Innovative Financing
How to finance Africa’s economic
transformation?
Sebastian Große-Puppendahl, Policy Officer, ECDPM
Post-2015 Charter Event in the Hague, 20 April 2015
Background
• A broad field!! with various forms and sources
depending on definitions etc.
(e.g. impact investments, remittances/diaspora bonds, IFF,
private equity, SWFs and bonds)
• 9th African Development Forum’s theme:
‘Innovative Financing for Africa’s Transformation’
- Marrakesh consensus (Oct. 2014):
Africa’s financial systems are still largely underdeveloped in a
majority of countries and unresponsive to the needs of individuals,
households, and small and medium sized enterprises, constraining
the domestic savings rate and the availability and access to credit
for productive investments
• CAP on FFD  AUC-ECA consultation (Mar 2015)
ECDPM
Infrastructure gap: $100 billion a year
CAP and Agenda 2063: DRM and trade as main
source of financing for SD in Africa
Page 2
IFF & climate finance
•
Curtailment of illicit financial flows as unexplored
source for mobilising domestic resources (HLP, 2015)
-
•
Strong linkages between Africa’s transformative
agenda and climate change
-
-
ECDPM
Annual illicit flows from Africa during the past decade up
to $50 billion > ODA (2x)
Undermining Africa’s fiscal policy space, government
programmes and investment resources available
Commercial activities, organised crime, public sector
Climate finance & development finance inseparable
Adaption costs to CC for East, West, Central and
Southern Africa: $14-15 billion/year ($70 billion until
2045, if no additional mitigation action is taken
Innovative domestic financing mechanisms needed
Climate for Development in Africa Programme (ClimDev
by AUC, UNECA & AfDB)  building climate-resilient
economies on the continent (AfDB ClimDev special Fund)
Page 3
Private equity in Africa
•
•
Not a driver of economic growth but a catalyst
Private equity as a potential source of investment 
today approximately $29 billion in pension fund assets that
could be invested in private equity in Africa, which remains
untapped (UNECA, 2014)
•
$1.14 billion (2012) raised from institutional investors
for Africa-focused private equity funds (African Private
Equity and Venture Capital Association)
-
-
•
Challenge: investor perceptions (cost of doing
business in the continent)
-
ECDPM
another 50 funds currently in the market that are
targeting a similar aggregate amount
Ethos Private Equity alone (a South African fund
manager) is reported to have raised some $900 million
continent’s sheer physical size, geopolitical
fragmentation and weak infrastructure continue to make
it an expensive location for doing business
restrictions on capital flows between African countries
and the rest of the world  trade openness
Page 4
Sovereign bonds in Africa
• Relatively inexpensive sources of external
finance for economic growth
• sovereign bond inflows $5 billion (2013) – =20%
of aid to SSA & 12% of FDI inflows
• BUT risks involved: currency risks, roll-over risks
and greater macroeconomic volatility
• Reducing risks requires to (te Velde, 2014)
-
use revenues of sovereign bonds to address
economic and social infrastructure gaps
manage macroeconomic conditions to reduce
currency risks
• Role of int. community: reducing quantitative
easing, enhancing liquidity in the bond market 
reducing roll-over risks
ECDPM
Page 5
Conclusion
•
•
•
•
•
•
•
Africa’s transformation needs African-grown and financed
solutions to be sustainable
Centrality of DRM in the creation of inclusive & sustainable
economic growth for Africa’s transformation (e.g. ClimDev)
Role of financial markets & market regulation key 
diversification! of financial products
Need to further strengthen role & capacity of DFIs, IFIs &
Development Banks (incl. mechanisms to address risks)
Promotion of private equity as an important potential source
of investment for growth and development
High Level Panel on Illicit Financial Flows from Africa
New innovative forms of partnerships (UNECA, 2015)
-
ECDPM
boosting intra-African trade & Africa’s transformation
South-South cooperation and the scope for industrialization
regional and South-South initiatives to enhance resource
mobilization: stymying illicit financial flows, cutting remittance
costs and harnessing official flows
South-South coalitions to reform the multilateral trade and
financial system
Page 6
References
•
•
•
•
•
•
ECDPM
El Fassi, S. 2015. Financing for Development: The state of the debate
in Africa. ECDPM Talking Points Blog. April 2015.
http://ecdpm.org/talking-points/financing-development-state-debateafrica/
HLP. 2015.Track it! Stop it! Get it!. Illicit Financial Flows from Africa.
Report of the High Level Panel on Illicit Financial Flows from Africa.
February 2015.
http://www.uneca.org/sites/default/files/publications/iff_main_report
_english.pdf
Marrakech Consensus, ADF-IX Consensus Statement Marrakech,
October 2014 http://www.uneca.org/sites/default/files/uploadeddocuments/ADF/ADFIX/adf_ix_consensus_statement-eng.pdf
te Velde, D.W. 2014. Sovereign bonds in sub-Saharan Africa Good for
growth or ahead of time? ODI Briefing 87. April 2014
UNECA. 2015. Innovative Financing for the Economic Transformation
of Africa. Edited by Abdalla Hamdok. March 2015.
http://www.uneca.org/sites/default/files/publications/innovativefinancing-economic-transformation-africa2015-adf_en.pdf
UNECA, 2014. Private Equity in Africa. Issues Paper 9th ADF.
http://www.uneca.org/sites/default/files/uploadeddocuments/ADF/ADFIX/adf_ix-issues_paper_3-private_equity.pdf
Page 7
Thank you
www.ecdpm.org
www.slideshare.net/ecdpm
Page 8