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Channel: Infrastructure – BizNis Africa

Infrastructure development remains a key driver for SA economy

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Infrastructure development is a key driver of South Africa’s growth prospects, with rail and water infrastructure focal areas.

This is according to Ebrahim Patel, South African Economic Development Minister, who is in Davos for the World Economic Forum (WEF), as part of the South African delegation looking to showcase the country’s attractiveness as an investment destination and trade partner.

“We are putting a lot of money into our infrastructure build programme, it is averaging about ZAR300 billion a year and has seen us move out of an energy shortage into an energy surplus, but we still have very significant infrastructure investment we have to make, in rail, with the commuter story, freight logistics to move minerals more quickly, and water which is exacerbated by the drought.”

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UK government presents infrastructure development plans in Africa

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On the sidelines of the Mining Indaba in Cape Town, at a roundtable hosted by the UK Department for International Trade (DIT), UK government and private sector presented the Africa Infrastructure Board and emphasized the unique proposition UK companies and government could offer in providing a holistic approach to infrastructure development in Africa.

The UK Department for International Trade (DIT) hosted a number of African delegations attending the Mining Indaba to present the Africa Infrastructure Board. This is an initiative that brings together and puts the case forward for choosing the UK as an ideal partner not only to develop projects in the mining sector but to create a holistic solution that will benefit the wider community by developing the associated infrastructure around the project.

The High Commissioner of UK to South Africa, Nigel Casey, mentioned that the UK would be increasing their efforts to work closer with African governments and private sector. Mining projects are much more than just mining, he said, and they don’t work without the associated infrastructure. Without naming names, he mentioned that the UK was conscious that there is plenty of competition out there when it comes to offering comprehensive solutions to African partners. “We felt the need to up our collective game,” he said, “and create a new government industry partnership called the Africa Infrastructure Board, which brings together all the players in the UK whether that is government through DFID, or UK Export Finance, one of our best kept secrets, or the deep pockets of the Commonwealth Development Corporation (CDC), and private sector operators, all operating in one single place to offer an end to end solution.”

Oliver Andrews, Chief Investment Officer at the Africa Finance Corporation (AFC) who was one of the panellists during the roundtable, noted how DFID, the UK’s government development arm, was instrumental in developing the model currently being used in infrastructure project financing. He also reiterated the importance of the City of London, especially as most contracts are generally governed by UK law. The support network in structuring these deals, that is the legal, capital raising and technical side in London plays a vital role.

Craig Sillars from the Department for International Trade showcased a number of projects where opportunities in the mining sector are being structured in a way that truly develops the infrastructure and act as a catalyst to develop other sectors. The UK DIT, for example, is working with a UK investor in Angola on resurrecting an iron ore mine. But as well as the mine they are developing a smelter, which will ensure in-country beneficiation of natural resources, and that will involve the extension of an existing railways, and the expansion of a port. “There will be 600MW of power attached to that,” he went on to add, “and 25,000 of agriculture land provided grow biomass to help provide charcoal for the smelter.”

Interestingly, he said that the UK was looking at partnering with China on the Simandou Mine in Guinea once they take over the mine to help them develop a holistic solution to develop the local infrastructure and sharing with them the designs they have put together to ensure a sustainable project that benefits the local community as well as getting the high quality iron ore to market.

“The approach we are taking,” he told the participants, “is to produce masterplans that will benefit the communities not only for the next four to five years but the next 60, which is what we are doing in Angola, and that when the mining project is finished the infrastructure will continue to benefit the whole region.”

Francis Gatare, CEO of the Rwanda Mining Petroleum and Gas Board, had said that most of the Rwandan involvement with the UK had been through government, but that private sector interest was growing.

It was agreed that London would continue to be an important hub for investors in mining and in infrastructure, not only as a financial centre, but also for the legal and technical expertise it offered, and that the resurging interest from the UK to Africa can only be a positive development for both the UK and the African continent.

