CDC, the UK’s Development Finance Institution, has announced a USD30 million investment in the African Infrastructure Investment Fund 2 (AIIF2), an equity investment fund committed to developing basic infrastructure in Africa.
CDC’s USD30m commitment will help AIIF2 move closer to its target size of USD600m, which it will use to invest in a range of new and existing transport and power infrastructure projects such as toll roads, ports and rail, wind farms and other forms of renewable and traditional energy.
AIIF2 is managed by Africa Infrastructure Investment Managers (AIIM), a highly regarded team which has considerable experience of infrastructure investment, including a major toll road in Lagos and a 100MW wind farm in South Africa. The Fund will make investments ranging between USD30m and USD100m and expand its operations beyond South Africa, where it is well established, to a number of countries across sub-Saharan Africa.
CDC’s own investment in infrastructure projects in Africa currently stands at approximately GBP250 million and includes an electricity distribution company which brings energy to hundreds of thousands of consumers in Uganda, a communications cable network in Kenya and a utility company supplying water to households in Cote d’Ivoire.
Rod Evison, CDC’s Managing Director for Africa and Latin America, says: “The USD30 million commitment that CDC is announcing today will play a key part in addressing the shortage of equity capital that holds back the development of vital infrastructure in sub-Saharan Africa. Reliable power supply and road networks are essential for economic growth and sustainability and for improving the quality of people lives in some of the world’s poorest countries.”
Sub-Saharan Africa lags behind other low income countries on all measures of basic infrastructure provision and the additional investment required in infrastructure is estimated at USD31bn per annum.
The lack of infrastructure in Africa is impeding growth and reducing the continent’s potential to be competitive with other developing countries and with developed markets. According to a study by the Africa Infrastructure Country Diagnostic (AICD), the poor state of infrastructure in sub-Saharan Africa cuts national economic growth by 2% every year and depresses business productivity by as much as 40%.
With limited resources available from government and donors, investment from the private sector is desperately needed. This is particularly true for the transportation and power sub-sectors where the deficit is the greatest. A recent OECD study points to an estimated USD300bn power investment requirement up to 2030 and the AICD highlights the fact that more than 30 African countries experience power shortages and regular interruptions to service
Jean-Marc Savi de Tove (pictured), CDC’s Portfolio Director for Africa adds: “AIIM is one of the most experienced and respected managers currently investing in infrastructure and has around $800m under management. The Fund has raised capital from its sponsors, Old Mutual and Macquarie, as well as from other development finance institutions such as the IFC, DBSA and Proparco. We are confident that the Fund will attract yet more investors to Africa.
“CDC will work closely with the team to help them manage the governance of the businesses in which they invest and to encourage the fund manager’s expansion into other African countries.”
AIIF2 will look to take either majority or significant minority stakes in the projects in which it invests to ensure that the Fund has an ability to direct the key decisions of each portfolio company.
