CDC, the UK-based development finance institution, has written a $30 million equity cheque for the African Infrastructure Investment Fund 2 (AIIF2), a vehicle targeting investments in transport and energy projects across Africa.
AIIF2 is targeting a final close of $600 million and, in addition to CDC, counts Macquarie and Old Mutual as investors as well as other development institutions such as the IFC, part of the World Bank Group, Development Bank of Southern Africa, and Proparco.
The fund is already invested in a major toll road in Lagos and a 100-megawatt wind farm in South Africa. It is now looking to invest in a number of countries across Sub-Saharan Africa, targeting deals of between $30 million and $100 million, CDC said in a statement. The fund will look to acquire significant minority stakes, allowing it to influence the direction of the projects it invests in.
Rod Evison, CDC’s managing director for Africa and Latin America, hopes the firm's commitment to the fund will help address the shortage of equity that plagues Sub-Saharan infrastructure. “Reliable power supply and road networks are essential for economic growth and sustainability and for improving the quality of people’s lives in some of the world’s poorest countries,” he added.
The need for equity, and especially early-stage equity, was a big theme in Infrastructure Investor Africa: An Intelligence Report.
Bobby Pittman, the African Development Bank’s vice-president for infrastructure, and Plutarchos Sakellaris, the European Investment Bank’s vice-president for Sub-Saharan Africa and South Africa, both stressed the issue.
Sakellaris said: “We need more upstream work. We need to begin by providing more technical assistance to [African infrastructure] projects to make sure they are bankable.”
Sub-Saharan Africa’s infrastructure shortages are well known. A recent study by the World Bank – the Africa Infrastructure Country Diagnostic – estimates that the 48 countries that comprise the region need to spend an additional $31 billion per year than they are currently spending.
Power shortages frequently plague its countries, with the entire power generation capacity of Sub-Saharan Africa, which together is populated by some 800 million people, equal to Spain’s, with its 45 million people.