UK Department for International Trade (DIT) pledges investment in Africa

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The United Kingdom’s Department for International Trade (DIT) says it has the ability to facilitate the provision of billions of Pounds Sterling in lending and guarantees to African countries to help them address a chronic infrastructure backlog that the World Bank estimates to be about $93 billion a year in the Sub-Saharan region alone.

DIT in Africa has a presence in 21 countries across the continent, can enable the provision of these facilities through UK Export Finance (UKEF), the United Kingdom’s export credit agency, a part of DIT. Loans can be extended in the local currencies of 9 African countries for projects ranging from transportation, mining and general construction, though they must include at least 20% UK content and meet all other lending criteria. For example, UKEF has the ability to support infrastructure projects in South Africa (up to £4 billion), Kenya (up to £1 billion) and Nigeria (up to £750 million).

“Africa’s infrastructure challenges not only inhibit its ability to trade with the rest of the world but are also a significant obstacle to intra-African trade, both of which are critical to the continent’s economic growth agenda,” said Emma Wade-Smith, UK Trade Commissioner for Africa.

“Finance is a critical component of infrastructure development and the combined risk appetite of £21.4bn we have across the region to facilitate projects is a clear sign of the UK’s belief in Africa’s long-term economic growth trajectory.”

“Of course, projects must still meet all the lending requirements before we’re able to disburse any funding. But in terms of capacity, we have the ability to provide significant funding for infrastructure projects across Africa,” Wade-Smith added.

Although Africa is the second-fastest urbanizing region in the world behind Asia, with estimates showing that in the next 30 years more than half of its projected 2.2bn people will live in cities, the continent still struggles from a chronic lack of basic infrastructure. Data compiled by the Washington D.C.-based Brookings Institution show that 319 million people across Sub-Saharan Africa have no access to reliable drinking water; 620 million have no access to electricity; while only 34% of the continent’s people have adequate road access.

“There is enormous scope for Africa to boost its exports to the UK and indeed other parts of the world if it can address its infrastructure backlog,” says Wade-Smith. “The research shows that in the long-term trade is better than aid and without adequate infrastructure it will be very difficult for Africa to boost its ability to buy and sell with the rest of the world.”

DIT in Africa has been instrumental in establishing the Africa Infrastructure Board, which brings together UKEF, the Department for International Development (DfID) as well as UK infrastructure and mining companies that are already active in Africa. Its ambition is for UK government and industry to work together to identify major infrastructure projects across Africa that can benefit from the UK’s extensive expertise in the fields of finance, engineering and governance, as well as health and safety.

DIT in Africa is currently tracking numerous active infrastructure projects across the continent which it believes could benefit from UKEF funding. One such project that has already benefitted is Uganda’s Kabaale International Airport which, when completed, will be the East African nation’s second-largest airport, thanks to the £215m loan it received from UKEF in December 2017, the largest-ever facility granted to an African country by the export credit agency.

“UKEF’s risk appetite for Africa has more than doubled in the last few years in line with Africa’s improving economic and socio-political fundamentals,” said Wade-Smith. “The continent is becoming increasingly democratic and economically stable, which is heartening as with infrastructure commitments one needs to be in it for the long haul.”

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How to mobilise US-Africa pension funds to invest in African infrastructure

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Highly attractive infrastructure and private equity investment opportunities abound in Africa, but foreign pension funds willingness to invest in the region will depend on a more stable political and regulatory environment, and the availability of local peers to collaborate and co-invest in projects.

This was one of the key take-outs from the US-Africa Pension Funds Trustees Roundtables conference that took place in Johannesburg, South Africa hosted by the National Association of Securities Professionals (NASP) and USAID as part of their Mobilizing Institutional Investors to Develop Africa’s Infrastructure (MiDA) program.

The day focussed on exploring investment outlooks and opportunities in African infrastructure and private equity, as well as views and experiences related to diversity and financial inclusion.

