What are the main drivers of growth behind Africa’s infrastructure markets?
TA: There are a number of factors which are currently driving Africa’s infrastructure market. One of these factors is natural resources which are providing governments with capital to fund infrastructure projects and are also giving private companies reasons to develop regional infrastructure to support their extraction projects.
Another significant driver is development: Africa suffers from some of the lowest levels of infrastructure which creates a large demand for infrastructure projects, driving the markets forward. Finally, Africa’s demographics are a key driver of infrastructure: as the African population grows at a more rapid pace, it is necessary for governments and the market to provide a strong backbone on which the continent can grow.
Which countries seem to offer the most opportunities, and why?
TA: Countries with natural resources obviously offer great opportunities, but the entire continent has significant untapped resources from Africa’s many rivers and waterfalls, to sunlit stretches of deserts. Countries with more a developed infrastructure backbone perhaps have fewer opportunities as their markets are already developed enough not to need newly transformational projects. In more ways than one, countries such as fragile states or those which have suffered from severe infrastructure deficits will offer many opportunities. Africa is an extremely exciting place for infrastructure as from North to South, East to West, the continent and its many nations are filled with opportunities.
Which sectors seem the most promising?
TA: There are two sectors which are recognised to be at the heart of infrastructure and these two also happen to be the most promising in Africa, both from an impact perspective and from a private sector development one: energy and transport. These two sectors are vital and are also the foundations on which other infrastructure sectors are founded. Electricity and roads are essentially the key to unlocking Africa’s potential and they are also the most promising from a private sector perspective. Africa has recently witnessed incredible achievements in both the energy and transport sectors, with the world’s largest wind farm in Kenya and significant developments in the public-private partnership (PPP) approach to transport.
What are the main challenges/risk factors to overcome?
TA: There are a number of challenges in the African landscape. In the past, it has been difficult to mobilise the needed capital, as infrastructure projects did not present the private sector with adequate prospects for their investments. However, the AfDB has recently launched the Africa50 fund which will aim to restructure projects so as to provide the global markets with ample investment opportunities.
Of course, the fragility of some African states presents a risk to infrastructure projects which, by nature, involve government participation. Significant steps have recently been made by governments to promote transparency and capacity building, so although there are challenges and risk factors, doing infrastructure in Africa has never been as possible and as promising as today.
Which types of investors are most active, and through which channels/structures is capital likely to be invested?
TA: Africa’s infrastructure market today attracts investors from all over the world and from various sectors: mining companies, sovereign wealth funds and governments to name only a few. The creation of the Africa50 vehicle has created a new and exciting channel through which these investments are likely to be invested. This new vehicle, which encompasses the entire project life cycle, will play a significant role in catalysing investments into Africa’s infrastructure market and ensuring that investors are provided with steady financial returns.
* Tas Anvaripour is the director of business development at the African Development Bank, where she is also the team leader in charge of structuring, fundraising and establishing Africa50, a pan-African infrastructure vehicle expected to become Africa’s largest and most significant of its type.