The fund is invested in energy and rail, the two sectors that will drive economic growth
The US$435M Pan-african Development Fund (PAIDF) 2 learnt some valuable lessons from the pioneer PAIDF 1 fund, and promptly put these into practice.
For example, no more than 10% of the fund may be invested in a single project. The fund is further limited to 20% per country, and 40% per sector.
“This was a policy we implemented as a result of lessons we learnt on the PAIDF 1 fund, to reduce undue concentration risk” says Emile du Toit, head of PAIDF 2. “We are now focused more on properly allocating or mitigating risks, such as market, political, operational and currency risks.”
Two projects in PAIDF 1 performed well below expectations: the Sea Wolf offshore oil rig business in Nigeria (which failed due to overgearing and an exposure to a falling oil price), and the Yu telecoms business in Kenya (which was exited after their Indian-based operational partner pulled out of the telecoms sector).
Harith CEO Tshepo Mahloele keeps a Yu T-shirt on display in his office as a reminder of what mistakes to avoid. “We were entering a fairly competitive market against incumbent operators in Kenya, and we were overexposed to market risk. This is not something that we want to repeat,” says Mahloele.
Of the $435m raised in PAIDF 2, roughly $100m has been invested in four projects: three of them in the energy sector (see page 8) and one in rail. The Amandi Power project will add 190 MW of capacity to the Ghana national grid, sufficient to power 120,000 homes.
The plant has been designed to switch between heavy fuels and gas, which would allow it to harness the country’s large natural gas fields when these become commercially available. Amandi Power is one of two independent power producers (IPPS) licensed by the Ghanaian government, the other being Cenpower Generation, currently constructing a 350 MW light crude oil and gas-fired, combined cycle power plant at the port of Tema, near the capital Accra.
African Finance Corp is a major shareholder in Cenpower, and has agreed to pool its power assets with Harith under Project Edison, creating an African power behemoth with a combined generating capacity of 1,575 MW supplying power to more than 30m people in 10 countries. Even more substantial
Emile du Toit: Focus on mitigating risk