emelly mutambatsere economist african development bank n.
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FINANCING AFRICAN MINING & INFRASTRUCTURE PROJECTS The role of DFIs in u nlocking Private Sector Investments. EMELLY MUTAMBATSERE ECONOMIST, African development bank. OUTLINE 1. key CONTRIBUTORS OF financing 2. new procurement models / instruments 3. the value of development finance.

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OUTLINE1. key CONTRIBUTORS OF financing2. new procurement models / instruments 3. the value of development finance
slide3

INFRASTRUCTURE FINANCING IN AFRICA

  • Africa governments, 47 percent to total commitments ($89 bn) in 2013
  • China second largest (15% of total commitment, 28% of external flows in 2013)
slide4

COMMITMENTS THORUGH PPP

  • PPPs have grown in importance as a method of procurement of (economic) infrastructure services in Africa (USD 110 bn between 1990 and 2013)
  • A mild positive trajectory is evident on investment commitments to Africa
slide5

KEY DETERMINANTS OF FINANCIAL FLOWS

    • Macro:
    • Global liquidity cycles
    • Number of prepared bankable projects
    • Natural resources
    • Macroeconomic stability (inflation, exchange rates, currency convertibility)
    • Sovereign risk ratings
    • Policies, legislation, institutions
  • Project level:
    • Cost and quality of capital
    • Tariff
    • Nature of off-take contract
    • Payment guarantee
    • Predictability of operating costs
    • Subsidy level and type
slide6

INNOVATIVE INSTRUMENTS

  • Other ‘innovative’ instruments tapping local markets, international markets, and natural resource wealth to finance infrastructure, e.g.
    • Local currency infrastructure bonds
    • External sovereign bonds
    • Resources-for-infrastructure deals
    • Sovereign wealth funds with infrastructure focus
    • Private equity funds with infrastructure focus
  • Important considerations:
    • Macroeconomic stability, strong debt sustainability monitoring
    • Development and regulation of domestic capital markets
    • Enabling environment for private sector procurements of infrastructure
    • Governance and strength of public resource management framework
    • Sharing of risks and rewards between the financier and the recipient country
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FINANCING MINING IN AFRICA

  • Financing structure depends on
    • Degree of vertical integration – large equity share in vertically integrated operations
    • Global liquidity trends – MDBs mostly play a countercyclical role
    • Country context – large public investments in given industries & countries
    • Risk perceptions – sometimes MDBs involved to manage risk (A/B Loan)
  • Global conglomerates lead
    • >40% equity for iron group of metals over the period 2005-2010
    • Commercial bank covering the bulk of the debt requirements
  • Investments follow discoveries
    • High share of FDI flows into Africa destined to natural resources rich countries e.g. 65 % of FDI in 2013
      • Bulk of investments resource seeking; but also being leveraged for infrastructure
slide10

DFIs’ VAULE ADDED:

Improving quality of development results