A draft report by the United Nations Economic Commission for Africa (ECA) titled, “Attracting Institutional Investors in Africa’s Infrastructure,” has undergone a thorough review by experts from wide-ranging sectors, including infrastructure, finance, stock exchange, academia, investment, and legal, among others.
The report builds on recommendations from an ECA-NEPAD study commissioned by African heads of state, where domestic resource mobilization is highlighted as a more sustainable option for financing infrastructure development on the continent.
In his welcome remarks at the opening of the two-day expert group meeting on 29 November in Nairobi, Stephen Karingi, Director of ECA’s Regional Integration and Trade Division, told the experts that improved transboundary infrastructure is crucial for the continent to reap the benefits of the AfCFTA.
“We need, therefore, to address any perceptions and realities that can dissuade potential investors from our transboundary infrastructure projects,” he added.
The objective of the report, as explained by Adeyinka Adeyemi who heads ECA’s Infrastructure and Regional Integration cluster, is to “present, from a quantitative perspective, information on the quantum of resources that need to be leveraged, as well as guarantee instruments available to the African institutional investment community to encourage further investments.”
Africa’s infrastructure deficit is estimated at over $130 billion per annum. The ECA report accentuates on the need to explore capital from pension funds and sovereign wealth funds in Africa to accelerate the continent’s infrastructure development.
One of the experts, Hubert Danso – CEO of Africa Investor (Ai) Group – said he was pleased that African pension funds and sovereign funds have entered into a new partnership called the 5% Agenda with African governments.
“The 5% agenda is an agreement between African asset owners, institutional investors and heads of state, which says over the next five years we commit to employ our best endeavors to invest up to 5% of our assets as new infrastructure capital, especially if governments can create a more hospitable environment for long term institutional investment.”
Mr. Danso deplored the fact that “the regulatory environment under the PPP framework has always tended to favor development partners and development finance institutions, which are “debt providers” whereas institutional investors are “long-term equity providers.”
The experts were unanimous on the view that Africa needs to move from the old model where the continent was seen more as a developmental opportunity rather than a commercial and thriving environment for investment, economic growth, and job creation.
The deliberations included a comparative and competitive analysis of financial guarantees that are available to institutional investors and venture capitals angle investors, private sector investors, amounts others.
In total, African Pension and Sovereign Wealth Fund (SWF) investors hold combined assets exceeding USD 500 billion, a figure that is projected to continue growing at a pace of about 1.2% to 1.5% annually.