PROJECT DEVELOPMENT AND PROJECT FINANCING UNDER ONE ROOF
Africa50 focuses on medium to largescale projects that have development impact while offering an appropriate risk-adjusted return to investors. Bringing project development and financing together in one platform, Africa50 seeks to provide support at every stage of the project cycle.
PROJECT DEVELOPMENT PERSPECTIVE: Koffi Klousseh, Managing Director, Head of Project Development
What difference does it make to have a separate Project Development function in Africa50’s strategic effort to bridge the infrastructure gap in Africa?
Project development has been identified as the most challenging phase of project implementation and is where most projects fail. A lot of investment is needed in studies, structuring, contracting, and engagement with public authorities without assurance that projects will get to financial close. Thus it requires dedicated funding as well as a specific skill set. This is where Africa50 comes in. Project Development is a core activity and we allocate funds or early stage risk capital to projects. We get involved, as investors, in all aspects of project development, to steer projects toward financial close, executing the important mandate that was given by our shareholders to strengthen the pipeline of well-structured bankable projects.
- We fund, execute or supervise project feasibility studies; economic, social, technical, and environmental studies; and financial structuring. We also negotiate commercial and financial contracts to ensure a balanced risk allocation; drive the selection
of strategic partners; manage relationships acting as a bridge between public and private stakeholders.
- We are investors, and do not offer grants since we have a mandate to operate commercially, but we may facilitate the mobilisation of soft financing through other partners.
- We follow the venture capital model, where development activities are funded as early-stage equity investments with appropriate financial return prospects, along with the right to invest equity in the project at financial close. We can provide up to $10m of such capital to get a project off the ground.
We also act as a convener of potential partners and work with other institutions, notably the African Development Bank, for project preparation, transaction support, guarantees, public and commercial funding.
What unique set of skills does Africa50’s Project Development team possess to create projects that have attracted private and public sector investments?
Our success in project development is based on engaging directly with our 28 African government shareholders to create jurisdiction-specific risk mitigation and overcome the regulatory and administrative hurdles that may delay projects. Through our dialogue with them and the networks of our experienced team, we can also identify the projects that are most promising.
What is the unique selling proposition of Africa50’s Project Finance function, which allows the organisation to act as the go-to partner for the continent’s infrastructure projects?
First, we have unrivaled local knowledge and presence. Most of our team members are either from the continent or have extensive experience investing here.
Along with this local knowledge, we bring world class expertise and processes to infrastructure investing. As they say, ‘history does not repeat itself, but it rhymes’. Having team members that have done investments in other emerging markets around the world where they have gone through the same sequence of development that Africa is experiencing allows us to make better investments.
Many stakeholders on the continent consider us more of an honest broker as we are part of the local ecosystem. For example, we insist that our counterparts have world class representation so that their rights are well represented. This protects the investee but is also better for the investor in the long run. Thus, our presence in the capital structure leads to reduction in the overall cost of capital, and thus lower costs for the ultimate users of the infrastructure
What parameters inform the decision and investment amount Africa50 commits to a project?
We prefer reputable and experienced partners that have a track record of successful investments in developing countries - partners who have a well-thought out business model that is simple and defensible. We look for partners who have skin in the game and are not looking to monetise in the short-term.
For instance, in the ICT sector, our corporate priorities are improving access to the internet and mobile services. We look at traditional projects such as internet backbone infrastructure and data centers and at innovative projects tailored to the continent.
We do not provide concessional finance, so all projects must have attractive risk-adjusted returns while having a development impact. The bottom line is there should be significant increase in infrastructure delivery, while giving investors a commercial return.
While we normally prefer mid-to-large scale projects with a value over $100 million, smaller projects that have an innovative nature and strong development impact may be considered on a case-by-case basis.