- Investing across sectors – including our ecosystem investing approach where we aim to invest across the entire value chain of a project, while not excluding opportunistic projects
- Investing across projects
- Platform investments – where we aggregate sectors through a combination of companies that operate across them to create new listings
We focus our principal investing across four key sectors:
Heavy Industry, Telecommunications and Technology
Transport & Logistics
Natural Resources (Oil & Gas and Mining)
We also deploy multiple products across the capital structure: AFC provides technical structuring, project development, co-investment services, leveraging on a wide range of products across the capital structure to early stage, green field and brownfield projects and platforms to unlock value and deliver solutions on the continent:
- Project Development Equity and Loans
- Mezzanine and Subordinated Debt
- Senior Debt
- Product Solutions (Sovereign Lending, Guarantees, Trade Finance, Corporate Finance, A/B Bond)
We deploy multiple products in transactions where such solutions accelerate closure, deliver superior returns and optimise the financing structure.
Examples of such transactions include:
Takoradi Port Project (Ghana)
Thor Gold Mine (Nigeria)
Singrobo Hydro Independent Power Project (Cote D’Ivoire)
Lucara Diamond Mine (Botswana)
Dangote Refinery and Petrochemical Complex (Nigeria)
Leveraging infrastructure ecosystems for Africa’s accelerated growth and development
AFC focuses on building integrated ecosystems around infrastructure across sectors/countries to develop end-to-end value chains to drive accelerated growth and development. One such example is ARISE Integrated Industrial Platform (IIP): a success story for industrialisation and beneficiation on the African continent.
Throughout the Covid-19 pandemic, global supply chains have faced significant disruption. An over-reliance on China as a key manufacturing hub has been exposed, with factory closures there raising the risk of supply chain disruptions for multinational companies – with delays, raw material shortages and increased costs faced. In this regard, the development of local manufacturing centres and capacity is critical to achieve more efficient and diversified supply chains, to reduce overall carbon footprint, and contribute to job creation and sustainable livelihoods, as key aspects of achieving sustainable development goals on the continent. It is a compelling case to position Africa as an alternative manufacturing centre, driving import substitution through agro-processing, manufacturing and domestic value addition of primary commodities.
This requires an innovative approach to creating, structuring and financing integrated ecosystems and industrial platforms that considers the end-to-end value chain around resources – input supply, logistics (in-land and sea), ready-to-develop land with utilities, and marketing/commercialisation services for hosted companies’ finished goods. The approach led to the establishment of a US$1bn wood-based export industry in Gabon i.e. Nkok Special Economic Zone (Nkok SEZ), a cornerstone asset of the ARISE Integrated Industrial Platform (ARISE IIP).
Nkok SEZ is the first official Carbon Neutral Industrial Zone in Africa and the world. The certification of Arise IIP's GSEZ demonstrates how businesses can drive climate action, setting an example for the private sector worldwide. With a bespoke de-carbonisation strategy and investments in low-carbon technologies, GSEZ shows that it is possible to enable low carbon industries. The certification provides a transparent third-party assessment for GSEZ carbon footprint and offsetting. In its efforts to mitigate greenhouse gas (GHG) emissions, GSEZ will also focus on increasing utilisation of timber and renewable energy sources to supply GSEZ with carbon-free electricity. Solutions for low carbon transport are also being assessed.
ARISE IIP is owned as a 50:50 joint venture between AFC and Olam International, through the construction of a special economic zone:
- With a supply chain joining sustainable forestry with furniture manufacturing and spin off activities in a 37ha furniture manufacturing cluster (through sustainable timber plantations, handling, certification & warehousing);
- Creating an oasis of excellence served with power, water and other critical shared infrastructure; and
- Provision of logistics services to handle and move timber from forest to the zone, and finished product from the zone to the port through the upgrade of the trans-Gabonais rail network and construction of a general cargo port for export.
The Gabon model is being applied by ARISE in other West African countries (Benin and Togo), seeking their competitive advantage in relation to local industries as the basis for the roll-out of their respective ecosystems.
In 2016, AFC invested US$140 million for a 21% stake in Gabon Special Economic Zone (GSEZ), now rebranded as ARISE, a diversified portfolio of ports & logistics, integrated industrial platforms, infrastructure and airports businesses. GSEZ commenced as a joint venture between AFC, Olam and the Republic of Gabon. The platform was recently reorganised into 3 verticals: Ports & Logistics: ARISE Ports & Logistics, Integrated Industrial Platform: ARISE IIP and Airports & Infra: ARISE Infra.
Then, in 2020, AFC invested US$150 million convertible debt to ARISE IIP for expansion into new countries (Benin and Togo), following execution of binding concession agreements with the respective governments, with continued developments in Cote d’Ivoire, Chad and Gabon. AFC’s participation has catalysed equity and debt financing from Meridiam, Stoa, Bollore and AP Moller Capital (APMC), AfreximBank, BGFI Bank, GuarantCo, African Development Bank (AfDB) and Emerging Africa Infrastructure Fund.
Value Creation and Development Impact
As a group, ARISE has diversified the Gabonese economy from dependence on crude oil exports, created jobs (over 30k), increased FX earnings and GDP (US$900 million) and is expected to do the same for Benin, Togo and Cote d’Ivoire.
