Japan signs $350m loan agreement with African Development Bank to support private sector growth
The African Development Bank (AfDB) and Japan have inked an agreement for the provision of the eighth private sector assistance loan from Japan. The deal, which is part of the Enhanced Private Sector Assistance Initiative for Africa (EPSA), will see Japan provide JPY 44.1 million or US$350 million to the AfDB at an interest rate of 0.11% and a repayment period of 30 years, including a 10-year grace period. The loan will be used to finance the Bank’s private sector operations through credit lines.
The EPSA aims to boost the AfDB’s ability to finance private sector operations in Africa by providing financing through a line of credit from the Japan International Cooperation Agency (JICA). The initiative was launched in 2005, and since then, Japan has been one of the AfDB’s biggest contributors.
According to Bajabulile Swazi Tshabalala, Senior Vice President of the AfDB, the latest agreement “takes our collaboration forward, will build on the existing strong partnership we have had over the years and fits in firmly with the call and vision of our President Dr Akinwunmi Adesina to further strengthen our collaboration with Japan.”
The Japanese Ambassador to Côte d’Ivoire, Katsuya Ikkatai, highlighted the importance of private investment for Africa’s economic growth, noting that the Tunis Declaration, adopted at the Eighth Tokyo International Conference on African Development (TICAD 8), emphasizes the role of private investment in driving inclusive and sustainable development in Africa.
Ambassador Ikkatai also stated that at TICAD 8, Japan’s Prime Minister Kishida announced US$30 billion in public and private investment for Africa over the next three years. The latest agreement between Japan and the AfDB reflects a strong joint action of the Government of Japan and the African Development Bank, which embodies Japan’s policy of supporting private investment in Africa.
The EPSA loans for non-sovereign operations will help the AfDB finance its private sector operations through credit lines from JICA to the Bank. While the resources are pooled with the other financial resources of the Bank and subject to normal Bank processes, they are attributed to specific projects “endorsed” by the Japanese Government.
To date, the AfDB and the government of Japan have signed seven non-sovereign loans totaling US$1.5 billion, which have contributed to support 51 projects, mainly credit lines and equity to regional development finance institutions, private equity funds, and project finance for infrastructure public-private partnerships.
The signing of the agreement underscores the AfDB and Japan’s commitment to the development of Africa and is a testament to the success of the Enhanced Private Sector Assistance Initiative for Africa (EPSA), which has played a pivotal role in supporting private sector development in the continent. During TICAD8 held in Tunis in August 2022, the heads of the Bank and JICA announced the fifth phase of EPSA, from 2023-2025, with a joint target of US$4 billion, representing a $500 million increase from EPSA 4. Additionally, JICA will provide up to US$1 billion under a new special window to promote debt transparency and sustainability reforms in Africa.
The latest agreement between Japan and the AfDB will go a long way in promoting private sector development in Africa and help boost economic growth in the continent. The EPSA initiative, which has played a significant role in supporting private sector development in Africa, will continue to foster collaboration between Japan and the AfDB and create new opportunities for private sector financing in the continent.
