The Africa Finance Corporation (AFC) priorities those sectors which simultaneously offer a significant development impact and a high profit potential, so as to achieve the best return on investment for shareholders. The Corporation principally funds and develops projects in the power, transportation and logistics, heavy industries, natural resources and telecommunications sectors.
POWER
TAIWO-ADENJI2.jpgTAIWO ADENIJI
Senior Director Investments
“Improving access to energy is crucial for driving socio-economic development across Africa. Countries that have limited access to electricity are deprived of the chance to maximize the potentials of their population since children cannot study at night, hospitals are ill-equipped to attend to mothers who give birth at night and small or large scale industries may not spring up for want of electricity. We strive to lift the standard of living for millions of people through the modest work of AFC.

“In many respects, the raison d’etre of AFC to is help fill the growing gap between the demand and supply of financial capital to address Africa’s infrastructure needs. We invest in the knowledge that Africa has the natural resources, in both thermal and renewable energy sources, to quench her thirst for energy. For want of financing from government and donors, Africa has waited a long time. The needs are urgent and we cannot wait.”

The Challenge
More than 620 million of the African population currently lack access to electricity, an issue that is severely limiting the continent’s economic development. Power generation and distribution infrastructure across Africa is often inadequate, unreliable and costly, and this has constrained wider economic growth and development across the continent.

On current trends fewer than four out of every ten African countries will achieve universal access to electricity by 2050. Owing to outdated facilities and plants and a lack of maintenance, power supply in Sub-Saharan Africa is notoriously unreliable and power outages are frequent. This is of particular concern given emergency power is expensive and represents a considerable proportion of GDP in some countries.

A Solution
Solving Africa’s energy crisis is critical to unlocking the full potential of the continent’s natural, economic and human resources. Harnessing renewable energy has made inroads, as has the U.S. Presidential Power Africa Initiative. This scheme intends to add more than 10,000 megawatts (MW) of new, cleaner electricity to the grid and increase access to electricity for at least 20 million households. So far Power Africa has leveraged more than $20 billion from the private sector for new on and off-grid projects in Sub-Saharan Africa. With our total investments of $269 million and mobilized third party investments of $1.2 billion, we were the first of the initiative’s private sector partners to hit our targets.

The Role Of AFC
AFC has sought to address the wider infrastructure divide by originating, structuring and executing projects in the African power sector. Lack of project structuring expertise and available risk capital has hugely restricted the success of large-scale infrastructure projects in Africa in the past and AFC seeks to address this problem by bringing to bear its project development expertise, financial advisory skills and investment, often in the form of equity. In the past six years, AFC has financed five power projects comprised of generation and distribution assets. These generation assets have a combined output of circa 800MW and the projects utilise both renewable and non-renewable sources of energy.

AFC’s power projects include:
  • Cen Power Kpone IPP in Ghana
  • Cabeolica Wind farm in Cape Verde
  • 450MW IPP In Republic of Benin
  • 350MW IPP in Ghana
  • 300MW IPP in Mozambique
  • Technical Adviser to the Central Bank of Nigeria on its US$2 billion Power and Aviation Intervention Fund (PAIF)
  • AFC/Harith Merger
  • Singrobo Hydro Power Plant
  • Kenya Power & Lighting Company

TRANSPORT AND LOGISTICS
REUEL-IIa.jpgREUEL ANDREWS
Senior Vice President & Head Transport Infrastructure.


“Connecting Africa, whether by sea, land or air, is critical for promoting intraregional trade, improving competitiveness and growing local economies.

“At AFC we are supporting the development of a robust land transport network with investments in the Bakwena toll road in South Africa and in the Henri Konan Bedie Bridge, the first PPP road infrastructure development to be carried out in conjunction with the post-conflict Cote d’Ivoire government. We are also developing state-of the-art port facilities in the Gabon Special Economic Zone to enable the easy and quick transportation of manufactured goods to customers across the globe by sea. Furthermore, our investments in Ghana air transport infrastructure and Ethiopian Airlines are fuelling the expansion that will forge new air links across the continent.

“These projects, which span West, Central and South Africa, exemplify our truly pan-African footprint.”

The Challenge
Improving the transport infrastructure and connectivity of the world’s fastest growing continent could reap great rewards and this sector is in need of investment.

