On October 12, 2017, Africa50 CEO Alain Ebobisse addressed an audience of investors at the US Chamber of Commerce on how best to finance infrastructure investment in Africa. He was joined by Benedict Oramah, President of the AfreximBank and Charles Boamah, Senior Vice President of the African Development Bank. The panel was moderated by Scott Eisner, President of the Chamber’s US-Africa Business Center. Del Renigar, Senior International Policy and Trade Advisor of General Electric, gave opening remarks.
Mr. Ebobisse’s remarks:
"We all know that most African governments don’t have the financial resources to tackle their infrastructure shortfalls alone. They need outside investment, especially from the private sector. To attract this investment, they are competing in a global marketplace for limited funds. This means that they must improve their business climates, prepare sound sectoral policies, and write and enforce the types of regulations that attract investors. In 2015, Latin America received over $34 billion in private investment in infrastructure. Africa, on the other hand, received only $8 billion, less than 25% of that. The question we face in Africa, is how to we close this funding gap.
Despite the regulatory and fiscal constraints in many countries, access to finance is not the major, or only, obstacle. Or rather, the finance will come if the right prerequisites are met. For example, donors, IFIs and developers are standing by with adequate funds. And institutional investors and banks are sitting on trillions of dollars in capital, some of which could be used for investments in African infrastructure. Pension funds and other institutional investors are looking at infrastructure as an investment opportunity that has a low correlation with equities and bonds, and that can provide a steady and attractive long-term return.
In many cases, pension funds would rather invest in projects that are already up and running, allowing them to enjoy a steady yield. More pension funds would back large infrastructure projects if they are well structured with risks adequately mitigated and steady returns to compensate for the moderate residual risks.
However, beyond the inadequate enabling environment I mentioned earlier, the main issue is that there is limited appetite for institutional investors to finance developing the pipeline of bankable projects that are so desperately needed. This is where Africa50 can come in, acting like a bridge between the public and private sectors and developing projects from early on. The “to do” list for building up the pipeline of bankable projects, and thus attracting investment, is well known, and the goal is attainable. This has been proven in many emerging markets, including in parts of Africa.
Now that I’ve spoken about the challenges, allow me to present one of the solutions – Africa50: what we are doing and how we can mobilize financial resources for infrastructure development. Africa50 is an infrastructure investment platform owned by African governments and the African Development Bank. So far 25 countries (including those represented in the next panel) and two central banks have committed over $800 million in capital. We expect more countries to join soon and our capital should grow to over $1 billion in the short term and $3 billion in the medium term. Although most infrastructure sectors are eligible for our financing, our priorities are energy and transport. We mobilize funds, not only from our African member states, but also from international financial institutions, institutional investors, and private sector entities.
We operate like a private sector firm, focusing on medium to large scale infrastructure projects that are commercially sustainable, offer an appropriate return to investors, and have a significant development impact. To accomplish this, we have created two separate entities, Africa50 Project Development, which oversees building up the oft-cited project pipeline, and Africa50 Project Finance, which invests equity or quasi-equity near or beyond financial close. By bringing these functions together in one institution we can provide support at every stage of the project cycle and shorten the time between project idea and financial close, leveraging our funds to raise capital from private investors."