Linklaters: Here’s what drove deal interests across Africa in 2020

In 2020, despite the challenges posed by the global pandemic and economic shutdowns, Africa witnessed a significant influx of project finance investments, with a record deal value of approximately $30 billion. This marked a historic year with about 28 projects across the continent, the largest in the past decade or even ever. Andrew Jones, the Head of Linklaters Africa Group, shared insights on the key sectors that attracted these investments during an interview with CNBC Africa. The key theme that emerged from the discussion was the remarkable activity in the oil and gas and renewable energy sectors. The standout deal of the year was the area one financing project in Mozambique, valued at $20 billion. Additionally, various renewable energy projects, along with investments in mining and transport infrastructure, also garnered significant attention and funds from international sources. One of the notable aspects highlighted in the conversation was the geographical spread of project finances across multiple African countries. Apart from Mozambique, countries like Morocco, Nigeria, Guinea, Uganda, and Côte d'Ivoire also saw substantial project finance activities. These projects encompassed a diverse range of sectors including renewable energy, oil and gas, mining, and transport infrastructure developments. While manufacturing did not feature prominently in the project finance landscape, there was a strong focus on infrastructure that supports industrial growth. Jones emphasized the importance of investments in healthcare systems, bridges connecting countries, and power stations to facilitate industries that can drive exports across borders. The emphasis on infrastructure development aligns with the vision of the Africa Continental Free Trade Area, which aims to boost intra-Africa trade and economic growth. Jones highlighted the active nature of the project finance market, with a significant number of deals closing each year, particularly in energy, infrastructure, and mining sectors. The financing landscape is supported by export credit agencies, multilateral organizations, and regional banks, ensuring a steady flow of liquidity for large-scale projects. In terms of deal sizes, while mega-deals like the Mozambique project stand out, the average deal size typically falls in the low to mid-hundreds of millions of dollars range. This balanced distribution allows for a diverse pool of investors to participate in various projects, fostering a healthy investment environment across the continent. Looking ahead to 2021, Jones expressed optimism about the energy, infrastructure, and mining sectors, citing ongoing renewable energy programs and upcoming oil and gas projects as key areas of focus. The green transformation taking place globally has put a spotlight on Africa's importance as a source for key commodities and minerals, driving interest in mining projects. Geographically, East Africa, particularly Kenya and Uganda, presents exciting prospects for future investments, thanks to their liberalized markets and ongoing infrastructure developments. While certain political challenges may pose short-term disruptions, the overall potential for growth and exploration in the region remains high. Finally, the Africa Continental Free Trade Area was lauded as a transformative initiative that has the potential to significantly impact business strategies and investment decisions. The legal framework has laid the groundwork for enhanced intra-Africa trade, but successful implementation and the removal of barriers like red tape will be essential to fully realize the benefits of the agreement. In conclusion, 2020 was a watershed year for project finance in Africa, driven by key investments in oil, gas, and renewable energy sectors. With a robust pipeline of projects and a supportive financing landscape, the continent is poised for continued growth and development in 2021 and beyond.