Over 40 African local governments under the umbrella of the United Cities and Local Governments of Africa (UCLG Africa) have agreed to establish an African Cities Development Fund (FODEVA) with the aim of enabling cities to issue bonds on the national and international capital markets.
The decision was made on Thursday during a UCLG Africa’s two-day workshop in Morocco’s capital Rabat, where twenty top-level financial specialists are currently gathered to discuss the economic development of African cities.
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These specialists represent various financial sectors, including local and international development banks, asset management, national and local administration, and financial markets.
Unified Development Project
The workshop is a continuation of a conference held in Marrakech, Morocco in 2014 under the theme: “Funding African Cities: Agenda, Alliances and Solutions”. During the conference, members of UCLG Africa recommended the establishment of a special fund dedicated to the economic development of African cities.
At Thursday’s workshop, the specialists agreed that the African Cities Development Fund should 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 association also hopes that the fund will enable local governments, or national institutions granting loans to local governments, to borrow over a period of 7 to 15 years in order to be able to finance development projects.
To kick off the project, all members are required to raise a start-up fee of at least 2 million Euros, with local governments expected to contribute 1.5 million Euros while central governments will provide 0.5 million Euros.
The idea is to mobilize at least ten central governments and 30 local governments, each of which will contribute 50,000 Euros. The startup fund should be in place by the end of 2019.
“As a starting point, the vehicle [fund] 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,” the association said in a press statement.
A roadmap has already been established to define the structure of the fund, the risk portfolio, collaborate with existing national financial systems, present the fund’s benefits, and formulate an awareness campaign for the fund.
UCLG Africa hopes to finalize the roadmap as soon as possible so that it can present the African Cities Development Fund at the 2018 Africities Summit as a reliable funding tool.