In recognition of this need to change business models, the African Development Bank has responded by creating the Africa 50 fund. This is expected to be a significant game changer for Africa, says Tas Anvaripour, Director of Business Development, African Development Bank, who spoke to Engerati at the recent Africa Energy Forum.
Doing business differently
According to Anvaripour, Africa needs approximately US$100 billion dollars of investment for infrastructure each year. The US$3 billion infrastructure fund has been created with the purpose of raising money to deliver on critical infrastructure on the African continent through a new global partnership platform. Money will be raised from regional and non-African pension funds, insurance groups, sovereign wealth funds and institutional investors. The fund will help infrastructure projects to take off and meet a successful closure.
Says Anvaripour, “We have to show the market that we are doing business differently. By 2014/2015, we expect US$400 to US$600 million investments in existing projects. The bank has been watching these projects for the last 5 years and we know that these projects will reach a successful closure very quickly.”
Anvaripour points out that project preparation and development is critical for success. Through the fund, the bank aims to reduce the current project development timeframe from 10 years to around three to four by using development capital and leveraging others’ development capital by partnering with them.
This new investment vehicle will be more efficient and flexible than the current model, says Anvaripour. It will increase capital through the capital market. The fund will be a corporation-it will be financially independent, and have its own rules and regulations. It will also have different types of shares to attract different investors. Share options will be on offer to create investment capital.
This investment capital will be used throughout the entire project not just at certain intervals-basically from idea to delivery, says Anvaripour.
Peace of mind for investors
Institutional investors invest in a portfolio of energy projects across Africa-not in a single project. All of these projects have been checked for bankability by the African Development Bank. This definitely lowers the level of risk for investors.
Says Anvaripour, “With the right structure in place, it will be difficult to lose money. The African Development Bank has a brilliant track record as it has built up long-standing relationships with governments and investors over the years. We will also be bringing our own investment to the table.”
According to Anvaripour, new investors can expect some return from day one on a couple of existing projects.
Africa 50 is already up and running.