Studies are currently underway. Total Cost (Phase III): USD 175 million Financing Gap (Phase III): USD 84 million 11

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline ETHIOPIA: GIBE III HYDROELECTRIC POWER PROJECT Gibe I Plant 183 MW(Operational) Gilgel Gibe II 420 MW (Under Construction)

12 Major Financing Gaps in Bank Infrastructure Projects, Pipeline ETHIOPIA: GIBE III HYDROELECTRIC POWER PROJECT Gibe I Plant 183 MW(Operational) Gilgel Gibe II 420 MW (Under Construction) Purpose: To provide least-cost supply of electricity that will contribute to developing regional power trade and the implementation of the fast-tracked rural electrification program in Ethiopia. Status: Studies have been completed. Construction started in 2006 and 31% of the civil works have been completed so far. Total Project Cost: USD 2,200 billion Co-financiers: Commercial banks, EIB, Gvt of Ethiopia through EEPCo and AfDB Financing Gap: USD 847 million Gibe III 1870 MW (Under Construction) Gibe IV & V (Under Study) Gibe-Omo Cascade 2 12

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline UGANDA: ROAD SECTOR SUPPORT PROJECT 3 Purpose: To improve road access to over 0.

13 Major Financing Gaps in Bank Infrastructure Projects, Pipeline UGANDA: ROAD SECTOR SUPPORT PROJECT 3 Purpose: To improve road access to over 0.8 million people in rural areas of western Uganda by upgrading the Nyakahita Ibanda Kamwenge road from gravel to bitumen standard. Status: Studies have been completed. Total Project Cost: USD 124 million Financing Gap: approx. USD 80 million 13

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline OUESSO-SANGMELIMA ROAD CORRIDOR PROJECT Purpose: To improve the service level of the transport logistics chain on the Yaoundé-

14 Major Financing Gaps in Bank Infrastructure Projects, Pipeline OUESSO-SANGMELIMA ROAD CORRIDOR PROJECT Purpose: To improve the service level of the transport logistics chain on the Yaoundé- Brazzaville Road and the living conditions of people in the project area. Countries: Cameroon and Congo-Brazzaville. Status: Studies have been completed. The project will be implemented in 2 phases. A financing gap exists for Phase II. Total Project Cost: USD 707 million Financing Gap: USD 384 million 14

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline MOMBASA-NAIROBI-ADDIS ABABA ROAD CORRIDOR DEVELOPMENT PROGRAM Purpose: To improve transport communications between Kenya and

15 Major Financing Gaps in Bank Infrastructure Projects, Pipeline MOMBASA-NAIROBI-ADDIS ABABA ROAD CORRIDOR DEVELOPMENT PROGRAM Purpose: To improve transport communications between Kenya and Ethiopia for the benefit of both countries and the region. Countries: Kenya and Ethiopia. Total Program Cost: USD 1,333 billion The project will be implemented in 3 phases. Phase I and II financed Financing gaps exist for Phase III. Status: Studies and design documents have been completed for the Turbi-Moyale (Kenya) and Mega-Moyale (Ethiopia) portions of Phase III. Financing Gap: USD 279 million 15

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline TRANS WEST AFRICAN DAKAR- BANJUL - BISSAU- CONAKRY ROAD CORRIDOR PROGRAM: Purpose: The Road Corridor is one of ECOWAS

16 Major Financing Gaps in Bank Infrastructure Projects, Pipeline TRANS WEST AFRICAN DAKAR- BANJUL - BISSAU- CONAKRY ROAD CORRIDOR PROGRAM: Purpose: The Road Corridor is one of ECOWAS priorities for regional transport facilitation. It aims to improve the efficiency of the supply chain including transport infrastructure, and accessibility on the entire corridor of Douala- Banjul-Bissau-Conaky-Douala-Bangui. Countries: Senegal, The Gambia, Guinea Bissau, and Guinea. Status: Some studies have been completed while other need to be undertaken. Total Program Cost: USD 650 million Co-financiers: European Union and the Islamic Development Bank Financing Gap: USD 400 million 16

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline THE NORTH-SOUTH CORRIDOR PROGRAM: Purpose: The North South Corridor Programme is a Model Aid for Trade Programme sponsored by

17 Major Financing Gaps in Bank Infrastructure Projects, Pipeline THE NORTH-SOUTH CORRIDOR PROGRAM: Purpose: The North South Corridor Programme is a Model Aid for Trade Programme sponsored by the Regional Economic Communities of COMESA, EAC and SADC. Total Program Cost: USD 5 billion (over next 5 years) Co-financiers: Multi and bilateral donors Financing Gap: AfDB pledges US 600 million for the Corridor activities 17

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline ISAKA-KIGALI/KEZA-MUSONGATI RAILWAY PROJECT Purpose: To construct a new railway line connecting Tanzania, Rwanda and Burundi

18 Major Financing Gaps in Bank Infrastructure Projects, Pipeline ISAKA-KIGALI/KEZA-MUSONGATI RAILWAY PROJECT Purpose: To construct a new railway line connecting Tanzania, Rwanda and Burundi Status: Feasability studies completed ; Detailed studies on-going. Total Program Cost: estimated at USD4 Billions Co-financiers: Donors meeting to be scheduled in 2010 Financing Gap: Bank is expected to contribute USD 250 million; 18

Major Financing Gaps in Bank Infrastructure Projects, 2009-2010 Pipeline Interconnection of the Electrical Grids of Nile Equatorial Lake Countries Purpose: To construct transmission lines to

19 Major Financing Gaps in Bank Infrastructure Projects, Pipeline Interconnection of the Electrical Grids of Nile Equatorial Lake Countries Purpose: To construct transmission lines to interconnect the electrical grids of Burundi, DRC, Kenya, Rwanda, and Uganda. Status: Project approved by AfDB for loans and grants of UA million. Total Project Cost: estimated at UA 160 million Co-financiers: JICA, Govts, WB, NBI; AfDB Financing Gap: UA 20 million 19

20 Conclusion 1. The Bank has a clear mandate from its membership to reduce Africa s infrastructure deficit. 2. To fulfill this mandate, the Bank is actively implementing the NEPAD initiative with the support of all development partners and the private sector investors to: leverage greater investments in the infrastructure sectors; and lower and eliminate financing gaps in Bank projects 3. The Crisis is having a deep impact on African countries capacity to sustain the levels of investments required in the infrastructure sectors to meet the MDGs. 4. The Infrastructure Recovery and Assets (INFRA) Platform is therefore a timely opportunity to work together to successfully meet the challenges ahead. 20

21 Thank you for your attention. 21

AFRICA S S DEMAND FOR INFRASTRUCTURE. ICA Senior Level Meeting January 17, 2007 Berlin, Germany

AFRICA S S DEMAND FOR INFRASTRUCTURE ICA Senior Level Meeting January 17, 2007 Berlin, Germany ADB AND INFRASTRUCTURE DEVELOPMENT TOTAL 1967 2005 Bank Group operations UA million 40000 35000 30000 25000