IFC in Africa Partnering for Transformational Change through the Private Sector

Oumar Seydi

Director March 2014

Macroeconomic Trends

2

2.6

2.2

5.5

5.2

5.7

0

1

2

3

4

5

6

Real Growth in GDP Annual Average % change

16.9

27.4

10.1 8.6

6.0

0

5

10

15

20

25

30

Inflation Annual Average % change

•Robust growth •Lower inflation •FDI ex. RSA at new peak

9.2

12.2

10.1

12.0

13.9

21.6

26.8

29.4

26.6

33.1

34.0

0

5

10

15

20

25

30

35

40

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

FDI Inflows into SSA ex. RSA US$ billion

Growth remains strong and inflation subdued amid strong FDI inflows and rising consumer demand, despite

vulnerability in balance of payments

0

20

40

60

80

100

ICT Irrigation Power Transport Water and Sewage

Total

Africa Infrastructure Spending Needs vs Estimate($ billion, annual)

Spending Estimates - Public Spending Estimates - PrivateTotal Needs (Capex + Maintainance)

•1981 •1984 •1987 •1990 •1993 •1996 •1999 •2002 •2005 •35

•60

•40 •45 •50 •55

•65

•Countries with major violence •Countries with minor violence •Countries with negligible or no violence

•Source: WDR calculations based on Chen, Ravallion, and Sangraula 2008 poverty data

Development Challenges Large infrastructure gap, soaring food demand, low access to finance and ongoing fragility drive our strategy

•Africa Infra Spending Needs vs. Estimate •Per Capita Food Consumption

•Firms with a Line of Credit as % of Total Firms •Poverty Rate in FCS versus non-FCS

Overview of IFC in Africa

4

Regional Strategy Overview Reduce extreme poverty and promote shared prosperity by driving growth and job creation

•Bro

ad B

ased G

row

th th

at Generate

s Jobs

Bridge the

Infrastructure

Gap

Physical, Social &

Financial Infrastructure

Build a

Productive Real

Sector

• Agribusiness,

Manufacturing

Lead Inclusive

Business Approaches MSMEs, Base of Pyramid

•Logistics,

•Agri-related

•Infra

•Treasury

•Solutions

•Investment Climate

•Fragile & Frontier

IDA Countries

•Climate Change

•Partnerships

•Gender Empowerment

•Foundatio

n: W

orld

Ban

k G

roup P

artnersh

ip

•Cross-Cutting Focus Areas

•WB

G T

win

Goals

•Strategic Areas of Focus

Guided by clear targets for development impact

8

Increase or improve sustainable farming opportunities for over 550,000 people annually

Reduce greenhouse gas emissions by over 460,000 metric tons of CO2 equivalent

annually

Increase or improve infrastructure services to over 8.2 million people annually

By FY16, IFC Strategy aims to…

Provide access to financial services to 9.5 million micro clients & individuals

and over 245,000 SME clients annually

…by leveraging WBG competencies for transformational impact and shared prosperity

Close proximity to our clients and strategic staffing

IFC Hub Offices

IFC Country Offices

ATLANTIC

OCEAN

Mediterranean

Sea

INDIAN

OCEAN

Johannesburg Maputo

Antananarivo

Lusaka

Freetown

Nairobi Kigali

Douala

N’Djamena

Lagos Accra

Ouagadougou

Abidjan

Dakar

Monrovia

Kinshasa

Addis Ababa

Dar-es-Salaam

Bujumbura

Bamako

Bangui Juba

Regional Hubs

Dakar INFRA

Johannesburg

A2F/FM/M&S/AS

Nairobi Agri/SBA/IC

Local offices Abuja

Abidjan

Accra

Addis Ababa

Antananarivo

Bamako

Bangui

Bujumbura

Conakry

Dar Es Salaam

Douala

Freetown

Juba

Kigali

Kinshasa

Lagos

Lusaka

Maputo

Monrovia

N’Djamena

Ouagadougou

Conakry

Abuja

131% CAGR in Total Investment Volume in the

decade since FY02

252 140 405 445 700

1,379 1,390 1,824

2,428 2,150

2,733

3,501

2,104

26

265 13

117

1,493

647

1,237

1,778

525

252 166 405 445

700

1,644 1,403

1,941

3,922

2,797

3,970

5,278

2,629

0

1,000

2,000

3,000

4,000

5,000

6,000

IFC own account $m Mobilization

252 140

405 445

700

1,379 1,390

1,824

2,428

2,150

2,733

3,501

2,104

0

50

100

150

200

250

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

IFC own account $m Project count (R axis) Country Reach (R axis)

