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AfDB continues deal hunt in Johannesburg

AfDB continues deal hunt in Johannesburg

The second Africa Investment Forum secured investor interest for $40.1bn in infrastructure projects across 29 African countries. Shoshana Kedem reports.

Amid a backdrop of global economic uncertainty, the African Development Bank (AfDB) held its second Africa Investment Forum (AIF) in Johannesburg this November.

The conference was designed to tilt investment into Africa to narrow the continent’s gaping infrastructure gap. Deal-makers discussed 56 proposals worth $67.6bn in sectors across energy, transport and agriculture spanning 29 countries. After three days of pitches and presentations, deals worth $40.1bn secured investor interest, according to the AfDB.

The theme of this year’s summit, declared AfDB president Akinwumi Adesina, was “Transactions, transactions, transactions. Deals, deals, deals!”

Echoing the AfDB’s mantra, Alain Ebobissé, the CEO of Africa-focused infrastructure fund Africa50, said: “There’s no other conference anywhere else that is exclusively focused on making deals, closing deals and moving deals forward.”

One such deal in the spotlight was the $2.3bn Accra SkyTrain. The high-capacity, fully automated public light-rail system powered by green pneumatic propulsion is designed to ease the gridlock in Accra’s increasingly congested roads by eventually transporting 380,000 people a day across the Ghanaian capital.

On the first day of the conference, the Ghana Infrastructure Investment Fund and Africa Investment SkyTrain Consortium Holdings signed a concession agreement with the government of Ghana. The agreement marks the final stage of a feasibility study before construction kicks off. With the memorandum of understanding (MoU) for financing and developing the project first signed between Ghana and South Africa at last year’s AIF, organisers hailed the latest agreement as a sign that the forum has brought the deal closer to financial close.

Promise made, promise kept

Indeed, the challenge for AfDB is getting such deals over the finishing line, and turning them into bricks-and-mortar projects, Vuyelwa Vumendlini, deputy director general of South Africa’s National Treasury, told journalists during a press conference.

“Project preparation is key; we need to see more bankable projects reaching financial closures. Money is coming in – that should be the ultimate goal of this forum. Last year, the goal was ‘transactions, transactions, transactions’, this year ‘promise made, promise kept’. Next year we want we want to hear how many financial closures have happened, we want to see more deals being signed like we did with the Ghana SkyTrain.”

The largest project pitch unveiled this year was the Mozambique government’s call for $24.6bn in investment in the state oil and fuel company Empresa Nacional de Hidrocarbonetos (ENH) to develop the Golfinho and Atum fields and the nation’s first onshore liquefied natural gas plant. The project would be “transformative” for the country’s economy, prime minister Agostinho do Rosário promised in his pitch to investors.

Taken at face value, many of the deal proposals appear to have promise. But one Africa investment adviser warns that deal figures can be exaggerated.  

“The $67bn number is more aspirational than realistic. Last year, in 2018, the entire continent attracted roughly $46bn in FDI according to UNCTAD. Hard to believe that one conference closed more deals than all of the FDI that was attracted last year?” asks Aubrey Hrouby.

Asked how many of the commitments made during the conference in the form of deals and MoUs were concrete investments, Alain Ebobissé said: “Specifically these will be provided later on because the teams are currently looking at the figures. But what I may say at this stage is that what is very important in the context of the Africa Investment Forum is that projects are brought to financial close and implementation and execution.

“In infrastructure, project development is made up of a series of critical steps that lead to financial closure and building. For example, here there are a number of concession agreements signed. With the SkyTrain for example, this is a crucial step in the development of the project.”

Deal or no deal?

The summit, held in Johannesburg, was the latest in a series of investment forums held in a bid to crowd billions of dollars into regional investment. Such events demonstrate that investor interest in Africa remains robust, according to Christopher Vandome, research fellow at Chatham House’s Africa Programme.

“There’s a desire for success but people on the ground want to see other things happening that will create a better business environment and help generate economic growth and in turn attract investment beyond summits,” he says.

He argues that many of the deals tabled at such summits aren’t new and have been under development for years: “A lot of pledges made were already in the pipeline. In the context of South Africa, once you dig into it, there are a lot of projects that are already on the books.”

Of more importance than figures, says investment advisor Aubrey Hruby, who has advised on African investments for 18 years, is the important function served by such summits in bringing people from like-minded sectors together in “dealrooms” to start a dialogue on specific projects.

“What I think AIF does very well is to create boardrooms on the sidelines that allow interested people to find each other. For example, they had a room to present ICT deal in Malawi. That means that the telecoms investors who happen to attend AIF, instead of wandering around trying to find someone useful to them at a cocktail party, can go to that room and meet other people who are looking at specific deals in ICT.”

“I think that deals will certainly get done out of this, because the right people will meet each other. AIF is very good at creating a forum where people can organise and meet each other around fixed projects in specific countries, in specific sectors. And that’s valuable.”

On a knife-edge 

This year’s conference called on investors to bet on Africa at a time when global economic uncertainty could be slowing down deal flow. The Global Uncertainty Index, measuring unpredictability in 20 nations, hit record highs in December due to mounting tensions in the US-China trade war, the US 2020 election, Brexit and protests in Hong Kong.

“A lot of times the things that impact Africa’s investments are not Africa-specific issues but rather global market trends,” Hruby says.

“In that reality, investors are acting conservatively in the age of unprecedented global economic uncertainty. Investors are willing to pay negative yields. In the era of Brexit, US-China trade tensions, etc, people tend to sit on their money, or take what they see as really safe.”

That said, Africa continues to buck the trend of a global slowdown in FDI. From 2017 to 2018, global FDI slid 13% from $1.5 trillion to $1.3 trillion, a report by the United Nations Conference on Trade and Development (UNCTAD) from June found. Defying the trend, FDI into Africa surged 11%, with around $46bn worth of FDI flowing into the continent in 2018.

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