Martin Kuscus, Mineworkers Provident Fund Board Chairman, stated that the day represented a welcome opportunity to exchange views with representatives from the United States as both the world’s biggest economy and a country with highly developed capital markets.

“South Africa is one of the leading economies on the African continent, so from our perspective it is encouraging to hear that the world would like Africa to succeed. It has also been useful for calibrating our thinking with global best practice, and to gain a sense of context from foreign investors in understanding where they may be risk averse to investing on the continent,” he said.

The US delegates seemed to agree that while Africa holds a wealth of long-term investment opportunities, many asset allocators prefer to invest in regions they are familiar with and need some sense of comfort of the security of investments.

Participants present indicated that while Africa offered a favourable risk/return investment profile, political instability, the ability to perform a comprehensive due diligence and potential illiquidity remained some of the key risks.

Charles Burbridge, Chicago Teachers Pension Fund Executive Director, explained that while African infrastructure investments represented similar levels of risk to infrastructure investments in the United States, US pension trustees and executives would prefer to partner with another pension fund or investment agency with in-depth regional experience and political understanding to help de-risk investments.

“Considering the potential for returns in consumer driven economies, and in terms of the age of its citizenry, we see huge long-term investment opportunities in Africa,” he said.

“But as investors you tend to manage to what you know and fear the unknown, and while today has shifted more of the world into the known, we would also look at what partners are available with boots on the ground that can do the necessary due diligence.”

Delegates also shared common experiences in implementing diversity and inclusion initiatives.

While many agreed that the dearth of experienced black asset managers continued to represent a challenge, diversity and financial inclusion policies and initiatives offered the advantage of enabling funds to support the incubation of new firms and strategies and the diversification of manager types for the next generation of asset managers.

“This gathering was an excellent experience for our members seeking to engage with industry peers in Africa to further our understanding of the opportunities in the region. We look forward to more exchanges with investors on the ground with similar investment philosophies, and that will ultimately lead to US investors doing more business in Africa and opportunities for co-investments,” stated Donna Sims Wilson, National Association of Securities Personnel (NASP) Chair.

“The day has really been about leveraging the collective wisdom and expertise of like-minded local and global pension funds, participating complementary organisations and industry service providers. It marked the first step in building sustainable and strategic relationships. Institutional investors are the main suppliers of capital within the alternative investment space. Emerging market economies have much to offer and we welcome the opportunity to explore areas of future collaboration,” adds CEO of Ba, Anne-Marie D’Alton, BATSETA Chief Executive Officer.

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Off grid investments ideal for Africa’s energy sector

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With recent reports estimating that six hundred million people are without access to electricity in sub-Saharan Africa, significant and sustained investment is required across Africa’s entire energy generation and supply value chain.

While even a decade ago meeting Africa’s energy backlog was considered unaffordable, today, many largely technology-driven factors are creating new opportunities for investment in Africa’s energy sector.

Significant improvements in the cost and quality of renewable technologies are enhancing the feasibility and attractiveness of energy projects in Africa. Combined with new battery storage capabilities, “these changes offer investors, funders, governments and consumers a fundamentally different energy make-up and mix – presenting Africa with a new universe of energy ownership, supply and funding opportunities,” says Renita van Tonder, Standard Bank Head of Power.  

The trend is clear

As the size and number of large government-funded and implemented non-renewable power projects in Africa has decreased there has been an uptick in smaller mixed public-private (or entirely private) off-grid power projects with rational, local end-user funding.

To date, Standard Bank’s power and infrastructure portfolio has been biased towards large scale projects and finance solutions developed for grid-dependent power producers. While large utility-owned non-renewable projects will remain an important part of the energy value chain, off-grid offers a faster way to close Africa’s power gap.  

“By expanding Africa’s energy mix beyond state-funded utility-provided non-renewable grid solutions Africa can – much more quickly and affordably – support its immediate industrial and business growth needs,” says Stephen Barnes, Standard Bank Global Head of Power and Infrastructure.  

