Development Bank of Southern Africa (DBSA)’s Post

Last week, the Board of Governors at the African Development Bank Group approved a US$117 bn in callable capital, elevating the total bank capital to a robust US$318 bn. This significant enhancement strengthens AfDB's financial foundation, reinforcing its role in Africa's economic development.   🔍 But what exactly is callable capital? 💵 Callable capital functions as a safety net. It is pledged by member countries but remains unpaid unless needed to ensure the Bank can meet its debt obligations in scenarios of extreme financial distress. Across seven major MDBs, callable capital surpassed US$900 bn, serving as a cornerstone of their AAA credit ratings. 🌐 This boost in capital at AfDB underscores the confidence of its member countries and their commitment to fostering sustainable growth across the African continent. It is a strategic move that not only secures financial stability but also catalyses future development initiatives.   💡 What does the latest research reveal? 1️⃣  Exploring the potential of callable capital, ODI 's latest paper delves into strategies to maximise its value.  - Emphasis on collaborative efforts between shareholders and MDB management. - Establish credible standards for capital markets and inform rating agencies. - Proposals highlight transparent protocols for activating callable capital. - Robust strategies suggested for monitoring and recovery. - Aim to enhance stakeholder understanding and bolster MDB resilience. - Stakeholders urged to optimize existing callable capital for expanded lending. https://lnkd.in/dGqFRfbM 2️⃣  In September 2023, shareholders urged major development banks to clarify conditions for callable capital calls, aligning with recommendations of the G20 CAF Review. The requested analysis was published in April 2024. - Conclusions on AfDB's robust financial framework preserving the AAA rating and lending capacity. - No previous calls on callable capital of highly rated MDBs. - Extreme scenario call probability projected minimal (between 0 and 0.096%) by 2040. - Bank's callable capital framework allows proactive calls with liquidity buffers. - Shareholders ready to promptly respond, showing strong support. AfDB version: https://lnkd.in/diRmUVUK EBRD version: https://lnkd.in/dHb8bmZZ World Bank version: https://lnkd.in/dJYDFGnr ADB version: https://lnkd.in/dwrtQHrC   ⏩ Looking Forward As the global economic landscape evolves, the role of MDBs in maintaining economic stability and fostering development becomes even more crucial. These analyses serve as a cornerstone for future policymaking and strategic financial planning.   #AfDB #DevelopmentFinance #CallableCapital #MDBs #LionsHeadGlobalPartners

A great brief summary of the relevance of callable capital to boost the capacity of multilateral development banks, with links to our ODI research project with Chris McHugh Bianca Getzel and Eamonn White. AfDB's recent increase shows how much markets respect this shareholder guarantee to MDBs. Let's do what it takes to make more use of it.

The Africa Banking Corporation (ABC Bank Group) has embarked on a significant journey towards environmental sustainability by joining the European Investment Bank (EIB)’s Greening Financial Systems (GFS) initiative. This collaboration aims to enhance ABC's climate risk management framework, aligning it with global standards, including those set by the Central Bank of Kenya. The GFS program provides tailor-made technical assistance to build climate-resilient financial systems, showcasing ABC's commitment to sustainable practices. Over the coming months, ABC Bank staff from various departments will work closely with technical advisory experts from EIB and Development Alternatives Inc. (DAI). This collaboration launched with a workshop led by Marjan Stojiljkovicć and Enrique Rebolledo, is set to advance ABC’s green financing initiatives. Group Managing Director Shamaz Savani emphasized the significance of this partnership, noting its role in integrating climate risks into the bank's risk management framework. The cooperation agreement, signed in November last year, marks a milestone in ABC Bank's journey towards environmental sustainability. "With the support of EIB and DAI experts, we are confident in enhancing our green financing initiatives," stated Savani. The GFS initiative, supported by the International Climate Initiative Fund (ICI Fund) and the German Federal Ministry of Economic Affairs and Climate Action (BMWK), aligns with the NDC Partnership's 'Readiness Support for Greening Central Banks' initiative. Through this program, ABC Bank staff will foster an environment conducive to green investments, manage climate risks, and enhance their capabilities. They will also explore green financing opportunities for their clients, contributing to a more sustainable economy. GFS program manager Dragana Tanasić expressed confidence in the partnership, highlighting its potential to set a commendable example for other financial institutions considering green financing. Stéphane Neyreneuf Hussein Anooshah, CFA Patrick Nganga #ABCBank #Sustainability #GreenFinancing #ClimateRiskManagement #EIB #EnvironmentalSustainability #FinancialInnovation #GreenEconomy #GlobalStandards #SustainableBanking To read more: https://zurl.co/RAPZ

2024 APRM Mid-Year Outlook shows increasing optimism by the international community in Africa’s economic prospects: The 2024 Mid-Year Outlook of the #Africa Peer Review Mechanism (APRM) shows that the first half of 2024 was marked by more positive changes in outlooks and rating upgrades of several African countries by the three most important rating agencies in the world: Standard & Poor's (S&P) Moody's and Fitch. The work of these agencies basically consists in expressing an opinion on the ability of States to repay commercial debts contracted with international lenders based on a comprehensive economic analysis of their financial markets. The reason why these ratings are important is that they are used by investors in their investment appraisal process and by borrowers in setting the interest rates to be applied on the money they lend. A poor credit rating means that a loan to a certain State has a higher risk to remain unpaid, which prompts an increase in the interest charged to that nation as a measure aimed at compensating for the substantial risk of lending. Read more here: https://lnkd.in/dfNscCE5