89 14 70 94 70 172 188 263 415 215 409 669

307 75 88 234 212 167

644 186

466 640

316

593

748

351

87 39 101 139 463

563 1,016

1,095

1,364

1,619

1,732

2,083

1,446

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

FM

INR

MAS

64 7 76 117 150 122 158 372 692

205 474 586

181 117 66 151 81 132 570 576

420

521

604 626

1,093

330 71 68

178 246 418

688 655 1,032

1,205

1,341

1,633

1,822

1,592

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Africa Region East & Southern West & Central

Strong Growth in Investment Services

Committed Portfolio by Sector

$7.8 bn portfolio diversified across products, countries, sectors

Portfolio by Product Type

Overview

2,679 2,600 2,826 3,007

1,260 1,398 2,016 2,057 1,868 2,106

2,545 2,746

5,808 6,105

7,387 7,810

FY11 FY12 FY13 FY14

IFC SSA Commitment FY11-FY14YTD ($M)

FM MAS Infra Total

Rapid rate of portfolio growth likely to remain

0%

12%

53%

2%

10%

23%

Risk Management Guarantee Loan

Quasi-Equity (ET Type) Quasi-Equity (LN Type) Equity

39%

27%

34%

FM MAS Infra

Committed Portfolio by Industry Sector

• Commitment growth accelerating. Volumes on

target for FY14, Africa to become the biggest

region by volume in FY17.

• Portfolio well balanced between three

industry depts. Equity portfolio is substantial.

Largest regional Advisory Services program in IFC

SSA AS is 28% of total IFC AS Client Facing Spend

of $232m at end FY13

Investment Climate and Access to Finance

accounted for the largest shares of spending.

Strong focus on IDA countries, Fragile Situations

and Climate Change

Client-Facing Spend by Region Client-Facing Spend by Business Line

A2F 24%

IC 39%

PPP 19%

SBA 18%

Region FY13 (A) ($M) % of Total

EAP 38.5 17%

ECA 36.4 16%

LAC 25.5 11%

MENA 20.4 9%

SA 33.6 14%

SSA 65.4 28%

WLD 12.2 5%

Advisory Services Business Lines work together

to address IFC strategic developmental priorities

11

Investment Climate

Access to Finance

Works with financial intermediaries to

expand access to financial services,

complemented by work to improve financial

market infrastructure

Sustainable Business

Works at firm and sector level to develop

inclusive, environmentally sustainable and

efficient markets

Public Private Partnerships

Works with governments to design and

implement PPP transactions for

infrastructure and other basic services

Works with governments to create an enabling environment to enhance private sector growth and development

IFC Advisory Services and Relationship with Japan in Africa

12

Japan is an important donor

to AS in Africa. Japan was

one of the first donors to

contribute flexible funding

(i.e. funds appropriated to

projects through internal

decisions) to PEP Africa with

an initial contribution in FY07

of $1.3 M. To date, Japan has

contributed $10.15M to PEP

Africa with most of its funding

going to support Linkages,

Education, Entrepreneurship

and Sustainability programs.

IFC Mobilization in Africa

13

Mobilizing additional funds alongside IFC investments

14

0.0

1000.0

2000.0

3000.0

4000.0

5000.0

6000.0

FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13

SSA Total Volume Commitment FY03-FY13

Mobilization

O/A

• Mobilization in Africa has grown

significantly since FY07 – from a total

mobilized volume of $264.9M in FY07 to

$1.8 billion in FY13. A growth of over

571% over six years.