Renewables, especially privately or partially privately-funded new off-grid and captive power solutions, are set to sustain and expand investment while increasing affordability and access to electricity in Africa’s rapidly evolving energy landscape.

From a funding perspective, off-grid deals have shorter tenors and can often be denominated in local currency. As such, off-grid projects lend themselves to Africa’s traditionally more illiquid and hard currency constrained environments. Since local currency debt structures support the development of domestic currency markets renewables projects denominated in local currency could make domestic African pension funds, for example, relevant to domestic energy supply, directly leveraging domestic savings for national development.  

To date, Africa’s off-grid power landscape has seen the most growth in the solar home systems (SHS) and commercial and industrial (C&I) segments.

Africa’s SHS energy segment is currently dominated by small 8 to 200 watt solar panels mounted on the roofs of small rural homes – with larger customised solutions in the affluent market. By allowing customers to pay in instalments via pay as you go, SHS are breaking the affordability barrier for off-grid solutions in Africa.

“As such, looking ahead, most of the growth in terms of households covered by off-grid power solutions could come from service-platform developers able to leverage strong distribution platforms,” says van Tonder.

In Africa’s C&I energy segment, off-grid solar systems have created new markets for investment across the value chain, from the product developer to the integrated service provider. For example, factories and business complexes that produce their own renewable (largely solar) power are proliferating across the continent. Large mines too often also supply electricity to local communities. These captive power systems operate mini and localised grids, “effectively acting like utilities in the supply and sale of power to local communities and businesses,” says Barnes.

Going forward, there is further opportunity to target tier one property companies or corporates with large property portfolios in Africa, “creating local offtake financing solutions for rooftop solar installations on their properties – and then selling energy to local communities,” adds van Tonder.   

Standard Bank has developed an off-grid strategy focused on developing a continent-wide off-grid project pipeline aimed at driving the growth of Africa’s off-grid renewables sector.  

“With Standard Bank’s established presence in 20 markets, we are particularly well-placed, for example, to use available information to identify and unlock rational off-grid user-pay opportunities for revenue-independent power development and supply across the continent,” says Barnes.

Given Africa’s energy deficit and sovereign credit challenges, the continent’s energy future will need to blend the full range of energy sources and technologies, renewable and otherwise, “in both grid-connected and off-grid solutions that mix public and private, and local and global, investment in affordable and sustainable revenue generating structures,” says van Tonder.  

Developing this diverse energy supply and generation mix will require an equally diverse funding mix if it is to be sustainable.

The global trend towards public private partnerships (PPPs) is currently playing out across the African continent. While non-cost reflective tariffs in some countries make PPP financing solutions more challenging, recent moves towards cost-reflective tariffs in Mozambique, Ghana and Zambia facilitate the relevance of PPPs as a viable funding model, providing the potential to further improve the electrification rates across Africa. 

Adding localised privately funded and user-pay solutions to the national grid or allowing entirely independent off-grid solutions to take pressure off the grid, “provides debt-stressed African sovereigns with a way of funding the development of power projects – by moving substantial investment off government balance sheets,” explains van Tonder. 

Another opportune trend for Africa is that development finance institutions (DFIs) and export credit agencies (ECAs) driven by their governments’ environmental agendas are increasingly willing to partner with commercial banks to fund projects that integrate renewable power into African grids – or provide entirely off-grid alternatives that bring affordable and sustainable power to more Africans. Debt structures including more patient DFI or ECA funding, “allow commercial banks to support the longer-tenor projects that characterise large power and other infrastructure projects,” says Barnes.

At the global level ongoing low yields in developed markets are encouraging cyclical investment in emerging market assets. In this environment, “well-structured renewable or mixed power projects supported by innovative PPP and user-pay legislation will provide sustainable long-term yield for developed world funds,” explains van Tonder.  

This is an exciting time for Africa. The continent’s governments, banks, businesses and consumers – and the world’s investors – are faced with a, “significant technology-delivered opportunity to build a sustainable, affordable and long-term yield-generating energy ecosystem in Africa with the potential to drive growth and broaden prosperity for generations to come,” says Barnes.