Are South Africans too pessimistic and are they missing some positive signals from the debt markets? While domestic equity markets have struggled in recent years, the debt markets are demonstrating robustness, innovation and continue to attract demand in the global marketplace. This is important as it speaks to the growth prospects of both South Africa and the broader African continent. Lusanda Ndesi, CFA Lead Specialist: Banking Syndications and Matome Modiba, CDFA: Head of Africa Regional Operations Syndicate at Absa CIB explain further: https://lnkd.in/dmAfSqny #ABSACIB #AfricanDebtMarkets #InternationalInvestorDemand #Investing

The African Development Bank Group has released its Annual Report 2023, painting a picture of improved financial performance and robust support to its member countries across Africa. Its critical financial support has resulted in increased resilience and recovery despite the challenging effects of regional conflicts, economic shocks, climate change, and the after-shocks of the COVID-19 pandemic. The overall financial performance of the African Development Bank Group improved in 2023 with significant increase in revenue across its three entities. Revenue rose to $2.32 billion from $1.03 billion in December 2022, a result of heightened loan activities and favourable returns on treasury and other investments. This was largely offset by higher borrowing expenses, but the Bank achieved very strong net income of $544.79 million, close to double the $318.44 million in 2022. The #AfricanDevelopmentFund, the group’s concessional lending arm, saw the largest increase in revenue, totaling $446.54 million in December 2023, up from $201.94 million in December 2022. This is its largest surplus ($154.65 million) in the past 20 years. Similarly, the Nigerian Trust Fund demonstrated improved financial performance, with revenue reaching $8.33 million, a notable increase from the $3.38 million recorded in December 2022. Access the report here: https://bit.ly/4bHUoDe #AfDBAnnualReport2023

Recollecting IMANI's 20 years as your local think tank.... 14 years ago this week, Ishac Diwan, World Bank Country Director for Ghana, Africa Region,(Sierra Leone, Liberia, Guinea, Ghana) with the support of Kafu Kofi Tsikata convinced the World Bank that IMANI should lead the World Bank Africa-Region's Consolidation of a 40 country-Consultation process between governments, businesses and civil society held across Africa .The series of consultations were aimed at influencing the scope and direction of a new 3-year African strategy for the World Bank christened Africa Action Plan. We delivered. IMÀNI principals spent three days at a retreat in Sogakope with the World Bank country director and his small team which included Kofi Tsikata to strategise. IMANI principals will later hold consultations in Accra , Lagos and Washington. In one of two summary reports IMANI published, titled "Ghana Sits on Borrowed Money & Borrowed Time", we said, "In the vast majority of cases, when one delves into the deeper structure of our development problems as a society, there is absolutely no evidence that the competence and the capacity of the World Bank, especially given how it has been up to function, are anywhere suited to playing a major role in the complex redesign efforts that appear to be needed to substantially transform the fortunes of the continent or our nation, for that matter. It seemed though that once we as a country and a continent were well on our way towards development, the World Bank’s resources could provide a supplementary impetus, similar to the effect of reconstruction aid to Western Europe in the middle of the last century. Seeing that we are, as a continental and national society, quite a distance from “being on our way” to this blissful destination, it seemed to us, as we observed the gathering, that the time could just as well have been spent figuring out ways to prevent the World Bank from adding to our pile of excuses for not setting off.- 2010. -"Ghana Sits on Borrowed Money & Borrowed Time". The paper is available online. The other paper was "IMANI Report: Fierce Debates over How the World Bank Spends its Cash and Time in Africa.". Ishac Diwan World Bank Country Director for Ghana, Africa Region will later write of IMANI. “IMANI has grown, within a short time of its existence, to become a stalwart for encouraging reality-based solutions to a complex array of economic and social problems in and beyond Ghana. IMANI is known to highlight those critical areas of economic and political policy that find resonance across the artificial borders of Africa. The think-tank courts audience from important policy makers and drives policy matters to the very top of the priority lists of African governments and their allies in the intergovernmental and non-governmental communities.... Good morning.

I was excited to share my latest insights on the race for the presidency at the African Development Bank Group (AfDB), as quoted by African Business Magazine in London! The #AfDB, boasting assets of $60 billion, is pivotal in #Africa's development landscape. However, the continent faces multifaceted challenges, including mounting debt, escalating international food and energy prices, the lingering effects of the COVID-19 pandemic, and geopolitical tensions impacting Africa's performance. Whoever clinches the presidency in the upcoming election will inherit a significant mandate. With African nations grappling with mounting debt, depreciating currencies, high inflation, and sluggish global growth, the next AfDB president must articulate a compelling vision to reassure stakeholders of the bank's ability to address these challenges effectively. Central to the AfDB's mission is a leader who can maintain the confidence of creditors, donors, and shareholders. Rather than focusing solely on leadership disputes, attention should be directed toward driving the $3.1 trillion African economy forward. Obtaining an AAA rating from global agencies like #FitchRatings demands rigorous financial performance, risk management, and governance structures. Hence, the new president must advocate for reforms in African countries' pension and banking systems to mobilize private capital effectively. Moreover, effective communication from the AfDB's board of governors regarding structural reforms is essential to safeguard stakeholder confidence. While 60% of votes come from developing countries, ensuring responsiveness to African governments' needs, this dynamic also poses challenges in capital raising. Hence, a review of the voting structure may be warranted to enhance the bank's ability to access capital affordably. Excited to witness the transformative leadership that unfolds at the AfDB, shaping Africa's economic future! Link - https://lnkd.in/dD_DaCvx #AfDB #AfricanDevelopment #EconomicTransformation #Leadership #DevelopmentFinance #AfricanEconomy