AfDB Approves a USD 100 million Risk Participation Agreement with Commerzbank AG to Boost Trade Finance in Africa

This facility will help address critical market demand for trade finance in Africa

TUNIS, Tunisia, May 23, 2013/ — The Board of Directors of the African Development Bank (AfDB) (http://www.afdb.org) approved on Tuesday, May 22, a USD 100 million unfunded Risk Participation Agreement (RPA) between the AfDB and Commerzbank AG under which the two banks will share the default risk on a portfolio of qualifying trade transactions originated by issuing banks in Africa and confirmed by Commerzbank AG. This facility will help address critical market demand for trade finance in Africa by providing support for trade in vital economic sectors such as agribusiness and manufacturing. It will foster financial sector development, regional integration, and increase government revenue generation ultimately improving Africa’s sustainable economic growth.

The majority of African banks have small capital bases which constrain their ability to obtain adequate trade limits from international confirming banks and to undertake sizeable transactions that have significant development impact. Moreover, despite the growth in trade risk distribution globally, local banks in Africa have not significantly benefitted from this growth. AfDB’s additionality lies in the use of its “AAA” rating to share trade risk and expand the trade finance capacity of banks in Africa, thereby expanding trade and strengthening regional integration.

This RPA facility, running over a 3-year period, is 50/50 risk sharing arrangement that will enable Commerzbank AG to match AfDB’s undertaking in every transaction, thereby creating a maximum portfolio of up to USD 200 million. The facility will also result in the provision of significant support to African banks and SMEs. Counting roll-overs, it is expected to facilitate about USD 1.2 billion of trade in equipment, raw materials, intermediate and finished goods over the 3-year period.

Moreover, the proposed facility aligns with AfDB’s Regional Member Countries’ priorities to promote trade as was reaffirmed by the African Union at its 18th Ordinary Session in January 2012. It is also in line with the Bank’s Ten-year Strategy and Regional Integration Strategies which seek to consolidate its engagement in trade finance in Africa.

Source: African Press Organization on behalf of the African Development Bank (AfDB).

Filed under: Development, AfDB, Africa, Banking, commerce, Trade

LDCs set to jump start to a green economy

With their low-carbon profile, rich natural assets and promising policy initiatives, the world’s 48 least developed countries are well-positioned to jump start the transition to a green economy, according to a new UN report released at the start of the Fourth UN Conference on Least Developed Countries (LDC-IV). Carla September reviews the report, titled Why a Green Economy Matters for the Least Developed Countries. http://www.world-economy-and-development.org/wearchiv/042ae69ee20b05812.php
According to a new report released by the UN Conference on Trade and Development (UNCTAD), most of the investments taken in LDCs have not yet resulted in significant economic growth and job creation. ”Such investment has not tended to ‘fertilize’ LDC economies by leading to greater links between foreign businesses and local firms that can spread know-how and technology and help spur broad-based, long-term economic growth,” the body emphasised. In order to effectively address those countries’ economic potential, the international community should strengthen the ability of LDCs to attract foreign investments by inter alia setting up a ”LDC infrastructure development fund”, the report reads. http://tinyurl.com/63op5zt

Filed under: Development, Africa, green economy, ldc

Governing Development in Africa – Economic Report on Africa 2011 – Focused industrial policy

To catch up and, more important, to meet its own development objectives, Africa needs to promote rapid industrialization that will promote innovation, technological adoption, entrepreneurship, high value added and employment-generating manufacturing. This will enable the continent to overcome the low contribution of industry and manufacturing to GDP and employment. The formulation and implementation of industrial policy will enable African governments to target particular activities or sectors for support. Each country will have to identify niche industries where it has competitive advantages or the capability to develop dynamic advantages. This in turn will contribute to Africa’s industrial development. However, unlike most countries in post-independence Africa, which thwarted the emergence of a capitalist class, the 21st century African developmental state has to vigorously attempt to build an indigenous capitalist class.
Also, unlike the experiences of the 20th century developmental States elsewhere, industrialization in Africa in the 21st century will have to be sensitive to environmental sustainability (chapter 3). The development of renewable energy and a green economy as part of Africa’s overall development strategy cannot be over-emphasized. Renewable energy in particular and the green economy in general offer Africa a basis for transforming the structures of its economies and to create sustainable jobs and livelihoods.
The industrial strategy of the developmental States of East Asia suggests that creating industrial winners through fiscal incentives to facilitate enhanced productivity and some form of protectionism were critical for the growth of local manufacturing. While protectionism may be difficult and largely unfashionable in a globalized economy regulated by WTO, nonetheless, as part of their industrial policy, African States should ensure a phasing-out process to protect local industries, which is necessary for their growth and consolidation. This will enable them to compete, over time, in the global economy.

http://www.uneca.org/era2011

Filed under: Development, Africa, competitiveness, economy, industy, Trade

Africa Platform for Development Effectiveness (APDev) | Inspiring Change

Africa Platform for Development Effectiveness (APDev) | Inspiring Change.

APDEv is an African-led and owned physical and virtual multi-stakeholder platform and organizing mechanism for mobilizing African policy makers and practitioners towards achieving sustainable development results. The Platform focuses on 3 inter-related themes of Aid Effectiveness and South-South Cooperation with Capacity Development as a core driver for development effectiveness (DE) fostering “knowledge and evidence-based innovation processes” which is one of the six cornerstones of the AU-NEPAD CDSF.

Filed under: Development, Africa, Development, Effectiveness, innovation, knowledge