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Commercial Real Estate in Francophone Africa on the rise

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The bilingual Francoreal Property Investment Summit, will take place on 16 and 17 October 2018 in Dakar, Senegal.

It will provide a platform for Africa’s real estate investors and developers to gauge opportunities in one of the world’s fastest growing zones – known colloquially as Francophone West and Central Africa.

“The market is still growing at a faster clip than the rest of the World,” confirms JD Diabira, BHCI Chief Executive Officer.

Providing macroeconomic and currency stability; through the West African Monetary Union (UEMOA) regional block, this integrated and increasingly developed region has multiple competitive economic advantages according to the Chairman of BHCI, JD Diabira, the region’s first specialist commercial real estate mortgage provider and local real estate advisor, Ivan Cornet of Latitude Five.

As two of 30 confirmed high-level speakers for the forum, the two-day conference has been brought to market in partnership with Teyliom, the region’s largest investor and developer in real estate.

For Cornet, who has spent the past decade driving the development of commercial property from his base in Abidjan, Cote d’Ivoire, this forum provides a platform for local, regional and international delegates to learn, network and strike deals.

“I’ve been sharing Francophone Africa’s story at African real estate’s most significant event; the African Property investment (API) Summit for the past decade. And now, they are hosting a high-value conference backed by the largest investor and some of the most high profile names in the region,” he says.

While Abidjan has been a focus for investors due to its role as the commercial port and gateway into Francophone West Africa, Senegal’s emergence driven by its investment into infrastructure and real estate has placed it on par with its larger neighbour explains Cornet.

“A few years ago, Abidjan was the only market for outside investors, but the two-billion-dollar plus investment into Dakar’s Diamiadio City, proactive government policy moves and robust GDP figures, makes it a very attractive and stable market politically.”

The opportunity to obtain 10% yields across different sectors has made Francophone Africa attractive for Cornet compared to Europe. Despite, his successes, he believes that rapidly improving fundamentals, and particularly access to funding, will lead to a measured climb in investment.

For specialist mortgage provider, JD Diabira of BHCI (CEO), who is part of a new wave of lenders providing tailored and suitable loan structures to mostly African developers in the region – the massive demand has been welcoming and overwhelming.

“The number of bankable projects is not a problem we are bursting with projects, and we have not even engaged in much marketing outreach yet,” he says, 80% of which are locally driven.

“While the market is still modest, it is growing at a faster clip than the rest of the world and we are also seeing local institutional investors shifting away from direct equity investments and into debt-funded real estate transactions. For me, that’s a sign of new market sophistication.”

While demand remains high, access to funding remains a challenge in the market, but the difficulty is not a result of what people think, as he explains.

“The lack of capital isn’t the big issue it’s made out to be,” as he points to the number of significant successful capital raises in the market.

“It seems to us the real problem is the willingness (or not) of lenders to lend,” says Diabira.

The reason, he says is that local lenders have had little reason to offer mortgages, which has been attributed to the high prevalence of government bonds in the market which banks have collected 6-7% for a plain value zero-risk bond, he adds.

And while this 1940 ‘s style French Prefecture culture persists, Diabira believes specialist firms and new pan-African banks entering the market will be successful in their projects and also aid in deepening the market.

“Fortunately this is not a problem specialist lenders, like ourselves, have. We lend because it’s what we do, and it’s the only thing we do,” he adds.

And while the local market continues to evolve and develop driven by demand and new skills, international developers are typically funded by their countries of origin says Diabira.

“We are a local lender, albeit with a small Canadian parent, run by Africans. We are local and are more interested in getting Africans funded across the UMEOA region.”

For the host of the Francoreal Summit, API Events Managing Director KfirRusin, the event is a uniquely high-level conference and the response has been tremendous.

