Transcript Highlights of Year 2006 - African Development Bank

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Highlights of Year 2006
Africa
•
Real GDP growth exceeds 5% for the third consecutive year propelled by prudent
macroeconomic policies, improved terms of trade, a supportive global environment and
increased benefit from debt relief
Bank Group
•
Excellent operational and financial results
•
Year of transformation and institutional reforms to enhance development effectiveness
•
Establishment of High Level Panel to advise on strategic vision
•
Increased successes in local currency operations with issuance of bonds linked to Tanzanian
Shilling, Ghanaian Cedi and Nigerian Naira
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Bank Group’s Activities
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Bank Financial Profile
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Capital Market Activities
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Appendices
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Bank Group’s Activities
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The Bank Group embodies an effective partnership
across continents for the development of Africa
Africa
Algeria
Angola
Benin
Botswana
Burkina Faso
Burundi
Cameroon
Cape Verde
Central African Rep.
Chad
Comoros
Congo
Côte d’Ivoire
D. R. Congo
Djibouti
Egypt
Equatorial Guinea
Eritrea
Ethiopia
Gabon
Gambia
Ghana
Guinea
Guinea Bissau
Kenya
Lesotho
Liberia
Europe
Libya
Madagascar
Malawi
Mali
Mauritania
Mauritius
Morocco
Mozambique
Namibia
Niger
Nigeria
Rwanda
S. Tome &
Principe
Senegal
Seychelles
Sierra Leone
Somalia
South Africa
Sudan
Swaziland
Tanzania
Togo
Tunisia
Uganda
Zambia
Zimbabwe
African Development Bank (AfDB)
• Established in 1964
• Subscribed capital US$ 33 billion
• 53 African and 24
non-African countries
• Raises funds in the
capital markets
• Provides assistance at market
interest rates
Austria
Belgium
Denmark
Finland
France
Germany
Italy
North and South America
Argentina
Brazil
• Subscriptions US$ 23 billion
Kuwait
Saudi Arabia
Asia
• Financed by donor countries
• Provides assistance on
concessional terms
Canada
USA
Middle East
African Development Fund (AfDF)
• Established in 1972
Netherlands
Norway
Portugal
Spain
Sweden
Switzerland
UK
China
Korea
India
Japan
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Approvals reflect customized assistance …
The Bank
In UA million
US$ 4.3 billion
•
Approvals increased by 20.3% in 2006
•
Rise in policy based lending by 178% and
private sector operations by 55%
•
Major sectors: finance (53.0%), infrastructure
(23.9%) and multisector operations (7.8%)
US$ 3.9 billion
US$ 3.3 billion
US$ 2.8 billion
US$ 2.6 billion
The Fund
•
Approvals increased by 8.6% in 2006
•
80 operations in 32 countries and 20
multinational projects in 2006
•
UA 2.22 billion committed under AfDF-X by
end-2006
•
AfDF-XI replenishment discussions with
donors commenced in March 2007
Bank Group approvals (excluding HIPC) on a growing trend
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… diversified across all regions and critical sectors
By Region
By Sector
9.3%
15.2%
7.8%
13.1%
15.4%
5.2%
2.5%
4.0%
23.4%
13.8%
11.8%
17.6%
16.7%
11.6%
32.5%
Central Africa
West Africa
Southern Africa
North Africa
East Africa
Multiregional
Agriculture and Rural Development
Transport
Industry
Power Supply
Other
Social
Finance
Water Supply
Multi-sector
Total Approvals since inception: US$ 59 billion
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Through co-financing and partnership, the Bank Group
amplifies the impact of its own resources
Sector Distribution in 2006
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34 projects for UA 11.7 billion co-financed
in 2006
•
Development assistance from the Bank
Group was leveraged more than 4.2 times
through assistance from donors
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Enhanced emphasis on multisector
operations indicates the importance of
public sector management and institutional
support in Bank’s operations
•
Standardization and reform program
for technical cooperation fund adopted
in 2006
50.4%
0.6%
1.2%
12.9%
31.9%
3.0%
Agricultural Sector
Multisector
Industry
Infrastructure
Social Sector
Finance
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The 2006 Multilateral Debt Relief Initiative (MDRI) has
contributed to a reduction in the continent’s debt burden
