← This Week in Global Development
This Week in Global Development
Paving the way: How Africa50 is driving infrastructure development forward
00:25:05
While the African continent has seen significant economic growth in recent years, it continues to grapple with critical infrastructure challenges that hamper business expansion, service delivery, trade, investment, as well as sustainable development. ...
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- [00:05]
A
Hi, I'm Advaah Saldinger, a senior reporter at devex. And you're listening to a special edition of this week in Global Development tied to the World Bank International Monetary Fund annual meetings in Washington D.C. the annual meetings are a critical temperature check on the reforms at the World bank which range from incorporating climate change into the Bank's mission to to streamlining the bureaucracy and finding ways to lend more with the funds it has. In these next few episodes we'll be exploring how these now 80 year old institutions must change to address the challenges of today, including reducing poverty, addressing climate change and pursuing gender equality.
- [00:53]
B
Hi everyone, I'm Kate Warren, Executive Vice President and Executive Editor at devex. And and welcome to this special edition of this Week in Global development here in D.C. on the sidelines of the World bank and IMF annual meetings. And today we have a special episode in partnership with Africa50. And I am delighted to be joined by Africa50 CEO Elaine Abobese. And thank you so much for joining us today.
- [01:17]
C
Thank you for having me, Kate.
- [01:19]
B
So I first want to start off with learning a little bit more about Africa 50. I think you are maybe a little over 10 years old now and started as an investment platform for funding investment projects that have a development goal in the African continent. Can you share a little bit more about Africa50?
- [01:37]
C
Yes, absolutely. Thank you. In fact, we've been operational for about seven years now and we were created with a mandate to help bridge the infrastructure gap in Africa exclusively through private investments and PPPs. And what we decided to do is to really to start by focusing on a few things and do them well. We're investing in equity, quasi equity, but also we invest in something which is quite important, which is project development to build up the pipeline of bankable project. So our goal is to really to have a lot more pipeline of bankable infrastructure project in Africa and in so doing to attract more private investment in infrastructure in Africa to try to bridge the infrastructure gap on the continent. So that's what we've been doing and I'm happy to talk to you about some of the achievements that we've made over the last seven years.
- [02:35]
B
Yeah. And so what were some of the challenges you were looking to bridge and some of the innovations that you've brought to this space?
- [02:44]
C
Yeah, so it's very interesting because of course there are many institutions and players that are active in the infrastructure space in Africa. What we decided is trying to focus on areas where the needs were the greatest. I mentioned project development to build up the pipeline of Bankable project, because there's actually quite a few institutions that want to invest a lot more in infrastructure in Africa, but they don't necessarily find projects which are bankable. So we decided with Africa50 Project Development to focus on that. So this is one of the challenges that we were trying to. We're still trying to address now. What we also decided to do is to focus on two things, innovation and speed in execution. So we wanted to demonstrate, and we believe we are demonstrating that, that we can do things faster without necessarily compromising the quality, such that after seven years of operation, we've invested in 26 projects across 29 African countries, investing equity, quasi equity, project development, funding, and our investment have a total combined project cost of over $8 billion. So we're able to do that in a limited number of years. And so that is on the speed of execution in terms of innovation. We also said, look, let's see how we can innovate. Not necessarily rocket science, innovation per se, but we're trying to see what has worked in other regions and try to see whether we can adapt these practices or this project to the African context. So I'm very pleased that, for example, we are the first institutions to complete an asset recycling transaction in Africa. We did complete the asset recycling of the Senegambia Bridge in the Gambia, which is essentially asset recycling, a technique which is to engage governments and basically negotiate a concession agreement on a commercial asset that has been financed with a government. And the proceed of the concessioning will then be reinvested by the government on new assets. Essentially you're monetizing an asset to allow the government to have a bit more investment capacity. We're pleased to have done that. And then we look forward to do a lot more of this project. I can also mention the transmission PPP project that we are doing in Kenya today. In Africa, all countries are funding their power transmission project with public capital. But when you look at Latin America, in South Asia, developed continent and developing continents, you see that power transmission can be financed through ppp, through private capital. So we're pleased that we will be among the first to do a power transmission PPP in Africa. So these are some of the innovations that we're also bringing to the ground. So again, speed in execution and then innovation, two driving principles that Africa50 is trying to implement.
