New Development Bank finances $1.5 billion energy projects

Within its first two years of operation, New Development Bank (NDB) approves a total of $1.5 billion in energy projects some of which belongs in Africa. The bank was setup two years ago following the decision made by the leaders of Brazil, Russia, India, China and South Africa (BRICS). 

In opening his statement, NDB President Kundapur Vaman Kamath announced that it would soon establish an Africa Regional Centre. The NDB, was established in 2014 with US $100 billion share capital by Brazil, Russia, India, China and South Africa, often referred to as the BRICS group of countries which account for 42% of the world’s population.

Congratulating NDB President of the African Development Bank Group (AfDB), Akinwumi Adesina urged to do more for the continent, which needs all the support it can get in its drive to accelerate its growth and development.

“I am very pleased that the New Development Bank is investing in the energy sector and I’d like to invite you to join us in this huge task to light up and power Africa,” Adesina told delegates at the 2nd Annual Meetings of NDB in New Delhi on Saturday, April 1, 2017.

Africa, he said, remains a good address for business, noting that, despite the tough global economic environment, African countries continue to post resilient growth.

African economies grew by 2.2% in 2016, with growth projected to rise to 3.4% in 2017, he said, adding that 12 African countries grew by over 5% in 2016, while 20 others posted growth rates ranging between 3 to 5%.

“Africa beckons with boundless opportunities. There’s no doubt that the future belongs to Africa,” Adesina said, pointing out that by 2050 the continent will have the same population as that of present-day China and India combined, a growing urban middle class that would boost consumer demand.

For the Bank and Africa, the greatest need for strategic partnership lies in energy infrastructure, which should be considered as an emergency in a continent where over half of the population, or 645 million people, do not have access to electricity.

“We’re determined to change this quickly. That’s why the African Development Bank launched the New Deal on Energy for Africa,” Adesina said.

The New Deal espouses the ultimate objective of achieving universal access to electricity within ten years. The Bank is working on investing US $12 billion in energy in the next five years and leveraging an additional US $45-50 billion from the private sector.

“We plan to connect 130 million people to the grid system, 75 million people through off-grid systems and provide 150 million people with access to clean cooking energy,” Adesina added.

Furthermore, the Bank is taking the lead on matters concerning renewable energy and an “Off-Grid Revolution,” in Africa by hosting the Africa Renewable Energy Initiative, jointly developed with the African Union, which has attracted US $10 billion in investment commitments from G7 countries.

The Bank is also tapping into domestic channels such as pension funds to close Africa’s US $50-billion annual infrastructure funding deficit.

Africa’s pension funds are projected to reach US $1.3 trillion by 2025 while tax revenues already exceed US $500 billion per year alongside sovereign wealth funds estimated at US $164 billion.

President Adesina announced that the Bank will launch the Africa Investment Forum this year to leverage African and global sovereign wealth funds to attract investment by institutional investors and ensure that infrastructure becomes an asset class that can endear itself to the private sector.

He cited the Africa50, a new infrastructure entity now capitalized by African countries at over US $865 million, was established to quickly develop and finance bankable projects.

He also referred to AfDB’s partnership with the Exim Bank of India, among others, to establish the Kukuza Project Development Company (KPDC), a company based in Mauritius, which is helping to develop and support public-private partnership (PPP) infrastructure project development and finance.

Adesina called for the scaling up of guarantee facilities to larger co-guarantees pooled across Multilateral Development Banks to help speed-up infrastructure investments in Africa.

“We have used these instruments successfully to help mitigate risks for the concentrated solar power project in Morocco, the largest in the world. We have done the same for Lake Turkana wind farm in Kenya, the largest wind farm in Africa, among several others,” he emphasized.

The heads of European Bank for Reconstruction and Development, Eurasian Development Bank, International Investment Bank and European Investment Bank attended the New Delhi meetings. Adesina pointed to their participation as a clear signal that the MDBs were poised to work together.

He invited them to also attend the AfDB’s Annual Meetings scheduled to take place in Ahmedabad in the State Gujarat from May 22-26, 2017 “to continue the conversation.”

At the fourth BRICS Summit in New Delhi (2012), the leaders of Brazil, Russia, India, China and South Africa considered the possibility of setting up a new Development Bank to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries.

They directed Finance Ministers to examine the feasibility and viability of this initiative, to set up a joint working group for further study, and to report back by the next Summit in 2013.

Following the report from the Finance Ministers at the fifth BRICS summit in Durban (2013), the leaders agreed on the feasibility of establishing the New Development Bank and made the decision to do so. It was also agreed that the initial contribution to the Bank should be substantial and sufficient for it to be effective in financing infrastructure.

During the sixth BRICS Summit in Fortaleza (2014), the leaders signed the Agreement establishing NDB.