New investment platform, Africa50, subscribed to by 20 African countries, together with the African Development Bank (AfDB) has raised an initial combined amount of 830 million dollars in share capital towards infrastructure on the continent.
Africa50 launched late last month in Morocco after noting the need for more roads, rail connections and better water and sanitation on the continent.
The aim of this platform is to “increase the rate of infrastructure delivery, project development as well as financial tools to address specific market challenges” in Africa.
“The objective is for African countries to probably raise something close to 1.5 billion [dollars] and in two three years, we expect reasonably to get three billion,” said Alassane Ba, acting chief executive officer of Africa50.
The platform has a long-term objective to generate 10 billion dollars in five to ten years with a focus on high-impact national and regional projects in the energy, transport, ICT and water sectors.
“We expect to raise 3 billion in two to three years, as you know after our first closing we get an amount close to 1 billion for 20 African countries, we are still working with the other 24 African countries,” said Ba.
Africa requires 100 billion dollars annually for infrastructure funding however it is only able to raise half of that says the World Bank, despite the availability of capital.
According to The United Economic Commission for Africa, the continent’s foreign exchange reserves are estimated to have around half a trillion dollars.
Ba agrees that there is capital in Africa but that this entity has to follow a gradual process that will take time.
“I really want to emphasise it’s a process, this is the first time we are launching an initiative like that, it will take time…This is one of the most important initiatives in development finance over the last 25 years, it will require time to attract all this African saving into this vehicle,” said Ba.
Africa50 is reviewing about ten projects and it hopes to finance one of them by the end of the year and will most likely choose the most profitable option.
“We are driven by profitability, while we are doing good in African countries… I want to emphasise on profitable projects, this is a financial investment, we are not driven by a political approach,” said Ba.
Initially Africa50's target was only African countries as Ba believes “Africa has to finance her own development”, but it has since expanded towards looking at international investors – pension and sovereign wealth funds.
The initiative came about after the African Heads of States, in their Declaration on the Programme for Infrastructure Development in Africa (PIDA) in 2012, called for innovative solutions to facilitate and hasten infrastructure delivery on the continent.
The platform expects to start developing and financing projects before the end of 2015.