Govts urged to front Africa to investors

African bankers and investors called on sub-Saharan governments and private financiers to tell a better story about African development as a way of bringing much-needed foreign direct investments in infrastructure projects. Dr Donald Kaberuka, the president of the African Development Bank, said yesterday that governments and the private sector should work together to address concern among foreign investors that Africa is a risky place to fund electricity, water, roads and ICT projects. “African assets have been undervalued because African risk has been exaggerated,” Dr Kaberuka said, speaking on a panel at the AfDB’s annual meetings in Kigali. The Bank estimates current infrastructure needs in sub-Saharan Africa at $100 billion (about Rwf678 billion) annually, with a shortfall of $31 billion each year. South Africa attracts the most foreign investments each year and it is mostly private telecommunications projects. Credit rating African governments and developers need to combat the belief among foreign investors that problems in one country, such as the current crisis in South Sudan, represent the same level of risk across the continent, said Mahesh Kotecha, president of Structured Credit International Corporation, a financial services firm based in New York. Kotecha said the Senegalese government addressed investment concerns some years ago by having its credit rating assessed by crediting rating agencies. Senegal is one of about 30 African countries to have their credit assessed, he said. “That has enabled them to access capital markets to a tune of $10 billion over the past couple of years,” Kotecha said. “Perceptions have been pierced through the ability of investors to compare a B-rated credit or a double B-rated credit with other similarly rated credits in the world.” Rwanda has a ‘B’ credit rating from Moody’s Investors Service, which is similar to other countries in the East African region. Helen Tarnoy, founder of Aldwych International, a private firm that invests in projects throughout Africa, shared Kaberuka’s view that African risk is exaggerated. “I do get impatient when I see discussions about Africa’s risk,” Tarnoy said. “Perception and reality are poles apart.” Tarnoy said Moody’s commissioned a report on 4,000 infrastructure projects around the world, with only 200 from Africa. Only one of those projects was unsuccessful, with the developers unable to repay their investors,” she said. Project timelines Tarnoy said long project timelines could be deterring foreign investors from sinking money into a large infrastructure project in sub-Saharan Africa. She said the development phase of a project is long and risky, which can scare away institutional investors such as banks and pension funds. Investors generally wait seven to 10 years to see a return on their investment in Africa, which is too long for more conservative investors. Kaberuka suggested that African developers and investors could do more to invest in local projects to show foreign investors that investment risk is over-stated. In particular, he called on African pension funds to invest more of their members’ money in homegrown projects. “Regulations around African pension funds will have to evolve,” Kaberuka said. “Some of them have mandates which are so restrictive. They prefer to invest in American 10-year traded paper and get 1.5 per cent because they feel they are more comfortable with risk and liquidity.” AfDB recently launched the ‘Africa50’ designed to help scale up foreign infrastructure investment in the continent. It focuses on increasing the number of bankable infrastructure projects in Africa and creating financial structures that facilitate investment.

National

Govts urged to front Africa to investors