MDRI
External Debt to GDP (%)
•
MDRI became effective for AfDF on
1 September 2006
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MDRI complements HIPC initiative by
providing 100% irrevocable
cancellation of eligible AfDF debt for
countries that reach completion point
•
Bank Group has mobilized US$ 8.54
billion for MDRI related relief over a 50
year period
•
17 of the 33 HIPC eligible countries in
Africa have reached completion point
at end-2006
Debt Service (% of Exports)
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The ongoing institutional reforms will enable the Bank
Group to better deliver on its development mandate
New Organizational Structure
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Shifts resources to operations
(lending departments)
•
Builds organizational capacity in
line with greater decentralization
with 21 offices established as at
end 2006
•
Reinforces the Bank’s knowledge
leadership
Operational Priorities
•
Focus on infrastructure sector (Water
sector initiatives, Infrastructure
Consortium for Africa, NEPAD etc.)
•
Promote regional integration and
good governance
•
Strengthen private sector
development and competitiveness
•
Increased selectivity and improved
client-focus through decentralization
Appointment of an independent High Level Panel to advise the Bank on its strategic
vision at a time of new opportunities for Africa
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Infrastructure development and regional integration
are key drivers for sustainable growth in Africa
Water Sector
Initiatives
Infrastructure
Consortium
for Africa (ICA)
NEPAD
Rural Water Supply and Sanitation Initiative aims to provide safe water
and basic sanitation to 80% of rural population by 2015. 13 programs and
funding of US$ 536 million approved by end 2006.
African Water Facility is an initiative to improve water sector management
and attract investments in water sector. Donor commitment of UA 52.5
million achieved and 14 operational activities approved in 2006.
The Bank hosts the Secretariat of ICA, a tripartite body comprising
G8 bilateral donors, major multilaterals and African institutions.
US$ 7.7 billion committed by ICA members to the infrastructure
sector in Africa in 2006 (2005: US$ 7.0 billion).
13 regional projects approved with Bank financing of US$ 460 million as at
31 December 2006.
Preparation of 8 regional infrastructure projects funded by the Bank Group.
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Private sector is key to economic growth
leading to poverty reduction in the continent
Private Sector Portfolio - Approvals by Sector and Instrument
1.2%
0.8%
16.6%
0.2%
1.5%
5.0%
0.3% 8.2%
0.4%
8.2%
31.6%
55.3%
13.2%
52.9%
11.0%
Agribusiness
Health
Financial Intermediation
Infrastructure Oil & Gas
Infrastructure (Power, Shipyard)
1.5%
Manufacturing
Tourism
Mining
Funds
Equity Funds
Loans
Quasi-Equity
Guarantee
Lines of Credit
Private Equity
Enclave Projects
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Approved 7 private sector operations and a guarantee for UA 278.5 million (US$ 418.97
million) in 2006 (2005: UA 180.1 million)
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Establishment of Enhanced Private Sector Assistance for Africa Initiative in
collaboration with Government of Japan. First loan signed in 2007 for an
amount of JPY 11.5 billion
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Decentralization brings the Bank closer to its clients
Offices Established
• Field offices are intended to be the
operative arm of the Bank Group in
member countries with mandates for:
Burkina Faso
Mali
Cameroon
Morocco
- Project and program implementation
Chad
Mozambique
- Country dialogue
DRC
Nigeria
- Aid coordination and liaison with other
institution
Egypt
Rwanda
Ethiopia
Senegal
Ghana
Sierra Leone
Gabon
Tanzania
Kenya
Uganda
Madagascar
Zambia
• 21 Country Offices out of 25 planned have
been established at end of 2006
• Internal processes being streamlined to
empower field offices with appropriate
delegation of authority
Malawi
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Bank Financial Profile
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The Bank enjoys strong support from its shareholders
Callable capital is the commitment by
each shareholder to make additional
capital available to the institution in
case of financial distress
