At the heart of Agaciro Development Fund (AgDF) is the drive to give value for people’s contributions which were pooled to form a sovereign wealth fund, and this is through diverse investments in both domestic and international markets.
Officially launched in 2012, AgDF is a result of the need by Rwandans to cushion the country against economic shocks, to build savings for future generations, and to accelerate socio-economic development.
It has since metamorphosed into a sovereign wealth fund.
When the contributions were phased out in 2018 and the fund took on a trajectory to diversify capital sourcing approach, it made various investments in some key economic sectors within the country and beyond.
In that regard, AgDF invested $8.1 million in the Eastern and Southern African Trade and Development Bank (TDB), in September 2022, becoming the first sovereign wealth fund to invest in the regional development finance institution.
The regional bank has investment grade ratings and assets valued at $8.4 billion with a mandate to finance and foster trade, regional economic integration and sustainable development, through trade finance, project and infrastructure finance, and asset management.
Since the bank’s opening of its share capital to select institutional investors such as pension funds, sovereign wealth funds, central banks, and others, in 2013, it has been able to deliver returns on equity of about 10 percent as well as yearly dividends which these institutions have been either recapitalising or receiving in cash.
So far, TDB has raised more than $270 million from 21 such institutions, helping them to achieve both excellent impact and returns.
Gilbert Nyatanyi, chief executive officer of AgDF, observed that: “With the recent phasing out of the contributions, Agaciro is rebalancing and diversifying its investments be it in terms of asset classes as geographically in order to further grow the fund with return on investments.”
“Investing in TDB fits perfectly into this approach.”
The investment is in TDB’s class B shares by the Net Asset Value of the previous financial year or 1x Book value, which has grown more than 2.5-fold since the shares were launched.
- Return on investment
AgDF’s confidence in such investment was also inspired by the successful return on investment of 150 per cent made by Rwanda Social Security Board (RSSB) in TDB since it joined the shareholders’ community in 2014, earning high dividend yields over the past decade.
Umulinga Karangwa, Corporate Affairs and Investor Relations Manager, TDB, said; “Our partnership with institutional investors in our member states is highly beneficial for African investors as well as for the economies we serve, including Rwanda, as they enable us to deliver more impact.”
“Since joining last year, Agaciro has already earned a return on its investment, and will be paid dividends. The financial return is very attractive and so is the development impact as TDB funds key infrastructure and corporates in Rwanda,” she added.
The bank has an extensive financing portfolio in Rwanda with more than $700 million financing support covering several sectors including transport –namely roads and aviation projects –as well as lending financial institutions for infrastructure, healthcare and SME projects, electricity generation projects, among others.
TDB has also extended support in agribusiness, hospitality, and the manufacturing sector, notably cement production which has contributed to import substitution, and foreign currency savings.
AgDF investment in the bank is yet another pillar of furthering this bilateral economic cooperation between the institution and Rwanda, given TDB’s socio-economic impact and financial returns.
Overall, 10 years after the launch of the fund, AgDF has a total unaudited value of $284 million as it projects to close the year 2023 at $300 million and then take that as a baseline to grow to at least $1 billion over the next 10 years.
It functions as a holding company becoming a shareholder in 29 different companies operating locally or internationally.
On the other hand, Karangwa noted that the TDB plans to maintain a double digit return on equity and continue to grow its assets by about 10 percent per annum over the medium term.
Its shareholding comprises 23 member states, two non-regional member countries, and 19 institutional shareholders.
TDB is part of TDB Group, which also comprises the Trade.
