AFDB infrastructure bond plan nearly ready

THE African Development Bank (AfDB) plans to have a final proposal in place next month for its $22bn infrastructure finance bond, says bank president Donald Kaberuka.

The innovative bond aims to raise funds for infrastructure projects through central banks on the continent which will contribute a portion of their reserves to invest in the instrument.

"I am hoping to have a final proposition in place by May," Mr Kaberuka said last week at the end of the Brazil, Russia, India, China and South Africa (Brics) summit.

The original proposal was for African central banks to invest 5% of their reserves in the instrument, but it was possible that some would want to contribute more and others less, he said.

The economies of most subSaharan African countries are growing strongly, but poor road, rail, power and energy-generation infrastructure is a major impediment to development. The World Bank has estimated in a report that the region’s annual infrastructure funding requirements are $93bn a year, with roughly a third of that amount needed for maintenance alone.

About 40% of the spending requirement was needed for power, followed by water supply and sanitation, and then transport, the report said. Nearly a third of countries in sub-Saharan Africa experience power shortages.

Mr Kaberuka said he expected the region to grow by about 5.8% this year and next, above forecasts from the International Monetary Fund of just over 5%. If South Africa was excluded, growth should be 6.2%, he said.

"I think the dynamic is such that the only fact I can see which can slow down this momentum is a further serious deterioration in the international economy," he said.

Political instability in some African countries would have spillover effects on the region but the bank’s growth forecasts were likely to remain valid, he said.

Mr Kaberuka welcomed the new development bank that the group of five Brics emerging economies is planning to set up, but said it must operate according to sound banking principles and earn a return.

"This will be a bank that operates like a bank, you can’t just throw money away. If there were opportunities in infrastructure, they must make sense, they must be bankable, they must be business. It should not be a bank to do what public money is supposed to do," he said.

Brazil, Russia, India, China and South Africa agreed to set up a development bank to finance infrastructure projects on the continent at a summit in Durban last week.

Mr Kaberuka also said that the AfDB would start to move its headquarters back to its permanent home in Abidjan, Cote d’Ivoire, from Tunisia at the end of this year, with the departure of 500 staff.

The bank moved to Tunisia in 2003 during riots over a controversial peace plan between Ivorian rebels and then president Laurent Gbagbo. It had been based in Abidjan since its founding in 1963.

"The bigger number will return next year, me included," he said. A total of 1,600 AfDB staff, including the board of directors and senior management, would be back in Abidjan before the end of the first half of next year, Mr Kaberuka said.

Source: www.bdlive.co.za

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