AfDB to become top shareholder in Africa guarantee platform to boost derisking push

The African Development Bank will inject $125 million into African Trade and Investment Development Insurance (ATIDI) to become its biggest shareholder and ramp up the use of guarantees to attract private capital, the bank's president told Reuters. The move is part of a broader push to strengthen Africa's financing capacity as development aid from rich countries has fallen sharply.

Sidi Ould Tah, who took the helm of Africa's largest development lender last September, is pushing a new financing model known as the New African Financial Architecture for Development (NAFAD). The strategy aims to tap an estimated $4 trillion in Africa's institutional capital, including pensions, sovereign wealth funds and savings schemes, to help close an estimated $400 billion annual development financing gap.

Tah said the cash injection will take AfDB's shareholding in the agency to 14% from 3%. He said the bank's target is to bring the level of guarantees provided by ATIDI to $10 billion annually, up from an average of about $3 billion worth of investments covered each year.

Nairobi-headquartered ATIDI was set up 25 years ago to de-risk investment in Africa through insurance and guarantees that help channel private capital into riskier markets. It is currently owned by 24 African states and institutional investors, including African financial firms and Germany's KfW Development Bank, which joined in April.

The AfDB move marks a shift away from ATIDI's traditionally dispersed ownership structure, with stakes spread across member states led by countries such as Togo and Benin holding high-single-digit shares. AfDB is urging more African countries and investors to take stakes to boost ATIDI's capital and expand its firepower, Tah said.

Tah said the bank is also talking to various financial institutions and countries to increase their contribution or to become shareholders if they are not yet invested. France is considering increasing its shareholding, with more details expected at a G7 meeting in Evian later this month.

Some analysts argue African countries should focus on raising savings to build domestic capital pools, noting that Sub-Saharan Africa's savings rate is about 18%, less than half the global average, according to World Bank data. Tah said the bank could meet the region's financing challenges, adding that Africa can mobilise African resources to finance African development.