NKOK SEZ achieved many successes and has created immense development impact. Select highlights include:
- Attracting 107 industrial, commercial and residential investors, investing cumulatively US$1.7bn
- Generating US$1bn of wood product exports in 2019 compared to US$350 million in 2010 (3x increase)
- 2nd highest exporter of sawn wood (Africa), 10th (globally)
- Value of wood increased from US$150/cbm for log to US$4,000/cbm for furniture
- Introduced beneficiation to a world class standard, facilitating processed wood and finished furniture products in a country with a landmass that is 85% forest
- 3rd largest veneer exporter globally and the 1st in Africa
- Leading player in furniture manufacturing/export in Africa
- Contributor of US$842million to Gabon’s US$14bn GDP
- Creation of 8,200 direct and 26,000 indirect jobs
Leveraging on funds as an important tool to mobilise capital to drive the development of infrastructure that is resilient to the impact of climate change
As part of its drive to address Africa’s vulnerability to climate risk, AFC has created an independent asset management arm, AFC Capital Partners, with a debut offering: the Infrastructure Climate Resilient Fund (ICRF).
The mandate of AFC Capital Partners is aligned to AFC’s in offering attractive investment opportunities to the global development finance and commercial investor community –seeking long-term returns through structures that protect African-built infrastructure from climate risks. The newly created fund will employ traditional project finance and private equity structures, supported by a blend of concessional finance, grants and ‘soft equity’. AFC Capital Partners forms a core part of AFC’s five-year strategy, as set out in 2018, to expand its suite of pragmatic and innovative funding solutions by mobilising capital to drive the development of infrastructure that is resilient to the impact of climate change.
AFC Capital Partners plans to raise US$500m in the next year and US$2 billion over the next three years. The ICRF will act as a direct investor and a co-investment fund to enhance the quality of African ports, roads, bridges, rail, telecommunications, clean energy and logistics in the face of rising temperatures and sea levels due to climate change.
AFC Capital Partners will enhance AFC’s firepower in driving integrated infrastructure solutions that are core to Africa’s development in the post-Covid era. The Infrastructure Climate Resilient Fund will enable us to support climate adaptation as well as projects that reduce carbon emissions and catalyse our continent to build back better, with more climate-resilient and sustainable infrastructure.
The continent that has contributed the least to climate change is the most exposed because of housing, transport, industrial, and energy structures that are ill equipped to survive storms, floods, droughts, wildfires, and other hazards from extreme weather patterns. According to the UN Office for Disaster Risk Reduction, without urgent intervention the cost of structural damage caused by natural disasters will increase to US$415 billion a year by 2030 from between US$250-300 billion now. Damage to rail tracks, roads, bridges, seaports, and power grids will add to an infrastructure deficit currently at US$130–170 billion per year. The UN Conference on Trade and Development estimated that a total of US$2.3 trillion worth of infrastructure is needed across Africa. Significant financing is urgently required to build physical infrastructure that will survive the forces of climate change. Much of this investment is compatible with competitive returns for investors through leveraging the expertise, relationships, and blended finance models we have tried and assessed for years.
Africa is often viewed as monolithic while, in truth, there is diversity in economic landscapes, ways of doing business, and opportunities. It is thus important to find strong ‘local’ partners like AFC, with a deep understanding of these dynamics to enable investors to do more – tracking trends and providing the flexibility for liquidity to play across the capital structure.
Platforms deliver an opportunity to aggregate assets across the continent, while diversifying portfolio risk, generating higher returns and providing institutional and other investors access to markets they haven’t yet cracked. AFC has achieved this through the ARISE platform with ports, special economic zones and infrastructure services, where we have deployed over US$500 million in the last 5 years – and catalysed additional investments of US$2bn from multiple investors including African Export Import Bank (Afreximbank), African Development Bank, GuarantCo, BGFI Bank and others.
We are also bundling new and existing solar, wind and hydro projects in several African countries into a single unit, with combined generating capacity of 1-2 gigawatts of renewable energy, with plans to list on the London Stock Exchange. We have identified that a number of European investors and oil companies are increasingly investing in this space but have not invested in Africa yet. Meanwhile, investors are interested in green energy opportunities in Africa but are unable to spend time scouting out relatively small 50-60MW projects.
Partnerships with Governments
Partnerships with governments are also key in supporting their national development plans and ambitions. Covid-19 has meant that government reserves and balance sheets have been stretched, shifting focus on priority sectors such as healthcare that have become constrained. This leaves little for government to invest in infrastructure and industry, which are core to supporting economic recovery.
As such, the private sector has to look to increasingly support governments through innovative sovereign lending solutions and public-private partnerships.
- AFC is leading this through its product solutions desk, focusing on sovereign lending and off-balance sheet structures. Public funding (National, Sub-National, Government-to-Government, Regional) for infrastructure projects is over 80%. Therefore, public funding as an asset class cannot be ignored. Two recent important transactions are supporting the government of Cote D’Ivoire primarily in its roads programme and the government of Tanzania on its water, social infrastructure and transport projects.
- The partnership with the Nigerian government on its infrastructure vehicle, the Infrastructure Corporation of Nigeria (InfraCo), is another such important initiative co-led by the Central Bank of Nigeria (a 42% shareholder in AFC) and the Nigeria Sovereign Investment Authority (NSIA). With initial seed capital of N1tn ($2.5bn) from the promoters, the government expects it to grow to N15trn within a few years. InfraCo will focus on delivering public and private sector projects from origination through to portfolio management and exits. Nigeria is the largest economy in Africa and has the largest population, but it has a significant infrastructure deficit. This requires capital and expertise to bridge, which InfraCo can provide.
- Our investment in Sonangol was an opportunity to support a key state-owned entity in Angola, with a strong financial position, following the country’s demonstration of the implementation of new reforms to enhance transparency, FATCA and IMF’s Enhanced General Data Dissemination system. Angola has also embarked on a privatisation programme to increase private sector participation, sparking renewed interest in the country.