The AfDB Group has set up Africa50 to fill the large hole that exists in investments in the infrastructure sector in Africa. Some people are concerned that Africa50 competes with the AfDB, but for those who understand the twists and turns of development funding, this initiative can only help to address the issue of the infrastructure deficit on the continent. Alassane Ba, Acting CEO of Africa50, is delighted with the strong commitment from countries and underlined the need for Africa50 to establish its credibility and comprehensively launch its activities.
You have more than 20 years’ experience in strategic management, making available the resources of countries, financial markets and development partners, as well as in the management of institutional, operational and financial performance. Could you briefly describe Africa50?
Alassane Ba: Africa50 is an independent financial structure that promotes and funds infrastructure projects in Africa. The ultimate goal of Africa50 is to promote and fund infrastructure projects that allow Africa to reach a new stage of growth, around 7-9%. The AfDB is the reference shareholder. It is well known for its expertise in development issues, its rigor in governance, and its ability to nurture and develop these structures. Remember that over the past 30 years the AfDB has promoted the creation of Africa Re, Afreximbank and Shelter Africa, as well as others, all of which have be effective.
Africa50 will work with two functions: one feature that promotes infrastructure projects and another that funds projects. It has sufficient capital and is governed by a legal framework under private law. It is in fact a public limited company with management and governance bodies like the private sector. It is based on a public-private partnership model, with category A shares for African governments; category B shares for African financial institutions (reinsurance companies, pension funds, insurance companies, central banks, development banks, etc.); and category C shares for the private sector. Africa50 is designed as a profit-making body, with a dividends policy.
The fund, which is headquartered in Casablanca, Morocco, will make it possible to change the infrastructure paradigms now and in the future. The idea comes at the right time, and we can see this with the creation shortly after Africa50 of the Asia Infrastructure Investment Bank, backed by China, with European and Asian countries as shareholders. AfDB President Donald Kaberuka recently quoted Victor Hugo in a campaign to mobilize capital for Africa50: "Nothing is more powerful than an idea whose time has come". This is true for Africa50.
Why is it called Africa50?
Alassane Ba: Africa50 is a name that celebrates Africa and its institutions. The AfDB is celebrating its 50th anniversary this year. The African Union and the Economic Commission for Africa are both in their 50s. And also we have celebrated the 50th anniversary of the independence of several African countries in the past five, three and two years. We have learned lessons for funding and development and new constraints linked to the internal situation of developed countries. We want to take our destiny in our own hands. Africa50 combines experience and innovation. It is an African solution to African problems, and will create the Africa we want.
The fact that so many African countries want to join the Africa50 fund demonstrates the interest sparked by infrastructure development in the region. What is the latest information about contributions to establishing Africa50?
Alassane Ba: We are very happy with the way in which capital is being mobilized. More than 15 countries with various development levels have provided a quarter of the capital that has been contributed, in accordance with the Africa50 statutes, and contributions exceeded USD 600 million. Considering the commitments of various countries and the need to add to the internal procedures of countries for contributions and payments, the Board of Africa50 has decided, after consulting the countries in question, to extend contributions and payments to June 15, 2015. It has also decided to hold an extraordinary general meeting in Morocco on June 29, at which the increase in capital and the various documents governing the legal framework of Africa50 will be approved.
In what way is this new institution important for African countries, and what are the advantages for Africa?
Alassane Ba: Africa50 will play a key role in the appearance and funding of infrastructure. It has a distinct competitive advantage, linked to its project development feature and integrated business plan. Its governance will enable it to be an institution that is quick in its decision-making. Its strategic partnership with the AfDB also allows it to make the most of the competitive advantages of that institution without its constraints. Definitively, the fund will be an accelerator for infrastructure projects. It is hoped that Africa50 will reduce preparation times for funding to 3-4 years, instead of 7-10 years, as is now the case.
As with any financial institution, it is expected to have the impact of a moderate financial lever that will make it possible to attract resources from African and non-African capital markets. With an initial investment of USD 100 million, the AfDB will be able to create a financial institution whose total balance could reach tens of billions of dollars.
Considering all these highly positive parameters, Africa50 will have considerable impacts on African economies as an accelerator to achieve infrastructure.
Africa50 will be a profitable body with a dividends policy to reward invested capital. Other than the economic and social advantages it creates, it must always be remembered that Africa50 is a good financial investment.
Some people think the existence of Africa50 could weaken or limit the role of the AfDB in this area. Some see it as a rival to the AfDB. What do you say to this?
Alassane Ba: The relationship between the AfDB and Africa50 is filial. Africa50 will be a good addition to the AfDB in the preparation and co-funding of projects. As the reference shareholder of the fund, the AfDB will provide the necessary strategic influence to ensure synergy between the two institutions. It is more than the duty of the AfDB and Africa50 to work together to ensure the availability of effective solutions to accomplish infrastructure projects. Their respective roles are to maximize profitable projects to meet countries' needs, within a well-defined context of the division of labour between the two institutions. In fact, speaking of competition between the two institutions when the AfDB is on Africa50's Board is misleading. The role of the Board is to define, among other things, Africa50's strategic orientations, including strategic partnerships with institutions such as the AfDB. So, considering the infrastructure deficit in Africa, and knowing the scale of the capital required, such a bias is illogical. Finally, the management framework for credit risks will limit Africa50 in turning to co-funders, and the AfDB will be its privileged co-funder. All these questions will be handled in the context of a memorandum of understanding between the two institutions. For a start, Africa50 was created to optimize the development and funding of infrastructure. In this context, the AfDB plays a key role in view of its experience, expertise and financial scope, as well as its strategic relations with countries and certain key operators in the sector. The AfDB is and shall remain the steering organization which Africa50 must lean on to achieve its goals.
The infrastructure market in Africa is currently fragmented. It comes as good news that Africa50 aims to act as a one-stop shop. What do you intend to do to accelerate the implementation of infrastructure investment in the region?
Alassane Ba: In the infrastructure market, the segment that is currently least well-funded is the preparation of projects. The needs are huge, but funding sources are scarce. Africa50 will help to fund this segment and I hope that other institutions will increase the resources available for funding the preparation, particularly pre-feasibility and feasibility studies. The fund will be the institution that accelerates projects by intervening from the start with the project development feature. We hope that this business model will be copied and expanded. Africa50 is one of the pioneers of a business plan that is integrated from start to finish, making a one-stop shop. This is a proposal of unique value.