AFRICAN Development Bank (AfDB) plans to use its newly ramped up capital to invest in infrastructure projects that support the African Continental Free Trade Area (AfCFTA) and boost private sector investments.
The Vice President of the bank, Bajabulile Tshabalala told the `Daily News’ in Johannesburg recently that was the focus of the bank after increasing its capital from 96 billion US dollars to 208 billion US dollars from shareholders contributions.
At the end of October, the bank’s shareholders, including Tanzania, agreed to more than double its capital, the largest increase in the bank’s history. It increased 112 million US dollars in its capital, equivalent to 125 per cent.
“It really increases the size of the bank substantially and basically it increases our capacity to conduct investment operations in general,” she said on the sidelines of Africa Investment Forum held in South Africa last week.
AfDB shareholders include 54 African countries and 26 more countries from North America, Europe and Asia, she said.
“What shareholders want us to do is to focus on providing regional infrastructure which supports African Continental Free Trade Area where countries need to have logistics that allow them to trade with each other.”
The capital boost will provide the bank with ability to increase support to private sector investments to countries deemed fragile or low income, she said noting that will include use of instruments that helps to mitigate risks for private investors.
“In addition to that they want us to look at increasing share of investments to the private sector in African countries particularly those considered to be fragile or low income countries.”
“That increases the headroom of the bank in terms of ability to lend to sovereigns and the private sector,” “We were progressively running out of the capital since our last capital increase in 2010.
Our ability to lend responsibly was being constrained so we were running the risk of compromising our AAA rating,” she said.
The African Union launched the operational phase of the Africa Continental Free Trade Area (AfCFTA) in September which will be the world’s largest free trade area by number of countries once it’s fully up and running.
The goal is to establish a single market for goods and services across 54 countries, allow the free movement of business travellers and investments, and create a continental customs union to streamline trade - and attract long-term investment.