• AMC is a major player in mobilization

efforts – A total of $350.2M AMC

mobilized funds invested in SSA (FY11-

FY13)

• AfCap total investment of $61.5M

in IDA countries

• ALAC total investment of $180.3M

• IFC Capitalization (SubDebt and

Equity) total investment of

$108.4M

Cross Cutting Focus Areas

15

16

Strategy for Working in FCS

Client relationship

strategy to promote

investments in FCS

Streamlining investment

process for smaller

projects

Leverage existing and build new relationships with larger

international and North-South sponsors to support infrastructure and

agribusiness projects

Leverage AS field presence to promote business development/provide

market intelligence

Aimed primarily at supporting project size between $20-50 million ($5-

10 million for IFC)

Targeted at inexperienced sponsors, weak regulatory environments

Dedicated AS and IS support for smaller projects

Engage with companies looking to expand regionally

Maximize investment and advisory in key sectors via Conflict-Affected States in Africa (CASA) program; pursue

WBG sub-regional & country level initiatives

CASA Overview

17

CASA’S MISSION

Peace and Stability through PSD: To increase stability, reduce poverty, and create economic opportunities and jobs—by developing the private sector in countries affected by fragility and conflict.

WHAT IS CASA?

Comprehensive Delivery Platform:

A platform designed to deliver IFC’s Advisory Services programs for private sector investment in Sub-Saharan African fragile and conflict-affected countries

WHAT MAKES CASA UNIQUE

Conflict-sensitive lens on addressing private sector development

A holistic Advisory Services program, providing a streamlined interface with clients

Flexibility to respond to changing country conditions and evolving needs of conflict-affected countries

A local presence in challenging environments to strengthen client engagement and to coordinate with development partners

•18

Strategy for Inclusive Business Approaches

FM/A2F and Inclusive Business: Partner with regional players to increase Access to Finance for Individuals,

MSMEs, Farmers and Women Owned Businesses as part of a programmatic approach.

Strategy Going Forward

South-South: leverage strong investor interest from outside the region, particularly MENA, LAC, China; expand new

mobilization platforms (e.g. SAFE); support South-South transfer of inclusive business models, esp. Health, education. 2

Strategic Client Partnerships: promote regional roll-out of large national players to increase financial penetration

rates for individuals, micro and SME clients. 1

Mobile Solutions: ramp up our support to mobile solutions providers as a way to reach the BoP and leapfrog traditional

channels of financial intermediation.

Open Up Large Markets: tap large markets – with WB support –Angola, Zimbabwe, Ethiopia, DRC.

Local Currency Finance: further expand partnership with Treasury to grow local currency finance offerings to clients

3

4

5

Innovative Approaches to Inclusive Business: particularly in agriculture, including GAFSP 6

KTDA, Kenya • Purchases tea from small tea

farmers, providing

comprehensive services such as

agri-extension, transportation,

processing, and marketing

• IFC committed $12M to date

Interswitch, Nigeria

• Creates technology

infrastructure, products, and

services that enable financial

institutions and corporations to

serve low-income customers

• IFC committed $10M to date

Food Concepts, Nigeria • Purchases from small chicken

farmers; sells to small-scale bakers

• Supplies both with high-quality

inputs and support services

• IFC committed $20M to date

•1

9

Inclusive businesses incorporate the BOP in the value chain

Successful issuance of the first ever Banking on Women Bond: In October 2013 IFC launched the first women bond program in the world. Working with Daiwa Securities and targeting the Japanese retail market, IFC raised $165 million in November 2013 to expand their financial services for women-owned enterprises globally.

Raising awareness of the first ever Women Entrepreneur Opportunity Fund: Fundraising undergoing for the Women Entrepreneurs Opportunity Fund (the “Fund”). The Fund will make investments in financial institutions in emerging markets globally, including in Africa. The focus of the fund is on investment opportunities for financial institutions that are developing a strategic focus on the women’s market, especially women-owned SMEs.

Gender Focused Opportunities for Africa

Examples of IFC’s Support to the Private Sector in Africa

21

22

Improving the Investment Climate

In 2005 the government of South Sudan

requested assistance in developing a viable

private sector. The Investment Climate

Advisory Services in Africa has supported the

government in establishing a legal and

regulatory framework for investment.

