AfDB will continue to support private sector growth – development bank’s regional director

The African Development Bank (AfDB) is one of Rwanda’s key development partners that has extended support in multiple sectors including infrastructure, entrepreneurship development, and capacity building, among others.

The bank recently announced that it has set aside over $939 million for Rwanda’s development support over a five-year period beginning this year. The New Times’Collins Mwai spoke to Gabriel Negatu, the bank’s director-general for East Africa Regional Development and Business Delivery Office, on the disbursement of the funds as well as the expert’s opinion on a few development aspects.

Excerpts:

The AfDB recently announced that about $939.4 million has been earmarked for Rwanda over a five-year period starting 2017-2021. What are the new priority sectors that will benefit from the funds? Disbursement so far?

The bank’s country strategy in Rwanda 2017-2021 priority includes boosting inclusive private sector-led growth and creating higher value-added formal wage employment.

The strategy has got two complementary pillars: investing in energy and water infrastructure to enable inclusive and green growth while the second pillar involves developing skills to promote high value added economic activities and economic transformation.

So far, no disbursement has been made on planned operations.

When disbursements commence, what models will be used in disbursements? Direct finance, loans, guarantees?

The bank’s interventions will be financed by a range of instruments including investment loans and grants from concessional or non-concessional windows, (AfDB, Africa Growing Together Fund (AGTF), and Africa50).

Co-financing will also be mobilised from various thematic Trust Funds or other development partners to augment the bank’s own resources.

Innovative financial instruments such as Risk Sharing Facility (RSF) instruments, Partial Risk Guarantees, Partial Credit Guarantees, and local currency bonds will be explored to mobilise funding from other financiers including DPs and the private sector.

Emphasis will also be placed on using public private partnerships as a financial vehicle.

Word has it that the bank is mulling investing in the recently launched Bugesera International Airport? How much are you likely to put in?

At the moment, the bank has not provided any financing on the Bugesera International Airport.

However, this is an investment that the AfDB will keenly consider financing in the future.

AfDB has previously said that they would like to increase the role of private sector in countries development, what approaches will be used in the case of Rwanda?

The Bank will give priority to increasing private investments through intensifying its efforts as a convener, connector and catalyst and use of innovative financing instruments.

The public sector window will help establish a more enabling environment for businesses engaging in value added activities through improved infrastructure and a better skilled workforce, thereby incentivising and attracting local and foreign investors.

On the other hand, the bank’s assistance under the private sector window will provide direct and targeted support to private enterprises with high potential for value added production and job creation that will notably comprise innovative financial instruments that facilitate risk sharing and de-risk commercial bank lending to the sectors with high growth potential.

AfDB will provide lines of credit and equity to financial institutions for onward lending to SMEs, youth and women including those engaged in exports and smallholder high-value agriculture.

The bank support from the private sector window will also provide additional infrastructure finance including through private-public partnerships to leverage supplementary resources for Rwanda’s development.

Partnerships with private companies will be developed including through the provision of catalytic seed capital to promote technology transfer, private investment and finance.

How ideal is the east African regional investment climate for the region to be able to attract private sector capital for the various projects?

East Africa is a dynamic region with many opportunities that usually attract private investors interested in Africa. However, like in other regions, the cost of investment remains high compared to some other regions (northern or southern Africa) due to poor infrastructure, lack of skilled labour among others.

It should also be noted that within the EAC region, member states are at different levels in terms of competitiveness.

While some countries have offered the necessary political stability and are implementing reforms to attract private investments, other countries like Burundi or South Sudan seem to lack progress due to conflicts or political crisis and represent a threat for the region as a whole.

What are some of the foreseeable regional trends in aspects such as development and support of Small and Medium Enterprises to increase their role in employment creation?

Africa grew despite the global recession. Despite a slowdown to 2.6 per cent in 2016, mainly due to the continued fall in commodity prices and weak global economic growth.

The continent’s average growth is expected to rebound to 3.4 per cent in 2017.

At the heart of this encouraging performance is the boom in small and medium-sized enterprises (SMEs). It is estimated that SMEs today create around 80 per cent of the Africa’s employment, establishing a new middle class and fuelling demand for new goods and services.

By 2035 the number of Africans joining the working age population will exceed that of the rest of the world combined, according to the IMF.

It is, therefore, evident that to maintain robust and inclusive growth, there is a need to promote SMEs that will create jobs for the millions of Africa’s youth.