Africa Fi­nance Cor­po­ra­tion to spend $1.5bn on in­fra­struc­ture

The National - News - - BUSINESS - Sar­mad Khan

Africa Fi­nance Cor­po­ra­tion (AFC) plans to in­vest about $1.5 bil­lion (Dh5.51bn) in 2020 as part of a $7bn pro­ject pipe­line as the mul­ti­lat­eral in­sti­tu­tion con­tin­ues to fund de­vel­op­ment schemes through­out Africa, its pres­i­dent said.

These op­por­tu­ni­ties are spread across power, trans­porta­tion and lo­gis­tics, heavy in­dus­tries, nat­u­ral re­sources and telecom­mu­ni­ca­tions sec­tors – the core ar­eas of in­vest­ment for AFC, said Sa­maila Zubairu, who is in Abu Dhabi at­tend­ing a the Africa In­vest­ment Sum­mit. AFC will con­tinue to look to in­vest jointly with pri­vate sec­tor en­ti­ties and longterm in­vestors, re­gard­less of the ticket size of the po­ten­tial in­vest­ment, Mr Zubairu told The Na­tional.

“If you look at it, we have done about $1bn [of in­vest­ments] this year ... and if you look at the pipe­line [of projects], I can see a bil­lion and a half [dol­lars] next year,” said Mr Zubairu, who is also the chief ex­ec­u­tive of AFC. “When we do it, we do it with a club of peo­ple. [The po­ten­tial] eq­uity [in­vest­ment] op­por­tu­nity will de­pend on the trans­ac­tion. We have done $10m and we have done… $200m [deals] so it all de­pends on the deal.”

AFC is an in­vest­ment grade mul­ti­lat­eral fi­nan­cial in­sti­tu­tion with an eq­uity cap­i­tal base of $1bn. It was es­tab­lished by African sov­er­eigns to boost pri­vate sec­tor-led in­fra­struc­ture in­vest­ment across the con­ti­nent and since its es­tab­lish­ment in 2007, it has in­vested $6.6bn across sec­tors, he said.

AFC’s loans and ad­vances at the end of Septem­ber climbed to $2.7bn and will prob­a­bly reach $3bn at the end of the year, ac­cord­ing to Mr Zubairu. Over the next three years, AFC ex­pects to in­crease lend­ing be­tween 25 to 30 per cent, con­sid­er­ing the size of de­vel­op­ment re­quire­ments across Africa and the pro­ject pipe­line.

Africa, re­garded as the world’s last fron­tier of growth, has a pop­u­la­tion of about 1.3 bil­lion peo­ple and is home to ma­jor economies such as South Africa and Opec mem­bers in­clud­ing Nige­ria, Gabon, Al­ge­ria and Congo. Africa’s econ­omy is fore­cast to ac­cel­er­ate to 4 per cent this year, and 4.1 per cent in 2020, slower than that of In­dia and China, but higher than other emerg­ing and de­vel­op­ing coun­tries, ac­cord­ing to the African De­vel­op­ment Bank.

Sub-Sa­ha­ran African economies are ex­pected to grow 3.4 per cent this year and 3.6 per cent in 2020, ac­cord­ing to the In­ter­na­tional Mon­e­tary Fund.

African na­tions present huge in­vest­ment op­por­tu­ni­ties in sec­tors in­clud­ing power, re­new­ables, health care, ed­u­ca­tion, agri­cul­ture, in­dus­tries, lo­gis­tics zones and rail and roads in­fra­struc­ture.

The cost of ad­dress­ing Africa’s in­fra­struc­ture deficit was about $30bn when AFC was set up more than a decade ago.

That fig­ure has climbed close to $170bn, with wa­ter and san­i­ta­tion re­quir­ing the bulk of in­vest­ment, fol­lowed by en­ergy, trans­port and lo­gis­tics and ICT sec­tors among others, Mr Zubairu said.

The gap for in­fra­struc­ture fund­ing is be­tween $68bn to $100bn ev­ery year, which is a “big chal­lenge” for African coun­tries, he added.

AFC has ac­cess to cap­i­tal mar­kets and will con­tinue to tap var­i­ous fi­nanc­ing op­tions to fund joint in­vest­ments with pri­vate sec­tor par­tic­i­pants to cut the in­fra­struc­ture fund­ing deficit as much as pos­si­ble, Mr Zubairu said.

“We try to lever­age our bal­ance sheet and we con­tinue to pur­sue the in­vest­ment op­por­tu­ni­ties when they come,” he said.

Ear­lier this month, AFC is­sued a $500m bond and is plan­ning to is­sue a sukuk next year. The size and the tim­ing of the po­ten­tial deal is still being fi­nalised. AFC is also get­ting ready to sign a Kim­chi loan, a $140m fi­nanc­ing fa­cil­ity with a South Korean lender, Mr Zubairu said.


AFC’s Sa­maila Zubairu with Pavel Mash­chit­sky of Rus­sia’s Vi Hold­ing in Moscow in Jan­uary

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