Boosting Business After Conflict

In West & Central Africa, IFC is providing

ongoing investment climate reform support to

the 17 members states of OHADA (Organisation

pour l’Harmonisation en Afrique du Droit des

Affaires) to simplify and harmonize business

laws and implementing regulations.

Sparking Sub-Regional Reform

IFC’s investment climate programs in Burkina

Faso, Liberia, Rwanda and Sierra Leone

facilitated: creation/formalization of 23,000

new businesses; $75 to $95M in new private

investment and creation of 51,500 jobs.

Rapid Reform of the Investment Climate

23

Partnering with the Private Sector to Boost Power Generation

To reduce Kenya’s power shortage, IFC has

been supporting the sole distribution company,

KPLC, and two IPPs, Thika Power and Gulf

Power. In FY12, IFC provided a EUR28 million

loan and mobilized $76 million for the

development of Thika Power, a 87 MW HFO-

fired IPP. In FY13, IFC also financed Gulf

Power, with expected commissioning in 2014,

via EUR17 million senior debt and EUR4 million

subordinated debt.

Bridging the Supply Gap

To boost South Africa’s renewable energy

output, IFC provided a total of $160 million in

debt and mezzanine financing for two

Concentrated Solar Power (CSP) power plants

being developed by Abengoa, generating almost

500GWh per year of clean solar electricity.

Cutting-Edge Solar Technology

To support Cote d’Ivoire’s recovery, IFC has

supported the expansion of two major power

producers, Azito and Ciprel increasing power

generation capacity. In FY13, IFC provided a

US$125 million senior loan and mobilized an

additional $220 million for Phase 3 of the Azito

Power Project. In FY14, IFC provided a $133

million senior loan and mobilization an

additional $240 million for Phase 4 of the Ciprel

Power Project.

Powering Forward After Conflict

Select examples of recently financed power projects by

IFC Countries where IFC is currently actively engaged

to develop / finance potential power projects

24

Scaling Up Support for Agribusiness and the Food Supply Chain

Managing Commodity Price Risk

Building Commercial Agribusiness

Supporting Food Production

In Nigeria, IFC is providing a loan of $70m to

Olam International to support projects in

cashew and sesame processing. IFC has also

partnered with Olam in Cote d’Ivoire, Ghana

and the Asian region, supporting the firm’s

expansion into frontier markets. The projects

are expected to boost food sufficiency.

In South Africa, IFC is investing US$35 m in

equity into the Hans Merensky Group, a leading

South African forestry company the largest

producer of avocados in Africa, supplying ¼ of

this fruit’s consumption in Europe. IFC financing

will support the Company in upgrading timber

processing capacity in South Africa with positive

climate impact.

In Ethiopia, the IFC is providing a 3-year, up to

$10 m guarantee facility on bank loans to

coffee farmer cooperatives. IFC’s participation

allows the commercial banks to exceed

exposure limits and reach more smallholder

farmers. The loans will help cooperatives to

process coffee and meet working capital needs.

25

In Cote d’Ivoire, IFC established a $17m Risk

Sharing Facility (RSF) to support SME lending in

post conflict Côte d'Ivoire for Banque

Internationale pour le Commerce et l'Industrie

de la Côte d'Ivoire (BICICI). The RSF is expected

to generate $30m in new lending to SMEs,

primarily in agribusiness, health, public works

and transportation sectors. IFC signed two

agreements with Micro Cred Madagascar and

Senegal valued at $3.2m to strengthen the

supply of affordable financial services to

clients in rural areas. The project is part of the

$37.5m IFC joint initiative with Mastercard

Foundation.

Expanding A2F for SMEs

Encouraging Africa’s Entrepreneurs

In Kenya, IFC provided a landmark $100 m

senior loan to Equity Bank Group to support

lending to SMEs, agricultural projects and

women entrepreneurs in the sub-region. The

credit line is expected to enable $279 m in

24,000 new loans to SMEs, providing vital

support to shared prosperity and job creation in

East Africa.

