Africa50 Fund open by year-end
27 August 2013
The Sunday Mail
A NEW fund to accelerate the building of infrastructure across Africa and reduce a current annual funding gap estimated at US$45 billion should be open for business by the end of this year, the president of the African Development Bank (AfDB) predicted last week. Donald Kaberuka said support was growing for the bank's proposed Africa50 Fund. Its main objective is to ensure that the continent does not miss a historic boat by failing to rapidly improve its key infrastructure at a time of high international interest.
The fund will target a middle zone between major projects which will attract only public money and those such as submarine and overland cables which have clear appeal to private investors because they will swiftly show a return.
"There is a whole range of projects which fall in between, where a combination of public money and private savings together can actually get it going," Mr Kaberuka said in an interview in Sandton.
"They range in sectors from transport, maritime, energy, urban water and sanitation, in different parts of Africa. These will be commercially viable projects, not politically selected," he said, speaking after attending a meeting of business leaders from the Brics (Brazil, Russia, India, China and South Africa) group of nations. He defined a political project as one which was in the public interest of one or more countries but not commercially viable. An example was a road project running from Algeria across the Sahara, linking North Africa and West Africa.
"But there are many which are commercially viable and also in the public in terest - we are looking at that category."
The Africa50 Fund, so-named because its ambition is to help secure Africa's economic transformation over the next half century, is being marketed as a vehicle which will be as attractive to African institutional and other investors, in terms of yields and risk mitigation, as instruments in Europe and North America.
The Tunis-based AfDB is hoping to house the fund, but the latter will have its own balance sheet, separate from the bank's, and says that it wants to build the fund gradually to about US$10bn with an initial draw-down of US$3bn.
Mr Kaberuka last week set out his next steps.
"First of all, I need to raise enough equity and, number two, I need to get these projects ready. These are bankable, transformational projects and on the basis of the equ ity we will go to the market and raise the funds.
"I hope by the end of the year we are up and running," he said. "We think Africa possesses a sufficiently interesting pool of savings to which some infrastructure projects can be attracted."
The chief economist at South Africa's Industrial Development Corporation, Lumkile Mondi, is also confident. "This fund is different because it is going to be an African agenda. We can use it to promote our own agenda... I think we want to put our money where our mouth is. Given that this is Africa's century, it's certainly time for an Africa fund," Mr Mondi said.