There has never been a call on the
capital of the Bank
As at 31 December 2006
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The Bank’s strong financial condition protects its bondholders
Leverage
* Not restated. The Bank defines “usable capital” as the sum of paid-in capital, reserves,
and callable capital of countries rated double-A and above
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The Bank’s risk bearing capacity allows room to expand operations
Equity (Risk Capital)
Uses of Risk Capital
2006 Risk capital
Paid-in capital: US$ 3,230 million
Reserves: US$ 3,468 million
3.5%
2.2%
40.9%
53.4%
Treasury
Unused risk capital
Sovereign portfolio
Non-sovereign portfolio
As at 31 December 2006
•
Based on the effects of the revised IFRS, effective 1 January 2005, the nature of loan loss provisions has
changed from ‘general’ to ‘specific’; accordingly, loan loss provisions represent a reduction in the exposure
to the relevant country, not a source of risk capital. Therefore, the main components of the Total Risk
Capital are Paid-in Capital and Reserves
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The Bank’s capital adequacy policy has graduated capital requirements with the
most risky assets requiring 75% capital backing against 25% capital
requirement for the least risky assets
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The Bank is allocating increasing amounts of income
to development initiatives
Income Allocation (%)
2005 and 2006* Income Allocation (UA million)
68
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65
22
DRC Special
Account
HIPC Trust
Fund
25
22
0
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African
Middle Income
Development
Country
Fund
Technical
Assistance
Fund
2006 Total: UA 132 million
0
15
22
0
Surplus
Account
0
Post-Conflict Special Relief
Country
Fund
Facility
2005 Total: UA 139 million
* Subject to approval by Board of Governors
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Financial ratios anchor the Bank among the
healthiest members of its peer group
*
AsDB
IADB
IBRD
AfDB
Five largest exposures to equity (%) *
178
184
127
80
Operating income / Average assets +
guarantees (%) **
0.8
1.1
0.8
2.0
Usable capital/Risk assets (%) ***
84
47
57
101
Source: Fitch
** Source: Standard & Poor’s
*** Source: Moody’s
All data is as at 31 December 2005, except for IBRD, which is as at 30 June 2006
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Capital Market Activities
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The Bank’s borrowing strategy provides African countries
with cost effective resources
28.6%
6.1%
7.2%
0.1%
5.0%
3.4%
1.1%
48.5%
USD
African Currencies ex-ZAR
ZAR
European Currencies
JPY
AUD
CAD
HKD
Diversified currency strategy to raise resources and active use of the
swap market to meet client requirements
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Established track record in several capital market segments
22.3%
20.3%
2.4%
1.1%
53.9%
Public Issues
Uridashi
Loans
African Currency bonds
Private Placements
Outstanding borrowings of UA 5.87 billion (US$ 8.83 billion) as at 31 December 2006
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The Bank continuously endeavours to widen its investor
base in various segments of the capital market
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US$ Global
Domestic
Markets
Private
Placements
Uridashis
US$ 500 million 4.875% global bond in November 2006 achieved broad
investor distribution
– Asia (ex-Japan) 37%; North America 24%; Japan 20% and Europe 19%
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•
Strategically important as the Bank can issue in benchmark size
Maiden Kangaroo bond issue of AUD 300 million in Australian domestic
market in 2006
– Australia 60%; Japan 34% and Europe 6%
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Arbitrage driven market
Strong investor recognition established over the years through demonstrated
responsiveness and flexibility
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Transactions targeted at retail Japanese investors
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The Bank is working closely with Japanese securities houses to increase flow
of such transactions
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Initiative to issue bonds denominated in African
currencies is attracting support from countries
Mali

