AIF INVESTOR MATCHMAKING TO SUPPORT RECOVERY
There is little doubt that the global Covid-19 pandemic has had a massive impact on the development of African economies. Yet the building blocks of economic progress that were being put in place before the crisis have not fundamentally changed and the Af
Africa has had to cope with a number of international crises before. The global economic downturn of 2008-09, for instance, saw growth rates fall and progress on living standards halted. The current pandemic has had a more intense short-term effect but recent progress on developing vaccines suggests that the recovery could be just as rapid, so the long-term impact may not be as great as many believe.
The African Development Bank (AfDB) set up the AIF as an investment enabler in 2018 alongside its founding partners: Afreximbank, Africa 50, Africa Finance Corporation, Development Bank of Southern Africa, Trade and Development Bank, Islamic Development Bank and the European Investment Bank.
The multilaterals are convinced that the continent’s long-term investment prospects are still positive and indeed investment now is more important than ever.
Investment is the key to building back better, particularly in an environment where economies have become more fragile. Trillions of dollars of capital are still available but African economies need to be innovative in how they tap that capital. The AIF is one of the key facilitators to driving that investment, as it can help create financial instruments and guarantees to help channel new capital.
Business leaders from across Africa and beyond met with the heads of state or government of Ghana, Mozambique, Rwanda and South Africa, prompting Aliko Dangote, the President and CEO of Dangote Group, to comment at the inaugural AIF: “We have never seen a quality crowd like this ever”.
High conversion rate
The world has changed a great deal since the AfDB held its second Africa Investment Forum in Johannesburg in November 2019. That Forum focused on attracting new finance for much needed infrastructural projects across the continent in the agriculture, energy and transport sectors in particular. The success of the meeting was apparent in the fact that deals worth $40.1bn secured investor interest out of the $67.6bn on offer. This was a big increase even on the $32bn of deals supported in the Forum’s first incarnation, in 2018, and a very clear indication that Africa was open for business.
AIF seeks to take projects all the way from deal origination and screening, through to investor-sponsor matchmaking, culminating in the post-boardroom deal tracker. This process is not restricted to the Forum event itself but continues throughout the year. Of the 2,254 individual investors approached to participate in a specific deal in the 2019 meeting, 416 actually participated in AIF boardroom meetings, representing a high conversion rate.
The top five sectors by value of boardroom deals were energy; urban development and real estate; agriculture; industry and trade; and funds. It was noteworthy that health, presciently, featured for the first time, with three deals worth a combined $498m. The Forum also offered a space for small and medium sized enterprises (SMEs) to pitch to potential investors for the first time.
Perhaps one of the biggest signs of the Forum’s success is apparent in the progress that has been made in developing the Accra SkyTrain, a light rail system planned for the Ghanaian capital. The 2018 AIF saw the governments of Ghana and South Africa sign an MOU, while last year’s meeting resulted in Africa Investment SkyTrain Consortium and the Ghana Infrastructure Investment Fund striking a concession agreement over the project – crossing the last big hurdle before the final investment decision is taken.
Other substantial deals struck at AIF19 included Mozambique’s ENH securing a $750m package to help finance its share of the $24.6bn Mozambique
LNG project. Of course, many of these projects would be developed with or without the AIF, but the Forum can help get some plans over the line – not just the finishing line but also some of the trickier preliminary stages that derail many otherwise viable ventures. Moreover, bringing such a large number of influential delegates together in one place can help to speed things up by just getting them in the same place, and also by creating a feeling of just what is possible. In this way, the AIF can act as a conduit for investment.
More than an annual gathering
It would be a mistake to see the AIF solely as an annual event. The actual gatherings are merely the most obvious manifestation of a longer term, continuous process that is supported by Africa Investment Forum Marketplace, launched in December 2018. Marketplace is an open source digital platform that the AfDB has developed in conjunction with the Inter-American Development Bank “to publish and connect real time projects” with project sponsors and investors.
In addition, the AIF has created a digital platform of viable private sector or public private partnership (PPP) projects, using data analytics to track investment flows, intra-Africa investment flows and global flows into Africa.
Mobilising domestic resources
The Forum’s innovative matchmaking process can bring bankable deals and surplus capital together by providing a platform that can move viable deals to financial closure.
African economies are often badly affected by global trends that are little to do with them directly, such as the US-China trade war. When trade is under threat, investors often respond by cutting investment to emerging markets to focus on protecting their core markets or simply to stash their resources for calmer times. Yet there has been an increasing trend of companies and funds investing counter-cyclically to take advantage of lower prices.
There is more finance available for investment within Africa itself than many would expect. Both global and African assets under management are growing rapidly and NEPAD estimates that African sovereign wealth funds and pension funds alone hold $1.1 trillion under management.
The AfDB, through the AIF, has the convening power and influence to help change mindsets and overcome constraints, including at government level, to help channel investment flows into viable projects. For Chinelo Anohu, from the AIF, the Forum, through all its activities throughout the year is the only platform that can truly make all of this happen.