African Finance Corporation set to begin operations by mid-April 2007

Notice IT services is not mentioned as one of the key sectors where it seems that if the public and private sector were aligned in individual countries, this sector would also deserve much attention as it has in Rwanda.

“The key sectors have been identified as: Agriculture, Power, Energy, Telecommunications, Financial Services, Mining and Fast Moving Consumer Goods, with Tourism mentioned as an additional area of investment”.
  

Nigerian team in South Africa to sell African Finance Corporation

27 March 2007
Central Bank of Nigeria

The Central Bank of Nigeria today visited South Africa as part of an international road show to interest business in investing in the African Finance Corporation, a private sector-driven African investment bank that will commence operations in mid-April 2007.

At an investor forum held in Sandton, Central Bank of Nigeria (CBN) Governor Prof Charles Soludo outlined the background to the institution, the business case for its existence and future prospects. The AFC, modelled on the lines of the International Finance Corporation, the private sector arm of the World Bank, is an initiative of the Federal Government of Nigeria, driven by the CBN.

The institution will be a private sector-led, profit-oriented African investment bank. A minimum of 51% of the start-up capital will be from the private sector. All central banks in Africa have been invited to invest in the bank, although the aim is to push private sector funding to 100% of the total, in time, in line with its objective of being a private sector institution.

AFC has an authorised share capital of two billion ordinary shares of US$1.00 each out of which one billion ordinary shares is expected to be paid up at the commencement of business.
 
More than $800 million has already been raised internationally towards the AFC’s start-up equity. The minimum investment is $50,000.

The institution, which is envisaged as being a pan-African organisation in time, will have its headquarters in Lagos, Nigeria, with branches in several other African countries, based on business development opportunities.

The road show has already taken the CBN team to London, New York, The Gambia and Ghana. Following the South African investor forum, the team will travel to Kenya, Ethiopia (headquarters of the African Union and Economic Commission for Africa), Tunisia (headquarters of the African Development Bank), Algeria, Libya and Egypt.

Prof Soludo said he expected that the AFC would easily meet its start-up funding objectives. However, the CBN has proposed making available an amount of up to $490 million to bolster the fund, in the event of a shortfall.

The deadline for private placements, at $1 a share, ends in mid-April, just ahead of the launch of the AFC. The aim is to have the AFC listed on international stock exchanges, including those in London and New York, within five years. It will also be listed on African exchanges, including the JSE Securities Exchange.

The intention is that the AFC will harness the opportunities created by the massive funding gap for the development of key economic sectors in Africa and especially the development of infrastructure. This regional investment bank will help to mobilise and distribute capital to priorities identified by Africans. It will also provide technical assistance and advisory services.

The key sectors have been identified as: Agriculture, Power, Energy, Telecommunications, Financial Services, Mining and Fast Moving Consumer Goods, with Tourism mentioned as an additional area of investment.

Africa was at a great point in its history and efforts needed to be made to realise the many opportunities this presented, Prof Soludo said. It was in this spirit that the AFC was conceived; to enable Africa to manage and direct its own resources. “Unless we have institutions ready, the money will not flow to Africa,” he told potential investors in Johannesburg.

Although large companies were emerging in Africa, they still needed to go offshore to raise significant funding, Prof Soludo said, because of a shortage of sources in Africa. This, he said, could take several years to organise. However, the demands of African development required that this process needed to be speeded up.

The AFC is to be incorporated as a legal entity through an international charter to be executed by Nigeria and other African countries. This charter will be ratified and gazetted in accordance with the laws of the respective countries. This approach confers the following advantages: International Status, in line with other international organisations such as the IFC and ADB; Diplomatic privileges and legal immunities, conferred on the AFC in signatory countries to the charter; Tax exemptions for the operations of the AFC, dividend income and capital gains tax of investors; and smooth market entry formalities and regulatory requirements.

The institution will have a world-class corporate governance structure and operate according to international best practice in terms of accounting standards.