NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, November 15, 2005

Jonathan Katzenellenbogen
Mumbai

In a massive boost to Africa’s private sector, the International Finance Corporation (IFC), the World Bank arm that finances companies, is to almost treble its support on the continent over the next five years to more than $1bn a year.

The expansion in financing to the continent will involve a doubling in IFC financing for projects in SA over the next year to about $200m. Part of the IFC’s unfolding plan is for it to play a far greater role in helping smaller South African companies invest in the continent.

In SA, the IFC stressed, it would steer clear of areas of potential competition with commercial banks, but it would offer them financing and technical help to expand low cost housing loans and support for small businesses.

Dick Ranken, the Johannesburg-based head of IFC operations in Africa, said the planned increase in financing would amount “to the most significant increase by the IFC in lending to one region in its 50 years’ history”.

Ranken said the $1bn that the IFC planned to reach in annual commitments within five years would take both the form of loans and equity stakes in companies.

This was not a figure cast in stone, and could be expanded by the IFC if worthwhile projects were identified.

Ranken, who was speaking at a conference in Mumbai to representatives from Indian businesses thinking of investing in Africa, said there was firm commitment in Washington for the IFC’s plans to expand its financing to the continent.

The new president of the World Bank, Paul Wolfowitz (pictured left), who also acts as IFC president, has said that the bank planned to focus heavily on Africa with an emphasis on infrastructure and small business.

While the amounts SA will receive can be raised in domestic markets, the importance of IFC funding is that it often goes into projects that cannot find commercial funding.

In addition, IFC financing often played the role of a catalyst in helping to bring in other funders. The IFC said it was often able to obtain further financing for projects equal to about five times the amount it had originally invested in a venture.

Ranken said he expected that Cameroon, Chad, Ethiopia Ghana, Kenya, Madagascar, Mali, Mozambique, Nigeria, Senegal, Tanzania and Rwanda would be the other main beneficiaries of the IFC’s investment portfolio.