MiDA Advisors and Standard Bank Group, in collaboration with Mercer, have published the second edition of the report titled “Infrastructure financing in sub-Saharan Africa: Opportunities and impact for institutional investors”, to present the attractive case for investing in Africa.
This report builds upon the 2018 groundbreaking publication by MiDA Advisors and Mercer, Investment in African Infrastructure: Challenges and Opportunities, which offered an initial examination of sustainable investment opportunities in sub-Saharan Africa. This second report makes the affirmative case for Africa as an infrastructure and real assets investment destination. As in the first publication, the U.S. Agency for International Development (USAID) co-sponsored an expansive survey of the market that is included in the report.
The African continent has been growing at a steady pace in recent years as its economies diversify and continue to prove resilient in the face of the Covid-19 pandemic. The sizeable scale of Africa’s unmet infrastructure needs provides a compelling opportunity to create shared values for all stakeholder groups, including global and local investors, local businesses, and the communities they serve.
Given the pressure on investment yields in developed markets, African nations have an opportunity to attract private sector funding as they embark on infrastructure development programmes to boost their economies.
Similar to the success of other markets, infrastructure investments will be key to reigniting Africa’s economic growth and development in the wake of Covid-19. The continent needs to address its substantial infrastructure deficit, which according to the African Development Bank, has an infrastructure funding gap in excess of US $100bn per annum.
“As a follow up to our previous publication on infrastructure in Africa, this report examines in some detail examples of infrastructure projects and programmes that have been carried out successfully and that have involved or have the potential to involve foreign institutional investors. The projects cover a mix of sectors across some countries and all have been structured in ways that have successfully attracted private sector financing,” says Max Messervy, Sustainable Investments Senior Consultant, Mercer.
Considering that many African nations now find themselves in weak fiscal positions, governments are turning to public-private partnerships to deliver large-scale projects. Market dynamics could well support the mobilisation of private sector capital and expertise.
“This report examines in some detail examples of infrastructure projects and programs that have been carried out successfully and that have involved institutional investors. The projects are a mix of sectors and countries. But all have been structured to successfully attract private sector financing,” says Daniel Bond, MiDA Advisors Principal Advisor.
“In addition, we look at several promising recent innovations in infrastructure financing that have the potential to open up even greater opportunities for institutional investments in Africa,” says Bond.
“To successfully crowd-in the private sector, governments need to ensure they create attractive investment conditions. This involves managing political risk, ensuring that long-term infrastructure planning is robust, building capacity to ensure projects are well structured and bankable, creating policy certainty, and stamping out corruption,” says Kenny Fihla, Standard Bank Group Chief Executive of Wholesale Clients Business.
“We believe that many African countries are moving in the right direction with regard to protecting investor interests, and we are seeing growing interest in assets on the continent. We consider infrastructure to be the backbone of any economy and we have streamlined our strategy for the sector to align our resources with key themes on the continent,” added Fihla.
Stronger demand for natural resources as global economies recover, alongside investments in efficient ‘pit to port’ or ‘farm to fork’ transportation and logistics infrastructure, will boost long-term economic growth. Large-scale infrastructure development will assist the continent’s construction and cement sectors, which are significant employers. This is for as long as the focus remains on investing in productive infrastructure on which other sectors can operate – infrastructure development will drive Africa’s economic recovery.
“African nations have an opportunity to capitalise on the increasing demand for sustainable investment options, including green bonds, and to ensure that economic recovery is underpinned by sustainability. I am certain that we are going to see Africa’s sustainable bond markets grow. Given the scale of the climate crisis and the dire inequality characterizing societies around the world, the focus on social and economic impacts is here to stay and African policymakers and corporates need to position themselves accordingly,” says Bond.
About MiDA Advisors
MiDA Advisors (MiDA) is an advisory firm specializing in facilitating institutional investments and trade in Africa and other emerging markets. Our mission is to identify investment opportunities and provide transaction advisory services in emerging markets in partnership with development finance institutions, governments, institutional investors and research institutions. Originally founded during the 2nd US-Africa Leaders’ Summit in 2016 under a cooperative agreement with the U.S. Agency for International Development (USAID), our team has expanded to an implementing partner firm engaged by USAID and private sector organizations for development finance and transaction advisory services. We are passionate about building lasting relationships and capacity that foster investment opportunities and innovative capital markets solutions derived from the competitive edge of U.S. financial markets.
Mercer believes in building brighter futures by redefining the world of work, reshaping retirement and investment outcomes, and unlocking real health and well-being. Mercer’s approximately 25,000 employees are based in 43 countries and the firm operates in 130 countries. Mercer is a business of Marsh McLennan (NYSE: MMC), the world’s leading professional services firm in the areas of risk, strategy and people, with 81,000 colleagues and annual revenue of over $19 billion. Through its market-leading businesses including Marsh, Guy Carpenter and Oliver Wyman, Marsh McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit mercer.com. Follow Mercer on LinkedIn and Twitter.
About Standard Bank
Standard Bank Group is a financial institution that offers banking and financial services to individuals, businesses, institutions and corporations in Africa and abroad. Operating in more than 20 countries in Africa and abroad, the Group’s worldwide presence consists of an integrated suite of end-to-end wealth management services and banking solutions. As a connected, real economy bank, the Group’s insight and experience helps unlock opportunities and mitigate risk for the bank’s broad range of clients. Our differentiator is our long-term commitment to Africa, our home, underpinned by a heritage of over 150 years on the continent.