AfDB invests $18m in sub-Saharan Africa fund

The African Development Bank is investing with ISSIF — a fund established to offer badly needed funding for infrastructure improvement in the region. The recently launched entity is looking to raise $200m.

The African Development Bank (AfDB) is putting $18 million toward infrastructure in sub-Saharan Africa, a region, said the bank, whose “considerable deficit” is a financial drag on the entire continent.
AfDB said InfraCo Sub-Saharan Infrastructure Fund (ISSIF) is the recipient of its “private equity investment”. The fund will “catalyse” additional capital to fund infrastructure work. 

ISSIF, a “key alternative” for financing infrastructure, has a target capitalisation of $200 million, with a first closing of $100 million set for the third quarter, according to the Tunisia-based AfDB.

“ISSIF is expected to have immediate access to quality projects and help them to get to the bankability stage,” said Tas Neside Anvaripour, AfDB head of infrastructure finance.

In a recent interview with Infrastructure Investor – featured in the Emerging Markets Handbook 2012 – Anvaripour signalled the bank was ready to sponsor more infrastructure funds:

“We are seeing substantial growth of indigenous funds, which we are quite keen on helping develop further. Many countries such as Nigeria and Botswana have pension funds with large cash reserves that could be used to sponsor indigenous private equity funds for infrastructure development in their respective markets. This is an avenue we are exploring and expect to develop further.”

The AfDB, established in 1964 to promote economic growth in Africa, estimated sub-Saharan Africa will need $94 billion annually between now and 2022. 

“Power and transport are especially lacking in investment,” the AfDB stated in a press release announcing the transaction. Population growth has caused a shortage of power in the region, while the dearth of transportation has driven up import/export cost, continued the bank.

As a politically recognised region, sub-Saharan Africa is defined to include any country in Africa located south of the Sahara, the largest hot desert in the world. Fifty percent of the region has no electricity. Meanwhile infrastructure accounted for the bulwark of the economic improvement Africa underwent from 1990 to 2005.

The AfDB has regularly invested or otherwise provided financing to improve Africa. In September, the bank made a second, $45 million loan to the Emerging Africa Infrastructure Fund, following a previous $31.25 million loan.