- [06:06]
B
And how do partnerships play a role in that? Working with African Development bank, we're here at the World bank annual meetings and the other MDBs and looking at governments private sector, where do you fit in to that ecosystem and how do you approach partnerships to be able to catalyze investments there making.
- [06:23]
C
Well, that's a very, very important question. The needs on the continent, the infrastructure needs on the continent are huge. The latest figures, the African Development bank estimates that the investment requirement in infrastructure in Africa between $130 billion to $170 billion a year. So of course no single institution can do it alone. So we need to partner. We need to partner. And for us, At Africa50, our partnerships are fairly vibrant with a number of institutions. We've worked with the World Bank Group, the International Finance Corporation, IFC in some of the project, such as the Nakchigal project in Cameroon Hydro project. We've worked with of course the African Development bank quite actively. The African Development bank is one of the founding, the founding shoulder of Africa 50. So we work together quite frequently. But we also work with many companies from the private sector, sponsors of projects that we've done. But one of the partnerships that I'm the most excited about, honestly I should mention is what we are doing in mobilizing institutional investors capital from within Africa. You see many folks when they were looking at funding Africa infrastructure, they, they were looking at outside of Africa to raise capital to fund African infrastructure. There is nothing wrong with that. But we also believe that there's a lot of money in Africa managed by African insurance investors that we have to figure out a way to mobilize to channel those funds into Africa infrastructure. This is why I am very, very pleased that Africa50 was able to bring together 16 African institutional investors who to back our Africa50 Infrastructure Acceleration Fund, which is a $500 million fund which we achieved first close in December last year with again 16 African institutional investors, two sovereign wealth funds, many pension funds, of course the African Development Bank. This is fantastic. We need to continue to mobilize African institutional investors capital at the same time that we are mobilizing global capital to come into Africa. So, so these are the kind of partnerships that we like.
- [08:38]
B
And you mentioned that the infrastructure needs are great across the continent. And so how do you prioritize what projects to do? What are you looking for when you're trying to decide which projects to invest in?
- [08:48]
C
Well, that's also another fantastic question I should mention. There's so much to be done on the continent. But when we were giving the mandates to lead Africa50, when the board chose me, I decided that I would recommend a strategy to the board which is focus on first doing a few things and do them well and then expanding. So what we decided to do is to focus on a few sectors power because it's so important, including renewables, of course, transport, ict, midstream gas. And then we also expanded after Covid, we expanded into health infrastructure, education infrastructure and fintech. So we need to prioritize. We cannot do it all. Africa50 again, we have asset under management of about $1.1 billion today. And I mentioned the vast needs. So we need to pick and choose what we do. So sector prioritization, I mentioned the sectors, but also we'd like to do project that we believe that we will be able to get to the financial close reasonably quickly and commercial operations. So we tend to stay away from massive projects that are very important, but they're quite complex. I like to say that sometimes those projects I will leave it up to the World bank, the African Development Bank. We tend to go to project Sweet Spots project with a total project cost of between $300 million of maybe a billion dollars. Of course this is what we are targeting. We can do project outside of this range. But I'm telling you about the type of project that we want to target.
- [10:31]
B
You're looking to really make an impact quickly.
- [10:35]
C
Yeah, as soon as possible. Again, this principle of speed in execution. I need to get things done. We need to get to the results as quickly as possible. We need to get things on the ground that work because we believe the virtuous circle is to actually get things done and to demonstrate that it can be done and others will come in and then you can do a lot more.
- [11:06]
A
Are you interested in the intersection of business and social impact? Do you want to know how corporate sustainability, esg, impact investing and more can contribute to development finance? My name is Advaaz Saldinger. I'm a senior reporter at devex and I've been reporting on these issues for nearly a decade. I'm the author of Devex Invested, our free weekly newsletter dedicated to development finance. Every Tuesday we explore how companies, investors and market mechanisms are reshaping the world of development finance. Visit devex.com newsletters and join us on Tuesdays.