The Bank requires the consent of member
countries to issue debt denominated in their
respective currencies

Approvals are requested when the Bank
foresees an issuance possibility and are
currently awaited from:
Nigeria
Ghana
Kenya
Tanzania

Egypt

Morocco

Tunisia

Uganda

Zambia

WAEMU countries (except Mali whose
consent has been received)
Botswana
Mauritius

Approval received

Approval requested
South Africa*
* Approval to tap the Euro-ZAR market
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Successes in the Local Currency project bring
increased investor attention to Africa
Objectives
Achievements
•
Develop and bring visibility to African currencies and bond
markets
•
Address need for local currency loans that eliminate
currency risk for borrowers
•
Promote international best practices
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Bond issues in Botswana Pula, Tanzanian Shilling,
Ghanaian Cedi and Nigerian Naira
•
BWP 300 million due January 2007
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US$ 10 million linked to TZS due Feb 07
•
US$ 45 million linked to GHC due Oct 08
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US$ 100 million linked to NGN due Jan08
GHC Transaction awarded The Banker Magazine’s “DEAL OF THE YEAR”
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The Bank enjoys the highest credit rating
Strong Membership Support
Healthy Capital Adequacy
Preferred Creditor Status
AAA
Prudent Financial Management
Excellent Liquidity
Prudent Financial Management
Franchise Value
Excellent Liquidity
Franchise Value
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Appendices
A
African Economic Outlook
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Summary of macroeconomic performance and outlook
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Africa has registered its longest period of economic expansion in the past two decades with
annual real GDP growth rate exceeding 5% during the last three years
•
Economic growth is broad-based across sectors and supported by both domestic and
external factors
•
Domestic: Prudent policy framework and improving business climate promote macroeconomic
stability and resilience to external shocks
•
External: better terms of trade, supportive global economic environment, increased aid flows and
rise in private capital inflows
•
Continued benefit from debt relief measures under HIPC and MDRI initiative
•
Economic outlook for 2007 is generally positive with expectations of another year of growth of
over 5%
•
Significant challenges remain
- Increasing the pace of economic growth and ensuring that it is sustainable to reduce poverty
- Accelerating development of basic infrastructure
- Consolidating macroeconomic stability and promoting growth of private sector
- Contain and reverse the HIV/AIDS pandemic and spread of other diseases
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Africa’s 2006 real GDP growth rate exceeded 5% for the third
consecutive year with growth becoming broad-based
Real GDP Growth
6.0%
5.5%
5.4%
5.5%
5.2%
5.0%
4.6%
23 countries achieved
GDP growth rate of
above 5 % in 2006
15 countries achieved
GDP growth rate
between 3% to 5% in
2006
4.5%
4.2%
4.0%
3.5%
3.6%
3.0%
2001
2002
2003
2004
2005
Drivers
Macroeconomic stability – Debt relief
Continued global expansion
2006
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High commodity prices lead to continued favourable terms of trade
and increased current account surplus
Terms of Trade
13%
10%
7%
4%
1%
-2%
2001
2002
2003
2004
2005
2006
-5%
Current Accounts as % of GDP
5%
4%
3%
2%
1%
0%
-1%
2001
2002
2003
2004
2005
2006
-2%
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Fiscal balance has improved due to increased savings among
oil exporters and increased aid flows while inflationary pressures
have remained relatively contained
Fiscal Balance as % of GDP
Inflation
4%
12%
3%
11%
2%
1%
10%
0%
9%
-1%
8%
-2%
-3%
2001
7%
2002
2003
2004
2005
2006
2001
2002
2003
2004
2005
2006
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Official Development Assistance flows to Africa have risen
from recent lows but only to the levels seen in early nineties
and well below the 0.7% GNP target for countries of the Development
Assistance Committee (DAC).
1990-2005 (US$ billion)
30
33.7
24.4
25.2
23.8
25
27.6
22.4
24.1
18.8
20
20.5
21.2
17.1
20.2
15.0
15
17.1
15.6
15.5
10
5
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
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Appendices
