THE CASE FOR EXECUTION OVER AMBITION

Instead of discussing the huge potential for infrastructure investment on the continent, I like to talk in practical terms. Here’s how we approach projects at the Africa Finance Corporation, and why.

By Samaila Zubairu, President and CEO of the Africa Finance Corporation and Chair of the B20 Finance and Infrastructure Task Force

READ TIME: 5 MIN

KEY TAKEAWAYS:

1. Impact is key to driving real progress.

2. Using domestic capital to kickstart and scale projects will demonstrate both capability and opportunity.

3. Standardised frameworks and agreements simplify project development and make it easier to replicate successful models.

THERE'S A LOT OF THEORY ABOUT AFRICA'S INFRASTRUCTURE POTENTIAL, and much ambition, but what has been missing is the shift to execution. At the Africa Finance Corporation (AFC), we've always believed that Africa's vast continent can result in prosperity for its people, and that this can happen only by demonstrating the impact of the projects we finance and develop.

What bankability means to investors

Discussions of bankability often get lost in complex definitions. It simply means investor readiness. A project is bankable when you can present a package that shows an investor how they will be paid.

Here’s a concrete example: we recently finalised the largest equity investment in Africa outside the oil and gas industry, a USD700 million deal for the Arise Integrated Industrial Platform (Arise IIP). It included USD400 million in new capital and USD300 million of existing debt converted into equity. We didn’t start with an ambitious continental initiative; it began as a single project in Gabon to shift from exporting logs to manufacturing veneer, plywood, sawn wood, and furniture.

The goal was to increase the value of exported wood from 30 to 50 euros to 150 to 280 euros per cubic metre. In the end, some products reached 4 000 euros per cubic metre, and the project added a billion real dollars to Gabon’s GDP and generated thousands of jobs.

But first, we had to have all the elements in place to make it bankable: power purchase agreements, connection agreements, tariff frameworks, transmission lines, a purpose-built industrial park, a one-stop shop for permits and approvals, and upgraded rail infrastructure. We effectively built a predictable enclave in a region typically seen as unpredictable, which ultimately allowed us to secure financing.

WHY AFRICAN CAPITAL MUST LEAD

It’s a little-known fact that Africa’s domestic capital pools total USD4 trillion. Thus, the challenge isn’t capital availability. It’s getting it to flow into productive sectors that create jobs and enable industrialisation.

The reason for using African capital first is that it’s easier to discuss scaling a project than starting a project from scratch. If we had initially approached the investors in the Arise IIP and said, “there’s an opportunity, come work with us,” we’d still be in talks. Because we used African capital to build the first project in Gabon, we could demonstrate success. This allowed us to expand to Benin and Togo; then attract other African investors; then scale to Nigeria, Chad, and the Democratic Republic of the Congo; and, finally, secure USD700 million from offshore investors.

“Investors need to see projects succeed. They want visible evidence of a project they can invest in and the profit to be expected.”

START WITH WHAT YOU HAVE AND GROW FROM THERE

Benin and Togo produce 600 000 tons of edible oil from soya and sesame, replacing imports from Brazil and exporting to Ghana and Senegal.

It’s a small dent in the 10 million tons of vegetable oil Africa imports, but it’s important. It reduces shipping emissions, improves export earnings, reduces reliance on external financing, and stops leakage from sourcing foreign exchange to import items that can be made locally.

Looking at titanium, we know that processed titanium is about 11 times more valuable than raw titanium. Imagine the tax base: USD100 versus USD1 100. If you tax USD100 at 10%, that’s USD10. If you tax USD1 100 at 10%, that’s USD110. It’s not about getting more tax, but about putting in place frameworks to capture more value and create higher value exports while creating jobs.

Growth lies in what people do and how they do it. Technology is one of the fastest ways to grow African GDP and create jobs. The technology in smartphones in New York and Singapore is the same as in China, India, and Africa.

How do we then get our young people to fully understand the productivity multiplier that exists in their phones?

One way is by building firms agric networks for connectivity. Think about the impact. Imagine 100 000 smart and innovative young engineers, and for innovation hubs to be established. But it must be done strategically, fully integrated with industrial development and creates jobs.

PARTNERSHIPS WORK WHEN BASED ON PROVEN SUCCESS

We have strong partnerships with development finance institutions in Europe. We also work with the US International Development Finance Corporation, Turkish institutions, Japanese entities, and Italy’s development bank. We also have access to Islamic finance through murabaha structures.

These partnerships work because they’re built on demonstrated success. Once you show that projects generate consistent cash flows and create development impact, international partners want to be involved. It allows them to focus on appraising proven cash flows rather than unknown risks.

The B20 Finance and Infrastructure Task Force’s focus on derisking projects by including concessional finance and public-private-philanthropic partnerships is logical, but it should be based on bankable projects that show clear paths to profitability.

GOVERNMENTS’ ROLE IN ENABLING PROGRESS

Most African policymakers know that infrastructure and industrialisation must be priorities, but have to shift their mindset to take ownership and work with partners.

Governments do want good things for their people. They want to create jobs. Once they see a path to building infrastructure that enables industrialisation and job creation, they’re happy to follow it. The challenge is capital, which is why it’s so important for African capital to take the lead.

$4t

Africa's total
capital pool

The B20’s workable solutions for impact

The B20 Finance and Infrastructure Task Force’s recommendations align with what we’ve seen work in practice – expanding investable projects, improving access to capital, and enhancing fund flows.

EXPANDING INVESTABLE PROJECT PIPELINES

Project preparation is crucial to convert complexity into a clear structure and align capital accordingly. You must select a single value chain, ensure all components to make it bankable are in place, work on it, and deliver results. Then you can replicate the process.

Improving access to capital

Emphasising credit ratings tackles a genuine issue. Many African nations’ credit ratings don’t accurately represent their risk levels. The AFC actively illustrates that African projects can be profitable and sustainable, and that numerous opportunities exist.

Improving fund flows

This requires efficient frameworks and we motivate stakeholders to adopt templates based on successful projects. You don’t have to negotiate a new agreement every time you construct a power plant, for example. We advise governments to work with an existing agreement of a successful project they’re comfortable with. This streamlines procedures and saves time.

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Governments also need to concentrate on issues like right-of-way for fibre optic cables, incentives for the private sector to establish universities or technology centres, and visa frameworks, because all this is vital to make investors feel comfortable and welcome.

EXECUTION CLEARS THE PATH FOR INVESTORS

Investors need to see projects succeed. They want visible evidence of a project they can invest in and the profit to be expected. This encourages competition, which gradually reduces costs.

The AFC’s role is to create frameworks that encourage new initiatives to come to life. Then we intentionally scale back to let new investors and management teams take greater ownership. When others see projects succeed, they follow suit because they understand what can be achieved.

Unlocking infrastructure investment in Africa depends on showing tangible opportunities rather than lofty ambitions. The continent has to demonstrate real progress, not merely highlight its potential, because prosperity for our people will only come through effective execution.

$4t

Africa's total
capital pool