“The local market, together with our strong base of multi-billion dollar pan-Africa funds, private equity partners and developers are excited about this region. We believe this bilingual event will result in new partnerships and a flurry of deal making across the region.”

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Meet Captains of Industry at 2018 Infrastructure Africa

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The impact of Africa’s current economic status and future growth potential on infrastructure development will be deliberated during the 7th annual Infrastructure Africa Business Forum (IABF) at the Sandton Convention Centre on the 9th and 10th October 2018.

Infrastructure Africa attracts leaders from across Africa who are looking for new projects, collaborations and an opportunity to create business connections.

Infrastructure Africa is an industry event that brings together business and government leaders as well as industry and country experts.

Delegates can connect with fellow CEOs, African Ministers and business leaders to meet potential customers, partners and financiers.

Who attends Infrastructure Africa?

For more information log on Infrastructure Africa website.

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Top Infrastructure challenges in Africa

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Every productive economy has strong infrastructure networks. Infrastructure connects cities and countries together, is the backbone of transport systems, healthcare systems, technology and schools.

In Sub-Saharan Africa, poor infrastructure cuts national economic growth by two percentage points every year and reduces productivity by as much as 40%.

The continent has made strides, but there are always new opportunities for seizing when it comes to developing infrastructure to set the stage for economic expansion of Africa’s countries.

• Mobilising financial resources

In an increasingly volatile global political context, mobilising financial resources for infrastructure projects has become more complex and challenging.

Africans are innovative and entrepreneurial and with the political will and accountability from its governments and with sound public-private-partnerships that are in the interests of the people, Africa can look inward to finance its own growth to find African solutions to Africa’s problems.

These solutions need to ensure revenue sustainability and long-term income generation plans.

• Transport regulations should promote the use of railway infrastructure

The development and maintenance of efficient and competitive transport systems ensures an integrated infrastructure network that can then serve as a catalyst for social and economic development; will promote safe and secure transport sectors, improve rural access, infrastructure and mobility, improve public transport systems and increase the contribution of the transport sector to job creation in Africa.

Transport regulations in Africa should look at promoting the use of railway infrastructure to support local and regional businesses, rather than using the road network, which slows down the continent’s productivity and keeps the costs of doing business and moving goods very high.

• Project bankability – Proper project preparation and due diligence

Many an infrastructure project has failed for lack of proper planning and preparation in the early stages of a project.

Structuring a project as a bankable project requires detailed consideration on the technical, legal and economic aspects of the project. Every bank and financial institution has its own set of criteria through which it assesses the bankability of a project.

However, the basic requirement is that a project should have a stable and visible cash flow throughout the entire financing period of the project.

• Technology and innovation in Africa

African governments are increasingly seeing infrastructure development as a job creation opportunity and the last 10 years has seen a marked change in the number of infrastructure projects in Africa reaching financial close, and several of these have been in transformational technologies.

However, Africa still has much to do to leapfrog its innovation and development into a world where technological advancements and innovation are becoming increasingly important for being a global business player.

Africa has the potential to leap frog by utilising the technological advances of other advances of
other countries investing in Africa’s infrastructure.

This information was originally published by Infrastructure-Africa.

Copyright Infrastructure-Africa 2018. Published under permission.

Source: Infrastructure-Africa

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Infrastructure Africa provides platform for women’s economic development

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The annual Infrastructure Africa Business Forum is providing a platform for women’s development in traditionally male-dominated infrastructure sectors.

“The role of women in Africa’s economic development remains a central issue with gender inequality thwarting growth in many countries. The women of Africa currently represent an untapped economic force that is necessary for the continent’s socio-economic development as well the optimisation of its potential,” said Liz Hart, Infrastructure Africa Managing Director.

Women are catalysts for meaningful change on the African continent and that women and women leaders will be critical in leading our continent into a new future is very evident. As such, creating opportunities that promote African women’s economic participation is a prerequisite if Africa is to experience its predicted growth within the next few decades.

