Rabat workshop creates Fund to develop African cities
United Cities and Local Governments of Africa (UCLG Africa) (www.AfriqueLocale.org/en) has organized a two-day workshop on the establishment of the African Cities Development Fund (FODEVA) in Rabat, Morocco. The Fund aims to enable cities to issue bonds on the national and international capital markets.
The workshop proceeded work that was carried out after the conference, “Funding African cities: agenda, alliances and solutions,” which was held in Marrakech, Morocco, in November 2014. At the conference, members of UCLG Africa agreed to establish a financial vehicle dedicated to the funding of African cities, termed the African Cities Development Fund (FODEVA). The Fund aims to enable cities to issue bonds on the national and international capital markets.
The workshop brought together twenty top level experts including specialists of fundraising on the financial markets; officials of development banks, funds or development banks dedicated to local governments; asset managers in international private banks; officials of rating agencies; and representatives of national and local administrations.
The exchange of views and experiences and the contributions of participants helped to establish that: There is a pressing need to set up a specialized vehicle for fundraising and access to funding in favor of African local governments. This vehicle will be named the African Cities Development Fund.
The African Cities Development Fund will have a dual role; to sell the destination of African local governments to investors; and to prepare the capacity for absorption and debt management of these local governments.
The African Cities Development Fund should enable local governments, or national institutions specializing in granting loans to the local governments, to borrow over a term of 7 to 15 years to finance development projects.
During the preparation phase for the launch of the African Cities Development Fund, UCLG Africa should mobilize 2 million Euros, including 1.5 million Euros to be provided by local governments and 0.5 million by central governments; the objective being to mobilize 10 central governments and 30 local governments, each contributing 50,000 Euros. This takeoff fund should be mobilized before the end of 2019.
As a starting point, the vehicle should aim to achieve approximately 2 to 3 billion dollars as its first fundraising goal. This should take place quickly (deadline 2020) and should target local governments that have a proven repayment capacity.
In this respect, a roadmap was worked out that would: 1. Define the structure of the capital: 2. Define the risk portfolio: 3. Cooperate with existing national tools: 4. Present the benefits of the vehicle: 5. Involve central governments to obtain their non-objection opinion: 6. Produce an information note on the vehicle: 7. Prepare and organize a communication campaign and a road show for the vehicle.
The intention is to finalize this roadmap in order to present the African Cities Development Fund as a vehicle of credible funding at the 2018 Africities Summit.