CMS Law: Market perspectives from InfraCo Africa’s General Counsel
17th Jun 2021
InfraCo Africa seeks to alleviate poverty by mobilising private sector expertise and finance to develop high quality infrastructure projects in sub-Saharan Africa. It is part of the Private Infrastructure Development Group (PIDG) and is funded by the national governments of the United Kingdom, the Netherlands and Switzerland.
Although publicly funded, InfraCo Africa is different to the development banks. It operates as a private company, through an innovative co-developer model whereby it partners directly with the private sector, providing much needed patient risk capital, development and asset management expertise. An investment strategy and framework set by PIDG and agreed with its funders, enables InfraCo Africa to independently originate new projects, assess their commercial viability and developmental impact, and decide whether to invest. Substantial investment decisions benefit from the experienced input of PIDG’s Investment Committee which is a balance of PIDG and independent industry leaders.
General Counsel and Head of Compliance, Alex Traube-Childs, notes that “PIDG and InfraCo Africa’s funders have worked together over the last few years to put in place a governance framework which allows the PIDG Companies to deliver on their funders’ objectives and leverage one another’s strengths whilst also devolving decision making so that InfraCo Africa can act nimbly, flexing its approach as needed by the market.
Ensuring our projects are inclusive, safe and have a positive impact on people and the planet is really important to InfraCo Africa. Consequently, we invest time and resource in ensuring that our projects are developed, built and operated to a high standard in respect to Climate, Gender, Compliance, Health, Safety, Environment and Social (HSES), and of course robust Governance.” Traube-Childs notes that in the run up to COP26 and with the devastating impact of COVID-19 on economies and communities, this focus on inclusive, sustainable growth is more pertinent than ever.
Some of InfraCo Africa’s more innovative projects include their East Africa Marine Transport investment in a roll-on/roll-off freight transport service across Lake Victoria alongside Grindrod, and a joint venture with Finnish company, EkoRent Oy, to support the expansion of its Nairobi-based electric taxi-hailing company, NopeaRide.
“InfraCo Africa as a vehicle is incredibly innovative in how it funds. We’re very flexible in our approach and use a range of models and instruments and those instruments are effectively tailored to the individual needs of each project.” As a development financier, they invest through debt, equity, convertible debt, convertible notes or other instruments like joint development agreements. “We’re helping to solve some of the problems the private sector has in these challenging jurisdictions and making projects more attractive to investors.”
Traube-Childs says ESG is of fundamental importance to InfraCo Africa and is a key factor when making new investments. He notes “Development impact is critical and is embedded throughout the approval process for InfraCo Africa’s projects, however our mandate is not only to deliver much needed, transformative infrastructure, but to also mobilise private sector investment. We therefore also have to consider the commercial viability of projects. We know that when we first invest they may be struggling to attract private sector investment, but our support should enable them to take the steps needed to unlock further investment. That might mean enabling green-field infrastructure projects to complete development or construction activities to a ‘bankable’ standard, or it might mean investing risk capital into an innovative infrastructure business that needs to scale-up or evolve its product to demonstrate commercial viability.”
Our ESG initiatives go over and above what you may sometimes see in other projects and we make sure we integrate those initiatives on the projects we invest in, working closely with the project counterparties we invest alongside.” In the energy space, InfraCo Africa only invests in renewable power, and Traube-Childs says other developers in Africa are beginning to follow suit due to increased global pressure, especially in the context of the upcoming COP26.
Looking forward, he says the macroeconomic situation remains an issue for the region given the escalating debt position of certain governments. “We still don’t really know what the impact of COVID is. We know what it is on the health service and on lives, but financially it’s difficult to quantify at this stage.”
Ultimately it comes down to affordability. “Governments are stretched, and we need to find new and innovative ways to unlock private sector capital and direct it towards the construction of these infrastructure projects, and that means helping with the development of local financial markets and new mechanisms to manage risk.”