The diversity within the 54 nation states of Africa is mirrored within the continent’s transport sector. There is huge variation in the quality and maturity of existing transport networks and in infrastructure investment, translating into low connectivity between the countries and creating problems for supply chains. It is also worth considering that in many nations, the cost of infrastructure improvements required dwarfs current GDP. Inadequate transport can stall growth in economies by failing to keep pace with resource potential.

Africa’s terrain is extremely varied, from desert to savannah and rainforest: it becomes more challenging under these conditions to build road and rail networks, bridges and tunnels. It is often unclear who will pay for and run the new infrastructure required across the continent: private companies are starting to make major investments but the investment gap remains high and lots more needs to be done

The Opportunity
Over 70% of the world’s biggest consumer goods companies are already operating in Africa, and a number of large multinationals are investing in the region, providing a key opportunity for the transport and logistics sector.

The Role Of AFC
Recognising the pivotal importance of developing better quality infrastructure in this sector, AFC has invested in a number of projects that are designed to improve transport and logistics links throughout Africa.

AFC’s transport and logistics projects include:
  • Henri Konan Bedie Bridge in Cote d’Ivoire
  • Ethiopian Airline Expansion
  • Bakwena Toll Road in South Africa
  • Ghana Airport Company
  • Port d’ Abidjan
  • Financial Adviser to Nigeria Sovereign Investment Authority (NSIA) on the Second Niger Bridge
  • Olam Gabon Special Economic Zone (GSEZ)
 
TELECOMMUNICATIONS

TARIYE-GBADEGESINa.jpgTARIYE GBADEGESIN
Head of Telecommunications and Heavy Industry

“Sub Saharan Africa is often described as the last untapped growth market for telecommunications, where mobile and internet penetration is still on the rise. Indeed, recent reports tell us that the regional telecoms market is set to top US$65bn by 2018.

“Innovative technological developments are disrupting traditional infrastructure, but we are still far short of where we need to be. AFC’s first equity investment was in the Main One Cable system, which links countries on the west coast of Africa to Europe and other parts of the world. Renowned for its reliability, Main One is now the provider of wholesale Internet services to major telecommunications operators, ISPs, government agencies, large enterprises, and educational institutions in West Africa.”

The Challenge
Often described as “the last great, untapped telecommunications market,” at the end of 2013, sub-Saharan Africa had on aggregate the lowest mobile penetration rate of any region, at just under a third of the population.

The telecommunications sector is crucial for economic growth and development and is often viewed as a supporting factor in developing the transport and logistics sectors.

The Opportunity
Improved economic conditions and rapid combined GDP growth over the last five years have seen Africa experiencing fast growth in this sector, which has transformed fundamental aspects of social and business life. Mobile phone usage is growing faster in Africa than in any other region and at a phenomenal rate; whereas only 6% of African citizens owned a mobile phone in 2004, now there are more than 82 million mobile users on the continent, a rise in part due to the escalating popularity of social media sites and mobile banking. On current trends Sub-Saharan Africa’s telecommunication market is set to top $65 billion by 2018.

The mobile phone industry plays an important role in Africa’s telecommunications sector. A lack of landline-based infrastructure has led to mobile devices becoming the most popular way to communicate or access the internet.
Investment in the sector is increasing and Sub-Saharan Africa’s telecommunication market is set to top $65 billion by 2018.

The Role Of AFC
AFC’s most significant investment in the telecommunications sector has been the Main One Cable System, an undersea fibre optic cable system that links countries on the west coast of Africa to Europe and other parts of the world. This system, which was completed on time and on budget in 2010, delivers on an open access model with a bandwidth that is approximately 20 times the available satellite capacity across Sub-Saharan Africa.

AFC’s telecommunications projects include:
  • Main One cable system
  • SAIF acquisition, South Africa
 
HEAVY INDUSTRIES

TARIYE GBADEGESIN
Head of Telecommunications and Heavy Industry

“According to the World Bank, value added and manufacturing sectors contribute just 13% of Africa’s exports. As the continent enters a new growth chapter, radically increasing this figure will be key.

“Recognising this, AFC has invested in major projects across the heavy industries sector such as cement, ammonia/urea and phosphates production. For example, in 2012, AFC provided a US$50 million investment in the form of a convertible debt to ARM Cement – a publicly held company on the Nairobi Securities Exchange, to support ARM’s future expansion initiatives across Eastern and Southern Africa. In 2017, AFC invested $25M in Carbon Holdings in Egypt to support the development of the petrochemical sector, thereby providing a raw materials base for downstream manufacturing in Egypt and Africa generally.