Better A2F for Women & Farmers

26

IFC’s Africa Schools Program is an integrated

investment and advisory services program

launched in Ghana (2005) and replicated in

Kenya (2007), Rwanda (2008), and Uganda

(2010) with a goal to support African

governments in their efforts to increase access

to quality education. Through the program, IFC

delivered skills training to staff in more than

600 low- to medium-income schools; supported

over 50 schools to develop business plans and

diagnostic reports; trained staff of 7 partner

banks on education and small and medium

enterprise (SME) project finance with the goal

to enable banks to increase their lending to

schools.

Africa Schools Program

Working to improve Health and Education Services

IFC provides advice to national and municipal

governments on designing and implementing

public-private partnership (PPP) transactions to

improve infrastructure, including social

infrastructure such as health, and education

services. Supported projects include: a hospital

PPP in Benin; a pilot PPP for healthcare waste

management in two districts and a PPP for 165

health centres in Lesotho; a PPP for a new

Diagnostic Centre (with combined lab and

diagnostic imaging services) in Ghana.

PPPs in Health Services

(1) Africa Micro, Small and Medium Enterprise, AMSME, program

(2) Additional Information on Inclusive Business

27

Annexes

28

• Set up in 2006 to provide IFC financing and technical

assistance to banks moving into the riskier SME market.

• Provides advisory services on strategy, credit and risk

management, staff and customer training, product and

marketing, delivery channels and IT/MIS support.

• The program includes a women markets component and

trains bank customers on business and financial

management.

• Has a portfolio of 27 banks in 18 countries with $415.5

million in investment commitments and $102 million in

Trade Finance lines. The current pipeline includes 9

banks.

• IFC has contributed $30 million towards technical

assistance to banks matched by a similar amount from the

banks.

• 14 projects have been completed - on average the

outstanding SME loan portfolios grew by 36%.

• Project countries include Benin, Botswana, Burkina Faso,

Burundi, Cameroon, Cote d’Ivoire, Democratic Republic

of Congo (DRC), Ghana, Kenya, Malawi, Mozambique,

Niger, Nigeria, Senegal, Sierra Leone, Tanzania, Uganda

and Zambia.

(Annex 1) Africa Micro, Small and Medium Enterprise, AMSME,

program

(2 a)Agri has been SSA’s largest real sector contributor to Inclusive Business over the past three years

0

5

10

15

20

25

FY08 FY09 FY10 FY11 FY12 FY13

(# p

roje

cts

com

mit

ted)

10.5

22 20.5

13 12

18

$0

$50

$100

$150

$200

$250

$300

$350

FY08 FY09 FY10 FY11 FY12 FY13

(millions

com

mit

ted)

FM INFRA MAS

$82

$311

$272

$102

$190 $200

•2

9

Agribusiness & Forestry

35%

Consumer & Social

Services 11%

FM 43%

JV - FM & MAS 4%

Infra-structure

3%

Oil,Gas & Mining

1%

Telecom & IT 7%

Manufacturing 4%

Other MAS 0%

Dollars Committed to iBiz in SSA, FY11-13

(2b) Inclusive business models provide transformational opportunities to the client,

the BOP, and IFC

•3

0

Source: Website search; IFC SBA donor report 2012

Case example of Ecom and coffee smallholders

…and a business driver for IFC

across AS and IS

▪ Training program to counter

coffee production decrease

▪ Replicated across multiple

geographies, certified farmers

have produced 81K metric tons

of certified coffee bought by

Ecom

▪ In Kenya, farmer income grew by

up to 70%, with doubling/

tripling of yields and premium

grades

▪ Across geographies, 15,000

coffee farmers certified, with

$13.8M in added revenue

Coffee and cocoa

are smallholder

crops. We are

very dependent

on those large

but fragile

supply chains.

--Ecom

We had only one kilo

per bush. Now some

of them are even

doing ten. And that

way the farmers are

gaining.

--Kenyan

smallholders

Good for client business…. Benefiting the smallholders….

IFC’s business with Ecom

(inv commts $M)

Cumulative total of $154M

since 2006

5024

55

25

2012 2010 2008 2006

▪ ~10 AS projects across multiple

product lines, incl. farmer &

SME training, ES&T standards

▪ Launch of a $55M global

financing to serve six coffee-

producing countries

▪ Development of new partners,

e.g., 3-party collaboration with

Nespresso Latin America