Africa Finance to spend $1.5bn in 2020 development projects across continent

Exclusive: The multilateral financial institution has a current pipeline of investments in Africa worth $7bn

Samaila Zubairu, president and chief executive of Africa Finance Corporation. Getty Images

Africa Finance Corporation (AFC) plans to invest about $1.5 billion in 2020 as part of a $7bn project pipeline as the multilateral financial 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 two-day Africa Investment Summit hosted by the Abu Dhabi Investment Authority. AFC will continue to look to invest jointly with private sector entities and long-term 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 [2019] ... and if you look at the pipeline [of projects] I can see a billion and a half [dollars] next year,” Mr Zubairu, who is also the chief executive of AFC, said. “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 deployed $6.6bn in investments across sectors, Mr Zubairu said.

AFC’s loans and advances at the end of September climbed to $2.7bn and will probably reach $3bn at the end of 2019, according to Mr Zubairu. Over the next three years, AFC expects to increase lending between 25 per cent 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 in 2019 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 number 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 of infrastructure funding is between $68bn–$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,” Mr Zubairu 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 Korean lender, Mr Zubairu said.