B
Bank’s Financial Statements
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AfDB: Statement of income and expenses (UA million)
Years Ended 31 December
2006
2005*
2004**
2003**
2002**
Income from loans
329.03
324.23
323.11
325.46
414.82
Income from investments and related derivatives
213.82
155.37
123.57
99.77
74.01
Operational Income and Expenses
Total income from loans and investments
Interest and amortized issuance costs
Net interest on borrowing related derivatives
Unrealized gain/(loss) on fair valued borrowings and related
derivatives
Unrealized gain/(loss) on non fair valued borrowings and others
542.85
479.60
446.68
425.23
488.83
(245.41)
(218.52)
(197.08)
(219.59)
(258.69)
(35.14)
1.40
-
-
-
10.67
(30.77)
(7.70)
(81.65)
37.20
21.07
7.22
(10.35)
-
-
Provision for impairment on loan principal and charges receivables
(51.69)
13.85
(53.86)
21.51
(3.49)
Provision for equity investments
(34.74)
0.75
3.31
(1.68)
(0.06)
4.10
1.58
-
-
-
Translation gains
Other income
23.74
15.73
7.40
2.61
1.25
Net operational income
235.45
270.84
188.39
146.43
265.04
Administrative expenses
(36.86)
(41.67)
(37.61)
(45.14)
(32.27)
(6.23)
(7.10)
(6.42)
(5.57)
(5.51)
1.68
(0.74)
(0.84)
0.98
(1.20)
Total other expenses
(41.41)
(49.52)
(44.87)
(49.73)
(38.98)
Income before transfers of income approved by the Board of
Governors
194.03
221.32
143.52
-
-
(139.20)
(144.00)
(114.64)
-
-
54.83
77.32
28.88
96.70
226.06
Depreciation – Property, equipment and intangible assets
Sundry expenses
Transfer of income approved by the Board of Governors
Net income
* 2005 has been restated
** The information presented above for 2004 and prior years have not been restated and therefore are not comparable to 2005 and 2006
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AfDB: Balance sheet highlights (UA million)
Years Ended 31 December
2006
2005
2004*
2003*
2002*
129.33
70.34
43.80
66.54
89.18
3.80
3.80
3.91
3.80
6.83
6,093.36
5,155.05
4,435.42
4,135.88
1,972.62
273.31
285.93
274.79
253.90
149.11
20.38
25.90
31.18
41.81
57.48
600.97
556.38
397.48
203.91
265.18
Outstanding loans
5,290.95
5,512.44
5,640.43
5,612.24
5,967.66
Accumulated provision for loan losses
(214.18)
(194.60)
(213.59)
(469.09)
(491.66)
119.12
168.70
160.60
164.22
163.84
14.95
16.98
18.14
21.34
16.69
12,332.00
11,600.91
10,792.16
10,034.55
8,196.93
Accounts payable
648.96
498.22
377.17
194.77
232.34
Securities sold under agreements to repurchase and payable for cash
collateral received
877.83
466.96
9.30
113.91
0.00
Assets
Due from banks
Demand obligations
Investments
Derivative asset
Non-negotiable instruments
Accounts receivable
Equity participations, net
Other assets
Liabilities, Capital and Reserves
Derivative liability
481.94
317.25
513.89
396.09
61.83
Borrowings
5,870.47
5,940.40
5,638.89
5,799.11
4,455.04
Capital
2,303.06
2,263.45
2,213.51
2,168.50
2,125.07
Cumulative exchange adjustment on subscriptions
(155.74)
(151.76)
(147.20)
(145.33)
(141.99)
Reserves
2,305.48
2,266.39
2,654.58
1,959.21
1,919.47
-
-
(467.97)
(451.71)
(454.83)
12,332.00
11,600.90
10,792.16
10,034.55
8,196.93
Cumulative currency translation adjustment reserve
* The information presented above for 2004 and prior years have not been restated and therefore are not comparable to 2005 and 2006
34
Revised accounting treatment of transfers
from Net Income
•
Prior to 2006, the Bank accounted for transfers of net income approved by Board of Governors as
a direct reduction in equity
•
Recent developments in financial reporting and auditing standards and MDB industry practice led
the Bank to revise the treatment of transfers from net income in 2006
•
Net income transfers are now reported as reductions in net income on the Income Statement
•
Two main arguments against the previous treatment of distributions of net income as direct
reduction to equity
- Distributions are not paid directly to member countries
- If a member country disagrees with a proposed distribution, the distribution would still be
effected, if the majority of member countries support the proposal
•
New accounting treatment of transfers from net income is consistent with emerging MDB industry
practice
35
More information on the Bank Group
is available at www.afdb.org
• Financial and Operational Analysis
• Documentation for Debt Programs
• Rating Agencies Reports
• Financial Products for Borrowers
• Exchange Rates
• Annual Report
Financial Information in Japanese for investors is available at www.afdb-org.jp
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