In most African countries, only about a third of women participate in economic activities, however research shows that when women are actively involved, the improvement is measureable: In Africa, women’s economic participation encourages increased GDP, better governance within political structures and improved performance as a result of leadership within organisations.

And it’s not only women’s economic participation that’s needed – women in Africa need to become more representative in most spheres, including in infrastructure sectors, and women need to become more involved in the decision-making and planning of infrastructure projects and programmes.

In addition, the burden of infrastructure deficit is carried mostly by women, who walk kilometres per day and spend hours collecting water as well as wood for cooking and heating. Thus the design of infrastructure programmes needs to prioritise such gender-specific issues to ensure that women are able to carry out their everyday chores more efficiently, allowing more time for family care, educational opportunities, productive work and participation in community life.

Although significant progress on the integration of gender in the infrastructure domain has taken place in the last decade, much more is needed to establish women’s inclusivity in African infrastructure. The event aims to provide opportunities for women to unlock opportunities for growth in the African infrastructure arena and this can be in the form of personal growth through learning, meeting business mentors, creating new business connections through the key people attending and growing their existing infrastructure businesses by doing deals.

The Infrastructure Africa 2-day conference takes place at the Sandton Convention Centre from 9 – 10 October 2018 and will host several leading women infrastructure experts as speakers as well as participants who are active in Africa’s infrastructure sectors. Women are invited to participate to learn, network and grow their businesses by accessing the project development opportunities on offer at this Business Forum.

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Africa’s first infrastructure performance index set to launch in 2019

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RisCura has partnered with Africa Investor to launch Africa’s first infrastructure performance index in early 2019.

“For years one of the main constraints for institutional investment into infrastructure in Africa has been the lack of a benchmark,” says Heleen Goussard, RisCura Head of Unlisted Investment Services.

“We believe the introduction of this index will enable increased investment into this asset class, as indices and benchmarks play a critical role in investment management,” says Goussard.

Consider the case of an institutional investor in the process of making an asset allocation decision within alternative investments. The availability of a reliable performance index allows returns to be compared, not only against a benchmark, but between asset classes. As a result, when considering the investor’s risk profile, an optimal asset allocation can be made.

Over the last two decades Africa experienced periods of per capita income growth that were higher than those seen in developed nations. However, numerous factors have led to a recent slowdown in the region’s economic activity.

“Many would argue that the inadequate supply of infrastructure services is one reason for this,” says Goussard.

Research by the World Bank has quantified the potential impact infrastructure development would have on Africa’s growth trajectory. According to this research, increasing infrastructure development to levels seen in other developing regions could result in GDP per capita growth increases of at least 1.2% annually. Adding in enhancements to the quality of infrastructure would contribute a further 0.5%; increasing growth by a total of 1.7% annually.

This growth is even more impactful when compared to the world’s leading nations. The impact on GDP growth, from making strides in both the quantity and quality of infrastructure, rises to 2.6% annually.

“Simply put, the potential benefit of funding Africa’s infrastructure deficit is significant,” says Goussard.

When looking for answers to Africa’s infrastructure financing need, it’s easy to look at public investment as the main solution. However, with insufficient current levels of infrastructure spend as a percentage of GDP and increasing debt-to-GDP ratios, most African countries have little room in their fiscus to accommodate a higher infrastructure spend.

“We believe the solution lies with institutional investors,” says Goussard.

“Pension funds long investment horizon make them especially suited to infrastructure investments. The potential for these investments to deliver a predictable cashflow stream over a sustained period, coupled with an element of inflation protection is attractive for institutional investors.

So, why are we seeing insufficient levels of capital committed to infrastructure funds?

The reasons are complicated. “The investment ecosystem is not yet thriving as African countries are still working on developing significant pools of institutional capital, sufficient asset managers and robust regulatory regimes,” says Goussard.

“The introduction of infrastructure performance information for Africa is a simple step in the right direction, given that institutional investors often cite a lack of performance data as a constraining factor when considering infrastructure allocations,” says Goussard.

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