This article is sponsored by Africa50
National, regional and private sector leaders joined shareholders of Africa50 for its annual meeting in the Madagascan capital, Antananarivo, on 19 September. Africa50 has raised over $1.1bn in capital and catalysed a further $4.4bn in investments to help bridge Africa’s infrastructure gap since it was established seven years ago. In the closing press conference, Africa50 announced that it would, for the first time, be distirbuting dividends to its shareholders.
Alain Ebobissé, Africa50 CEO, emphasised the need for action in the face of the continent’s urgent infrastructure needs. He said the trust and investment from shareholders, including 32 African countries, the African Development Bank and two African central banks, had enabled the Fund to invest in this short period of time in 25 projects across 28 countries, with a total of over $8bn in financing extended. Noting that Africa50 is undertaking the 120 MW Volobe hydropower plant in Madagascar, Ebobissé stressed that “now more than ever, it is imperative that we deliver infrastructure that meets the needs of the population and businesses of Madagascar and the entire African continent.”
Ebobissé reported that Africa50 had, through its Infrastructure Acceleration Fund, secured $225m at first close from predominantly African institutional investors, the first deal of its kind under institutional investors. This would open the door to leveraging some of the $2.3 trillion funds under management in Africa for infrastructure on the continent. “We intend to work very hard to mobilise a portion of these funds to channel them into Africa’s infrastructure,” he declared.
Africa50 is also developing a transmission line in Kenya in partnership with the government of Kenya and PowerGrid of India. In The Gambia, Africa50 achieved another first – an asset recycling transaction with the government, which enabled it to unlock capital for new projects without adding to national debt.
Investments by Africa50 have delivered real impact in the lives of people, such as the 17m who now have access to power and the thousands in Kenya and Tanzania who now have access to quality and affordable renal care. Stressing that “infrastructure is not only about projects, it’s about people, it’s about improving lives,” Ebobissé called for collaborative efforts to “drive forward infrastructure development in Africa, explore new and disruptive technologies, drive capital deployment strategies [for] infrastructure that is resilient, inclusive, and purpose-built”.
Adesina calls for architecture reform
In his keynote speech, Dr. Akinwumi Adesina, president of the AfDB, emphasised the need for large-scale financing and policy-oriented interventions to sustain Africa’s growth. The continent, he pointed out, “needs $130bn to $170bn per year for infrastructure development, and an additional $277bn each year to finance the fight against climate change”. Closing the gap would require reforms to the global financial architecture, including the need for new instruments and innovative financing structures, which he argued would help reduce credit rating bias.
Adesina, who is also the chairman of Africa50’s board of directors, praised the institution’s efforts in raising capital for infrastructure investments across the energy, transport, digital infrastructure, education and healthcare sectors. “Africa50’s success in mobilising capital and delivering infrastructure projects attests to its ability to adapt and respond to emerging challenges,” he said: its successes “inspire us to do more”.
Africa50 helps investors to identify bankable projects, Adesina said. “Africa50 plays a vital role in project development and financing, ensuring that potential infrastructure projects benefit from investment,” he stressed.
With a growing population, a rising middle class and a thriving consumer market, Adesina argued that “Africa can no longer be ignored.” Africa50’s projects in Madagascar, including the Sahofika green energy project; Volobe hydroelectric project; and the Corridor Development and Trade Facilitation project, he said, are a demonstration of its commitment to the country and to the development of infrastructure in the continent.
“Africa50 is well positioned to implement more bankable projects with significant development impact and providing strong risk-adjusted returns to shareholders,” he said, and called for strong partnerships to achieve the transformation of the continent’s infrastructure: “Collectively, we must remain committed and work urgently to mobilise capital, overcome investment barriers and deliver sustainable, transformative and high-impact infrastructure projects in Madagascar and across Africa.”
President highlights Madagascar’s potential
President Andry Rajoelina of Madagascar, host of the gathering, highlighted his country’s potential in the energy transition, with its abundant natural and renewable resources. With energy projects in the pipeline including hydroelectric, wind, and solar initiatives, with plans to exploit over 7,000 MW of hydroelectric potential, “Madagascar has the potential to become a model for the energy transition,” he said. It will require the support of international partners including Africa50 as it seeks to triple its generation of renewable energy.
Current energy production, in many cases using fuel, is costing the government over $250m annually in subsidies as it is costing the utility 25 cents to produce and distribute whilst charging customers 10 cents per kilowatt.
Rajoelina believed that Africa has a unique opportunity to establish itself as a global leader in the fight against climate change by supporting innovative, sustainable projects that lay the foundations for equitable and sustainable development, emphasising that “Africa is not a problem, but the solution.”
With a surface area larger than Europe, the USA, and China combined, Africa holds immense potential. With the majority of its people under the age of 30, the continent has a youth-driven potential that positions it at the centre of future global development. However, the challenges of improving living conditions through industrialisation and energy transition must be addressed to transform African nations. The president called for collective mobilisation to “change the course of history,” particularly through agricultural transformation.
Speakers in a panel discussion on redefining infrastructure investments called for more innovation in financing that would reduce the pressure on national budgets. Kevin Kariuki, AfDB’s vice-president for power, energy, climate and green growth, said that while previous models imposed burdens on national budgets “these projects can be financed by the private sector and we must be able to reduce the cost of capital and provide an array of instruments such as partial risk guarantees to further reduce the cost of financing.”
Dr. John Mativo is managing director of Kenya Electricity Transmission Company, where there has been success in public-private partnerships to fund the extension of transmission lines.
He shared some lessons from this experience and called for capacity-building to equip countries to navigate PPPs.
These calls were echoed in another panel discussion on financing Africa’s energy transition. Hassanein Hiridjee, chief executive officer of the Axian group, noted that political will and clear regulatory frameworks are necessary to encourage the private sector to invest.
Alamine Ousmane Mey, Cameroon’s minister of the economy, planning and regional development, said “we need strong commitment, a regional approach to energy pools and to mobilise resources from both the public and private sectors.”
Clean cooking
Discussing the role of natural gas in promoting clean cooking, panellists again called for the private sector to play a key role. Tanzania’s minister of finance, Dr. Mwigulu Lameck Nchemba Madelu, noted that only 3% of energy used for cooking in Tanzania comes from electricity, with most rural households still relying on firewood. Max Fontaine, Madagascar’s minister of environment and sustainable development, said that 95% of the population still use firewood and charcoal for cooking. Chebet Lesan, founder of BrightGreen Renewable Energy, called for more patient capital from development finance institutions, “to help us do the work of changing customer behaviour, which is a long and expensive process”.
Deals signed included a grant from the US Development Finance Corporation to the Volobe project, and an expression of interest from the European Union in the same project.
The government of Madagascar signed a loan agreement with the OPEC Fund for International Development for smart clean cooking and a letter of intent for an ethanol project with the AfDB and Africa50.