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As Africa leverages AIF to engage global investors

By Geoff Iyatse, Assistant Business Editor
29 November 2021   |   3:05 am
In two days, the Africa Investment Forum (AIF), an economic think-tank created four years ago as a marketplace of ideas on the region’s route to the world begins in Abidjan, Cote d’Ivoire.

In two days, the Africa Investment Forum (AIF), an economic think-tank created four years ago as a marketplace of ideas on the region’s route to the world begins in Abidjan, Cote d’Ivoire.

This year’s edition is holding on the heels of a rare regional travail. First, the entire global economy is merely rising from the ashes of COVID-19, a novel health challenge that has almost crippled the global economy in the past two years. Secondly, the two-track recovery fear has become a sad reality.

As of November 26, Africa’s share of globally administered COVID-19 vaccine doses was less than three per cent. Precisely, of the 7.88 billion administered doses, Africa, with a population of over one billion people had only given out 234.68 million doses, according to statistics gleaned from ourworldindata.org.

The African Development Bank (AfDB) had earlier this year, but the 2021 growth prospect of the region was at 3.4 per cent as it emerged from the worst recession in about half a decade. The projection is 2.5 percentage points short of the 5.9 per cent average global growth forecast by the International Monetary Fund (IMF).

As the global economy struggled under the heavy burden of the pandemic last year, sovereign debt ballooned to a new height. And amid debate over debt sustainability earlier in the year, fresh short-term COVID-19 response funding needs of African governments was pegged at $154 billion.

Indeed, COVID-19 has exacerbated the weak fiscal position of African governments and, like every other region, left the citizens poorer. But the AIF, an event championed by AfDB with other partners to accelerate closure of the investment gap, is not about the problems but the prospects of Africa, a continent often described as the next frontier of global growth.

The three-day event brings together investors, project sponsors, transaction advisors, legal and other professionals under ‘one roof’ to engage, interrogate and continue the process of addressing the continent’s investment gap.

Themed ‘Accelerating Transformative Investments in Africa’, this year’s meeting hopes to build on the successes of the previous editions, focusing on the five investment sectors that received priority under the Forum’s Unified Response to Covid-19. The focal areas – agriculture/agro-processing, energy/climate change, health, ICT/telecoms and industrialisation and trade – resonate with Africa need agenda.

Sector-specific discussion, according to the concept document obtained by The Guardian, includes energy, climate agriculture, agro-processing, health, ICT, telecommunications, industry and trade. A multi-disciplinary platform, the forum is dedicated to advancing private and public-private-partnership deals to bankable stages, raising capital and accelerating their financial closure while tracking investments in relevant areas with a focus on reduction of intermediation costs and increase of active and productive engagements among African governments and the private sector operators.

“The AIF21 will do more than showcase a pipeline of strong bankable deals. The focus will continue to be on transformative deals at different stages of readiness. The AIF curates high growth opportunities that will play a major role in the continent’s recovery. Projects put forward for financing this year will include those that are women-led, that leverage Africa’s dynamic capacities and promote financial, economic and social sustainability,” the event document states.

The forum also provides for a virtual segment where about 2,000 delegates meet for a healthy conversation on the options before Africa just as 250 participants will be present physically for deal-focus boardroom meetings and other engagements that could potentially change the fate of the African market, creating jobs for thousands of people and open vista of new wealth-creating opportunities.

The deal-focused, invitation-only physical boardroom meetings will be held among project sponsors, investors and key government officials “with the objective of securing investor interest and achieving financial closure”.

Besides, the investment forum provides for a virtual marketplace gallery to extend opportunities for investment-focused networking, bilateral meetings and entrepreneurial pitching sessions to showcase deals that do not make it to the boardrooms. Added as well is a virtual business-to-business (B2B) holding among investors and project sponsors.

Interestingly, this year’s edition rides on a robust history. The inaugural series (AIF2018) boardrooms convened investors, project sponsors and transaction facilitators of about 63 deals valued at $46.9 billion, the organizer revealed.

“Significantly, the platform mobilised investment interests across 49 of these boardrooms, deals worth $38.7 billion, across 24 countries. The 2019 edition (AIF2019) raised the bar even further. AIF2019 featured 57 boardroom deals valued at $67.7 billion and succeeded in crowding-in investment interests across 52 deals worth $40.1 billion from 25 countries,” AfDB added.

Africa, indeed, needs and deserves an opportunity for increased capital inflow. AIF was strategically positioned from conception to match Africa’s investment needs with a pool of global investors. Its key objective is advancing bankable projects, raising capital and accelerating the financial closure of deals.

In the past years, Africa has led global economic growth and holds rare returns on investment. Yet, the continent continues to suffer poor investment inflows, setting back its development agenda and targets set out in the United Nations’ Sustainable Development Goals (SDGs) as well as the African Union’s Agenda 2063. Africa’s strengths include decent economic growth, a rising middle class, and improving business environment, rapid urbanisation and active population, with huge potential for a demographic dividend.

As the continent shifts from private consumption to investment and household consumption, business spending is expected to offer a $5.6 trillion opportunity by 2025. Though glowing with opportunities, Africa has not been able to attract the needed investment to catapult its growth.

Much has been said about the positive correlation between foreign direct investment (FDIs) and economic growth. Before COVID-19, 37 countries in Africa were growing at three per cent and above while six out of the 10 fastest-growing countries in the world were in Africa.

Sadly today, FDI inflows to Africa are, at best, anaemic and have dropped considerably in recent times. The total value of capital importation into Nigeria, for instance, fell by over 50 per cent in the second quarter of this year.

Over the years, there have been talks about the risk factor. Interestingly, some of the recent studies have not proved that Africa is the riskiest region in the world. The Moody’s Investor Service on project finance bank loans between 1983 and 2016, for instance, suggested that Africa has the lowest project default rates globally, much lower than Latin America, Asia, Eastern Europe, North America and Oceania. Still, investments flow to regions with much higher default rates, which shows that the argument against Africa as a risky region, after all, is exaggerated, perception-driven and unreal. This poor perception about Africa is one of the challenges the meeting in Abidjan will be addressing as governments meet businesses in an uncommon opportunity since the outbreak of COVID-19. And the organisers promise the outcome will be nothing short of its previous editions.

On the gathering and its history, Senior Director of AIF, Chinelo Anohu, writes: “Building on the success of the inaugural edition of the Africa Investment Forum, our journey to the 2019 Forum was truly inspirational. Along this journey, the feedback from a wide cross-section of investors, governments and project sponsors has been unanimous. AIF is positioned as a critical platform that will transform Africa’s investment landscape. With the clear objectives of advancing projects to bankable stages, raising capital and accelerating the financial closure of deals, the work of the Forum extends far beyond the three market days. It involves a broad range of activities including investor mobilisation, pipeline deal origination and deal tracking.

“The outcomes from 2019 AIF have been outstanding, and include increased participation from a wider spectrum of institutional investors, commercial banks, private equity and venture capital funds and development finance institutions. Fifty-seven deals worth $67.7 billion were tabled for boardroom discussion, up 44 per cent from last year. Fifty-two of the deals tabled, with a value of $40.1 billion, secured investor interest. Nearly 2300 participants, representing over 100 countries, attended.

“The high-quality panel sessions have generated strong thought leadership on critical themes for Africa’s transformation. Participants have experienced an ocean of networking opportunities through multiple channels including bilateral meetings and a greatly amplified marketplace. We’ve had significant signing ceremonies and press conferences to mark important milestones on investment deals on the continent. Above all, we are sending a strong global signal that Africa is finally ready to engage.”