Investors mobilise $40bn for African infrastructure

Africa’s infrastructure investment needs between $130-170bn a year based on estimates by the African Development Bank (AfDB). With current inflows, Africa must attract financing to plug an investment shortfall of $68-108bn each year.

Pushing through such headwinds, the AfDB's second Africa Investment Forum, held in Johannesburg in mid-November, set up a platform to raise capital and establish a $40bn pipeline of projects in real time. 

Initially, deals worth $67.7bn were tabled in sector and project specific “boardrooms”. Following three days of brokering and deal-structuring, 52 transactions secured investment interest worth $40.1bn. The 52 deals brought to a close will reach 25 African countries in sectors craving infrastructure investment, including agriculture, energy and transportation. 

“Africa is working,” said Akinwumi Adesina, president of AfDB, pointing to the upswing in African infrastructure finance deals when compared to $38.7bn in 2018. “Thirty-seven African countries are growing at a rate between 3-5% and 20 countries are growing at about 5%.”

Amid such growth, infrastructure is becoming an appealing asset class for investors. 

Agriculture 

Ghana, the world’s second largest producer of cocoa, signed a $600m deal with the AfDB, Credit Suisse AG and the Industrial and Commercial Bank of China Limited to finance new cocoa warehouses, rehabilitate plantations and support the processing sector.

Acting through an official regulator, known as Cocobod, Ghana’s deal aims to boost farmers' incomes and its value-added trade gains in the $100bn chocolate industry.

“Only $7bn per year is invested in Africa’s agriculture sector that needs to rise to about $45bn per year to harness agriculture’s power and move Africa up the value chain to create jobs and revenue,” said Dr Jennifer Blanke, AfDB’s vice president for agriculture, human and social development.

She cited the AfDB’s support to create Special Agro-Industrial Processing Zones in Benin, Chad, Ethiopia, Gabon, Senegal, South Africa and Togo. Enhanced by transport, energy and other critical infrastructure, SAPZs are a solution to connect rural areas to regional and global supply chains.

Clean energy

Having turned down funding for a plant in Kenya, Mr Adesina confirmed the AfDB’s decision to stop financing coal projects. Instead, he signalled the AfDB’s $500m green baseload facility, which sets an ambitious target to crowd-in private investors and leverage $5bn in additional project finance.

Already capitalising on abundant solar resources, the “Desert to Power” (DtP) initiative was presented to investors as an opportunity to assist 11 Sahel countries in making affordable, clean energy transitions. The DtP solar project will generate 10,000 MW for 250 million people, forming the largest solar zone in the world.

Aiming to boost investor confidence, the AfDB lends its AAA-rating and capital to de-risk investments in such low income and fragile states. Throwing their collective weight behind the project, the Africa Export-Import Bank, Africa 50 and the Moroccan Agency for Solar Energy were announced as DtP investment partners on work-streams to establish local solar manufacturing plants. 

Rail transportation 

Promoting intra-continental investments, South African firm African Investment (AI) SkyTrain Consortium signed a concession agreement with Ghana to construct the Accra SkyTrain project. Billed as the first of its kind in Africa, the construction of the elevated light rail system is estimated to create 5000 jobs.

To develop, finance and operate more railway projects across Africa, the African-Export Import Bank also signed an MoU with South Africa-based Thelo DB Proprietary Limited. The AfreximBank president, Professor Benedict Oramah, highlighted the optimal timing for railway development in Africa, given the African Continental Free Trade Area agreement (AfCFTA).