MiDA, Standard Bank, Mercer rally support for Africa infrastructure finance

MiDA Advisors and Standard Bank Group, in collaboration with Mercer, have expressed optimism in Africa’s economic recovery and sustainable development.

They noted that such a recovery can be fast-tracked through infrastructure financing, especially through multi-investment schemes like green bonds.   

This is contained in the second edition of the report titled: “Infrastructure financing in sub-Saharan Africa: Opportunities and impact for institutional investors,” to present the attractive case for investing in Africa.

The report notes that Africa has been growing at a steady pace in recent years as its economies diversify and continue to prove resilient in the face of the Covid-19 pandemic.

The sizeable scale of Africa’s unmet infrastructure needs provides a compelling opportunity to create shared values for all stakeholder groups, including global and local investors, local businesses, and the communities they serve.

Given the pressure on investment yields in developed markets, African nations have an opportunity to attract private sector funding as they embark on infrastructure development programmes to boost their economies.

Similar to the success of other markets, infrastructure investments will be key to reigniting Africa’s economic growth and development in the wake of Covid-19. The continent needs to address its substantial infrastructure deficit, which according to the African Development Bank, has an infrastructure funding gap in excess of $100billion per annum.

This report builds upon the 2018 ground-breaking publication by MiDA Advisors and Mercer, Investment in African Infrastructure: Challenges and Opportunities, which offered an initial examination of sustainable investment opportunities in sub-Saharan Africa (SSA).

This second report makes the affirmative case for Africa as an infrastructure and real assets investment destination. As in the first publication, the U.S. Agency for International Development (USAID) co-sponsored an expansive survey of the market that is included in the report.

The report reiterates that stronger demand for natural resources as global economies recover, alongside investments in efficient ‘pit to port’ or ‘farm to fork’ transportation and logistics infrastructure, will boost long-term economic growth.

Large-scale infrastructure development will assist the continent’s construction and cement sectors, which are significant employers. This is for as long as the focus remains on investing in productive infrastructure on which other sectors can operate – infrastructure development will drive Africa’s economic recovery.

MiDA Advisors’ Principal Advisor, Daniel Bond, insists that “African nations have an opportunity to capitalise on the increasing demand for sustainable investment options, including green bonds, and to ensure that economic recovery is underpinned by sustainability. I am certain that we are going to see Africa’s sustainable bond markets grow.

“Given the scale of the climate crisis and the dire inequality characterizing societies around the world, the focus on social and economic impacts is here to stay and African policymakers and corporates need to position themselves accordingly,” Bond concluded.

African nations have an opportunity to capitalise on the increasing demand for sustainable investment options, including green bonds, and to ensure that economic recovery is underpinned by sustainability.

Infrastructure financing report

Commenting on the report, Sustainable Investments Senior Consultant, Mercer, Max Messervy, said: “As a follow up to our previous publication on infrastructure in Africa, this report examines in some detail examples of infrastructure projects and programmes that have been carried out successfully and that have involved or have the potential to involve foreign institutional investors. The projects cover a mix of sectors across some countries and all have been structured in ways that have successfully attracted private sector financing.”

Considering that many African nations now find themselves in weak fiscal positions, governments are turning to public-private partnerships to deliver large-scale projects. Market dynamics could well support the mobilisation of private sector capital and expertise.

“The projects are a mix of sectors and countries. But all have been structured to successfully attract private sector financing. In addition, we look at several promising recent innovations in infrastructure financing that have the potential to open up even greater opportunities for institutional investments in Africa,” Bond said.

On his part, Standard Bank Group’s Chief Executive, Wholesale Clients Business, Kenny Fihla, said: “To successfully crowd-in the private sector, governments need to ensure they create attractive investment conditions. This involves creating policy certainty, managing political risk, ensuring that long-term infrastructure planning is robust, and building capacity to ensure projects are well structured and bankable.”  

“We believe that many African countries are moving in the right direction with regard to protecting investor interests, and we are seeing growing interest in assets on the continent. We consider infrastructure to be the backbone of any economy, and we have streamlined our strategy for the sector to align our resources with key themes on the continent,” added Fihla.

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