- [11:44]
B
I'm going to talk about power and energy transformation. It's a really great opportunity when you're making these investments to be looking at green energy. But you know there's also trade offs there, right? And you do want to. You're focused also on development the continent. So how do you weigh some of those trade offs of being able to invest in cleaner energies but also recognizing that you do want to make impact quickly?
- [12:08]
C
Yeah, look, we are very clear at Africa 50 and this is a position that the African Development bank is also taking. And frankly, our leadership in Africa is also thinking that we are pursuing the dual objective of fighting against climate change, but also making sure that our development priorities are very clear and that we're pursuing them. So in the energy space, that means that we have a strong focus on developing renewable projects. In fact, if you look at our portfolio, our power portfolio, we have the biggest component of our portfolio, of our power portfolio, the biggest component is renewables. But we are also doing gas as a transition fuel because we need gas for baseload, we need gas for clean cooking. So we need gas and renewables to come together in a balanced energy mix that will serve Africa's interest of fighting against climate change, but also making sure that our development priorities are very clear and that we are pursuing them. This is the approach that we are taking and we are forcefully engaging the global community to make sure that folks understand that this is what we're going to do. We do understand Africa is the continent which is the most affected by climate change. We understand it. We do understand it. So this is why we have a sense of urgency in developing renewable power. We have a sense of urgency, but we also have huge development needs. I read somewhere that between $15 million and 17 million million people. Sorry, 15 and 17 million people, young folks, young Africans coming into the job market every year. These are huge numbers. We need to find jobs for folks. So development priorities are very important for us. So this is what we're doing. So trade offs for us. We do both, we do both and where we pursue in both strategies.
- [14:14]
B
And I want to hear a little bit more about distributed renewable energy and you've been focusing a lot on that for last mile low income communities. Can you talk a little bit about that approach specifically and what you're doing there?
- [14:26]
C
Yeah, you see, distributed renewable energy is really important. I think we're coming to realization that we are not going to be able to connect the entire continent with transmission line, expand the grid across the entire continent, at least not within the time frame where we need to have universal access to electricity. So we do believe at Africa50 that distributed renewable energy will have a very key role to play in growing the access to electricity. We're very pleased and we are a strong supporter of the recent initiative that was launched by the World Bank Group and the African Development bank group called Mission 300, which is to connect additional 300 million Africans to electricity by 2030. So we believe that distributed renewable energy will play a big role in achieving those targets Africa50 was recently selected as the prospective fund manager for a $200 million fund launched by the International Solar alliance for Distributed Renewable Energy. And we are engaging the World bank, the African Development bank and other partners to do even more in the space of distributed renewable energy. I also want to mention our emerging partnership with sustainable energy for all, and they are very focused also on distributed renewable energy. And we are very supportive of that goal. And so we believe that this is an area that is seeing a lot of momentum. I should also mention our emerging partnership with the Nigerian Sovereign Investment Authority, the Nigerian Sovereign Wealth Fund. Again, in that space of distributed renewable energy, a lot of momentum. I think what we need there is to design blended vehicles, blended capital that will finance those mini grid companies, those DRE companies that will then connect lots of Africa. You see, distributed renewable energy is not only about providing electricity, which is important. It's also providing a source of activity to people that get electricity. When you electrify a village, when you electrify a remote area, really the life of people change. So people have small businesses, people do a number of things and this is also what it's all about.
- [17:05]
B
Yeah, we also talked about clean cooking and that being an important priority. Can you talk a little bit about, you know, why that is an area that you are looking to invest in particularly and what opportunities you see there?
