“One of the key areas for AFC going forward over the next five years is how to de-risk African infrastructure for institutional global capital. How are we able to make African investment attractive to global capital? We do that by building a coalition of investors.
We can work for the benefit of the continent by mobilising this capital from all across the globe to come to Africa”
As Africa looks to grow, the neccesity of developing its infrastructure is apparent. The scale of infrastructure project requires big investment, with financiers across the globe Africa Finance Corporation (AFC’S) CEO, Samaila Zubairu, tells us the role his organisation is playing in galvanising that capital and developing critical infrastructure.
AfricaLive: Could you tell us a little about the AFC?
Samaila Zubairu: The AFC was established 11 years ago to reduce the infrastructure deficit on the continent. The deficit was assumed to be a $30 billion annual requirement for the next 10 years but unfortunately that has increased to $170 billion annually for the next 10 years. If you consider the population growth rate and the fact that most of the fastest growing economies in the world are in Africa you can understand why the number has gone up especially when you consider the demographic dividend the continent which has left over 50% of the population under 30. Our mission is to foster economic growth on the continent by addressing the deficit on the continent.
Africa’s growth potential is significantly impacted by the deficit. The World Bank tells us 40% of our productivity is reduced by the deficit and 2% of our GDP growth is deflated by the deficit. So clearly our mission is far more important than it was 11 years ago.
In the last 11 years AFC has tried to address this deficit. We have invested $4.5 billion across the continent, in 28 countries. We have grown from a balance sheet of $1 billion to $4.5 billion. We have several landmark projects across our sectors, which are power, transport & logistics and natural resources. That last one is very important for us because most African countries have natural resources but, unfortunately, they focus more on the extraction and export of those rather than beneficiation. We think that is a major impediment of the growth and development of the continent, so we are keen to focus on beneficiation of natural resources.
We also focus on heavy industries and essentially all import substitution activity. We export our resources and then import back finished goods, so what we’re trying to do is focus on beneficiation and conversion on the continent, for utilisation on the continent, rather than import back finished goods that provide jobs elsewhere. Increasingly we are also looking at financial institutions so that we can support others that are focused on our areas.
AfricaLive: What are some of the projects the AFC is currently undertaking?
Samaila Zubairu: Projects that we have done include one of the first wind farms in Sub-Saharan Africa, outside of South Africa, on the Cape Verde islands, which provides 20% of the country’s energy needs. It’s important to note that this has replaced diesel and heavy fuel generators. So this is going green in Cape Verde.
We’ve also mobilised capital for one of the largest independent power projects in Ghana, called Cenpower, which is currently under construction. We’ve also invested in toll roads in Bakwena, South Africa to link the Maputo corridor to the South African economy.
We are invested in a bauxite mine in Guinea. It was very important as it happened after the Ebola crisis and we worked with other investors to open up the bauxite mine, which has seen three exports so it’s a very successful project.
In addition, we’ve built the Henri Konan Bédié Bridge in Abidjan, Ivory Coast which links two parts of the city and we’re concluding a transaction to support a refinery in the country.
On that deal we were able to mobilise significant capital from other investors, which is what we’re looking to do moving forward, use our balance sheet to attract additional capital. This is something we’re able to do as we’re rated AAA by Moody’s, so we have the 2nd highest investment grade written on the continent so we have access to investors in Europe, Asia and America. We can work for the benefit of the continent by mobilising this capital from all across the globe to come to Africa.
AfricaLive: How is the AFC able to lead on so many large-scale infrastructure projects?
Samaila Zubairu: The AFC has a unique mix of bankers and industry specialists which means we can listen to an idea and convert it into a bankable project within a very short amount of time. It means we can bring engineering, commercial and technical aspects of the project to the front and explain it to sponsors and government to be able to execute the project. That’s one of our key differentiating factors and something we are looking to focus on.
In respect of the huge deficit that we have, we don’t have many bankable projects because they need to be prepared, which requires skills that tend not to be available. One of the advantages that we bring to the continent is that we have these skills and the capital to be able to invest in the development of the continent. We are not waiting for someone to bring us a bankable project to finance, we actively seek out mines, roads, governments and develop a bankable project, which we then get other people to join us as we make that investment.
Over the next five years, we want to enhance our capacity to do that. The focus is to enhance capacity to be able to develop more ideas into projects, to be the preferred partner of African governments for their infrastructure and industrial partners. We are looking to be the party they call when they are thinking of building a bridge, an important rail link or a mine.
We also want to play a role in developing intra-African trade. Exports from African countries to other African countries accounts for 10%-20%, if you look at the EU that figure is about 70%. It’s very low so we are looking to invest in infrastructure to link us up.
For instance, for a West African company with operations across the region, it is easier for them to import a raw material from China to Cameroon than export that same material from Nigeria to Cameroon. This is because there’s no rail link, no traffic of ships going around the coast, no infrastructure to move the material from the hinterland to the coast. That’s why it’s so important to build up infrastructure.
AfricaLive: What is the current global appetite for investing in Africa?
Samaila Zubairu: Within the African continent there are investable funds. We have very robust pension funds, particularly in South Africa and now in Nigeria as well. That is some capital but it’s still not enough for what we need on the continent, we still not bring more capital from outside of the continent into Africa.
One of the key areas for AFC going forward over the next five years is how to de-risk African infrastructure for institutional global capital. How are we able to make African investment attractive to global capital? We do that by building a coalition of investors. We are looking at how to work with a coalition of investors from across the globe for African investment opportunities. We think it is improving. We’ve always had the development finance institutions investing in the continent, but increasingly we are seeing China invest in the continent. Particularly to extract resources and export them to China. They’re also interested in fuel and infrastructure to support trade.
We’ve also increasingly seen interest from Middle Eastern investors and now we’re seeing European pension funds and insurance companies take an interest in Africa through the products we’re putting in place. We’ve found that there is a growing market of these investors in the continent and that’s something we’d like to pursue in the future. We are attracting investments from across the globe.
AfricaLive: Is there a future to beneficiation in Africa?
Samaila Zubairu: One of the benefits of Africa is that some of the world’s most valuable minerals are only on the continent. Platinum is 80% in Africa so having beneficiation on the continent is very important. We are working on a project now for a platinum refinery on the continent. We are also looking at beneficiation of bauxite on the continent. In addition, we are investing in a crude oil refinery, which was exported and then imported back into the country. There is opportunity for that kind of value addition project on the continent and that will continue to grow as it is what Africa needs.