The infrastructure sector in Africa presents a considerable investment opportunity, propelled by significant demand shortfalls and a lack of available capital.
The African Development Bank (www.AfDB.org) has recently finalized a $20 million equity investment in the African Infrastructure Investment Fund 4 (AIIF4). This agreement, formalized on 31 July 2024, underscores the Bank's dedication to promoting private sector advancement and enhancing infrastructure throughout the continent.
The investment, which received approval from the Bank Group's Board of Directors on 19 June 2024, will be funded from the Bank's regular capital resources allocated for private sector activities.
Africa's infrastructure industry continues to present a substantial investment potential, fueled by significant demand shortfalls and a lack of financial resources. Given the rapid pace of urbanization and rising local purchasing power, the continent requires an annual infrastructure expenditure ranging from $130 to $170 billion. Nevertheless, there exists a considerable annual funding deficit of $68 to $108 billion.
AIIF4, boasting a 13-year lifespan and a 5-year investment window, has successfully completed its initial round of funding at approximately $230 million, attracting interest from global investors. As of now, the Fund has surpassed the $500 million fundraising target, with the final round of funding anticipated to be completed in Q3 2024.
The Fund is anticipated to yield substantial development results, particularly in terms of private sector expansion and enhancement of household incomes. The Bank's assessment of the likelihood of achieving these results within the specified timeframe is deemed "High."
The Bank's investment in AIIM is in line with its operational priorities and long-term strategies, including the Private Sector Development Strategy, Climate Change and Green Growth Framework, and the Strategy for Addressing Fragility and Building Resilience. This investment demonstrates the Bank's commitment to supporting infrastructure development in Africa through private sector participation.
Mike Salawou, Director for Infrastructure, Cities and Urban Development at the African Development Bank, emphasized the Bank's confidence in AIIM as a fund manager, citing its expertise and track record in driving impactful investments.
The African Infrastructure Investment Managers have identified investment opportunities in renewable energy, digital infrastructure, and ports and logistics assets in South Africa, Kenya, and Morocco, with additional deals being considered in Egypt, Côte d’Ivoire, and Senegal.
The AIIF4 investment reflects the growing role of private equity in addressing Africa's infrastructure needs and underscores the continent's potential for sustainable economic growth.