“As the population grows, estimated at 2.2% each year, investments in sectors that create jobs and increase wealth will be critical to ensuring sustainable benefits to people in Africa.”

The Challenge
Sub-Saharan Africa’s growing population, already exceeding one billion and growing at 2.5% each year, has prompted a spurt of urban growth across the region.

Despite Africa’s wealth of natural and mineral resources, the continent has yet to see sustainable growth in the heavy industries sector. Raw materials are normally exported with little or no value added and manufacturing contributes relatively little to Sub-Saharan Africa’s GDP – according to the World Bank, only 13% in 2012.

Several challenges limiting the development of the industry include:
  • Poor quality supporting infrastructure – inadequate power supply and weak transport networks.
  • Low availability of industrial project sponsors and limited project management capacity for large-scale projects.
  • Financing requirements – large capital investment is normally needed to fund heavy industry projects.

The Opportunity
Africa’s large population provides companies looking to invest in the sector with an ever-expanding consumer base and a large labour force. The region’s human capital, combined with the abundance of natural resources, is making SSA an attractive investment option for both local and international heavy industry and manufacturing firms.

The Role of AFC
So far, AFC has financed major projects relating to cement, ammonia/urea and phosphates. These projects are located in East Africa, South Africa, Nigeria and the DRC. Over the next few years the corporation plans to focus on industrial project development and mobilising financing in partnership with other institutions. The current project pipeline includes pulp and paper manufacturing, potash, glass manufacturing, small-scale steel plants and refinery operations, as well as continued investment in ammonia/urea production.

AFC’s heavy industries projects include:
  • ARM Cement (Formerly Athi River Mining Limited)

NATURAL RESOURCES
OSAM-IYAHEN2.jpgOSAM IYAHEN
AFC’s Director, Investments

“Natural resources are critical to many African economies but the majority focus solely on the extraction and exportation of these materials. There is a notable lack of beneficiation and value addition to the raw materials, thereby stifling the growth of downstream industries, where arguably the highest socio-economic impact can be achieved.

“To make the most of these resources, and to encourage the development of supporting industries, we need to ensure that the correct infrastructure is in place. AFC invests in a variety of natural resources and related industrial projects. Recently we have invested in Egyptian petrochemical company Carbon Holdings to help develop downstream petrochemicals and manufacturing industries in Egypt, and in Alufer Mining’s Bel Air Bauxite mine, to support the growth of Guinea-Conakry’s economy post the Ebola crisis.”

The Challenge
Africa has 12% of the world’s oil reserves, 40% of its gold, and between 80% and 90% of all its chromium and platinum.

As is the case all over the world, a rich supply of natural resources unfortunately signals a degree of economic inequality within that region or country. There is also a high risk of corruption amongst large-scale commercial players and of exploitation of the local population, who often benefit little from the resources themselves.

Few African countries process their own raw materials. The real value is therefore added elsewhere, causing much of the profits from natural resources to leave the continent entirely in the hands of foreign-owned companies which pay low rates of tax.

The Opportunity
In addition to significant mineral deposits the region has the largest arable land mass in the world, as well as vast timber resources. The continent is gradually seeking to make the most of this abundance by not just exporting raw materials but by building up industries such as downstream processing and manufacturing. This development of course requires adequate supporting infrastructure.

The Role Of AFC
AFC acts as an adviser and financier to a number of leading sponsors seeking to undertake important transactions in the mining and oil and gas industries and associated infrastructure.

There is, for example, high demand for a wide variety of specialized rigs and vessels for both swamp and offshore areas of operations in the midstream sector of the oil and gas industry. In addition, a lack of essential pipeline infrastructure is slowing transportation from field to market. With its wealth of experience in sector development, AFC is strategically positioned to actively participate and lead indigenous companies in this critical space.

AFC’s key natural resources projects include:
  • Seven Energy
  • Megadrill Services Limited
  • Société Nationale des Pétroles du Congo, Republic of Congo
  • Bonny Gas Transport
  • Glencore/ Société des Hydrocarbures du Tchad
  • Vivo Energy
  • Shalina Resources Limited
  • New Age (African Global Energy)






 

 

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