- [17:17]
C
Yeah, well, clean cooking, again, it's really such an important development priority. You see, in sub Saharan Africa especially, we have, according to estimates, several hundred thousand people, mostly women and kids, dying every year, largely due to indoor pollution and the impact of dirty cooking, so to speak. And yet it is not very difficult to tackle clean cooking. And there was a recent conference. I'd like to thank my good friend, the Executive Director of the International Energy Agency, Fatih Birol, for elevating the tea cooking agenda in the global stage. Working together with the President of the African Development Bank, President Suruwasan of Tanzania, and also the Prime Minister of Norway, brought together a number of stakeholders to really to elevate this issue. We at Africa50, we will contribute. In fact, our contribution is overdue. We should have done it earlier because this is an urgent need. And where we are contributing is in helping build the infrastructure that will enable the importation, for example, or the production of lpg, liquefied propane gas. That is one way of, of supporting clean cooking or ethanol or other forms of clean cooking. We just need to get this done and the amount of money which is needed is not too big, let's put it as a Global priority. Let's make sure that less people or nobody, actually nobody will die because they're trying to cook a meal for their family.
- [19:18]
B
So we are wrapping up a busy week here. The World bank annuals. What has been your message to the other leaders here about investing in infrastructure in Africa? And as we look ahead to COP 29 coming up in a few weeks in Baku, and we talked about the importance of climate, both being built into infrastructure projects, but also helping to create more resilience for climate change. So what is your message to these leaders this week and then looking ahead as we we head into COP in a few weeks?
- [19:52]
C
Yeah, my message and we had a number of meetings. I always argue forcefully for a sense of urgency, for speed in execution. I think sometimes folks spend too much time thinking, designing things, and I suppose they want to be perfect in the design. Nobody wants to fail. But I'm urging folks to start implementing stuff if it's Good enough. At Africa50, our mantra, our culture is if it's good enough, do it. And you can correct things along the way. You have to do things. People should think about the opportunity cost of delay, project implementation. When folks sit in meeting rooms, in nice offices designing things to the perfection and taking a huge amount of time, they should consider the opportunity cost of what people, for example, who need power will do. They will cut woods, they will import diesel, they will do whatever they have to do to get electricity, and that will cost even more than, you know, if you have a project which is good enough, which is implemented. I am arguing forcefully for a sense of urgency, for pragmatism, for the need to do things as quickly as possible without compromising the quality, but just focus on the fundamentals. So that's my main message. The other message is also that, look, everybody understands, certainly in Africa, the importance of fighting against climate change, because we are again, the continent, the most affected. But we also understand that we have huge development needs. So we need the global community to work with us to make sure that we have those two objectives taken care of with blended finance. That allows us, for example, to speed up the adoption of renewable energy without really affecting too much our development path. We need also to be very clear that gas will be a transition fuel that we will use until we get to a stage where renewable energy will be cost competitive. And also because it's already cost competitive, but that is cost competitive as a baseload solution, because we need that. So these are the two messages that I'm giving. And now I think the dialogue is ongoing. And finally which is also another message is that we should look at institutions or projects which are successful in the global south and trying to support and trying to scale them up. Africa50 is an example of an institution created by African countries which today is reasonably successful. And we can scale up. We can do a lot more if we had a bit more capital. But we are doing what we can with the capital that we have and we can do a lot more if we had a bit more capital. And this is part of my job to raise additional capital to do a lot more things.
- [23:15]
B
Well, this has been a really action packed week and I think barely still standing, but is there one moment conversation idea you heard that just really excited you that you're going to be thinking about as you head home?
- [23:28]
C
Well, the moment the conversation that I had with a number of investors and I was very pleased that we had conversations with potential partners that may allow us to grow activity significantly. That is the excitement. Now there were a number of policy discussions. I enjoy policy discussions. I prefer action. So for me the most important thing is the conversation that we had with investors about doing things together.
- [24:03]
B
Yes, the perfection is the enemy of progress comes to mind.
- [24:08]
C
I agree with that.
- [24:09]
B
Great. Well, Elaine, thank you so much for taking the time to speak with us today. And thank you to Africa50 for partnering with us on this special edition of this Week in Global Development. And thank you all for tuning in.
- [24:20]
C
Thank you, Kate.
- [24:25]
A
Thanks for listening to this special episode of this Week in Global Development. If you enjoyed this episode, please share it or you can leave us a rating or review. We'd also love to hear from you. If you have any feedback or want to get in touch, you can find me on social media vasal or send an email to podcastevx.com be sure to sign up for our Daily Newswire and our invested newsletter which covers development finance. For more of our must read insider coverage of Global Development.