Need for Private Capital Increases as Africa’s Demand for Infrastructure Investment and Maintenance Continues to Rise

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The African continent is experiencing an increasing demand for infrastructure investment and maintenance, driving the need for private capital among many countries.

According to the African Finance Corporation (AFC) – an investment grade multilateral finance institution – the scale of African demand for financing such projects is high.

One of the latest reports by the AFC indicated that traditional sources of public financing and weakened economic conditions in many regions of the world have magnified the need for private capital.

“AFC, was established to meet this resource imbalance by investing in infrastructure assets on a pan-African basis,” said Andrew Alli, President and Chief Executive Officer of Africa Finance Corporation, who is set to officially step down from his role in the coming days.

“AFC has achieved this through stable leadership and consistent delivery, as well as a continued commitment to the Corporation’s core mission: to address Africa’s infrastructure needs, whilst delivering a competitive return for shareholders,” he added in a statement issued this week.

AFC, which was established in 2007 with an equity capital base of $1 billion, is described as a catalyst for private sector-led infrastructure investment across Africa.

The Corporation’s analysis found that 2017 saw an improved economic performance by the African continent compared with 2016, a trend the group expects to continue into 2018.

The performance was, however, varied across African nations, with the strongest growth rates coming from East Africa, whilst the challenges of lower commodity prices continued to affect the oil-reliant nations. These developments occurred against a global backdrop of political uncertainty in the United States and Europe, causing hesitancy in the markets.

AFC has spent the last decade focusing on projects in areas that would otherwise have been overlooked by traditional investors.

Alli believes that the company is well positioned to continue this trend after he steps down as CEO, even as more investors begin to realize the opportunities that reside on the African continent.

Over the last ten years, AFC has evolved from a start-up to an institution that is a powerful force on the continent; it currently has a membership of 17 countries, an A3 Credit Rating by Moody’s (the second highest rated African lending institution), and has grown from about $1 billion in total assets to about $4 billion.

This is all while investing in various capacities in the landmark African projects such as the Kainji Hydro Electric Power station in Nigeria, the Jubilee oil field development in Ghana, the Main One Cable Company across West Africa, the Henri Konan Bédie Bridge in Côte d’Ivoire, two major Gabonese port projects, a bauxite project in Guinea-Conakry, which was the first major post-Ebola investment in the country, and an upgrade to the airport in Ghana.

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