Increasing the bankability of vaccine manufacturing projects in Africa

A lack of available financing isn’t the barrier to expanding Africa’s manufacturing sector for COVID-19 and other vaccines, said speakers taking part in an Africa Centres for Disease Control and Prevention stakeholder meeting Tuesday. Instead, the problem is the low number of bankable projects — with strong financial, economic, and technical plans in place — ready for financing. Currently, 99% of all vaccines on the continent are imported, but the African Union aims to produce 60% of the vaccines it needs by 2040. This is expected to cost about $30 billion, according to Africa CDC, over the next two decades. “While funding for deals exists on the continent, a challenge has been faced around identifying bankable projects which are ready to be funded,” said Markos Abebe, senior researcher at the Armauer Hansen Research Institute. Because of this, development finance institutions must provide deliberate financing interventions during the project development stage, speakers said. But a platform is needed where DFIs can provide these financial commitments and seed capital. “The success of an investment is actually dependent on successfully managing and financing the regulatory pieces, as well as the skills development pieces.” --— Malick Antoine, principal investment officer, International Finance Corporation “We have seen quite a number of interests in providing finance to the sector, and we need to ensure that we have a ready platform to galvanize these efforts,” said Gwen Mwaba, director and global head of trade finance at the African Export-Import Bank, adding that project preparation is a challenge that cuts across almost all industries. “The idea is to develop these projects and make them bankable such that they can now be taken to the bigger forums and start to attract capex [capital expenditure] funds.” But whether to set up a new deal preparation and financing facility — to de-risk projects and bring them to bankability — or to use existing mechanisms is up for debate. A new facility would include a central entity acting as a one-stop shop to provide support across all project phases and ensure deal bankability, said Alhassane Haidara, a division manager at the African Development Bank. This could include financing, technical assistance, and hosting marketplace forums. It would feature a host of financiers — such as DFIs, commercial banks, private equity players, governments, and philanthropists. It would also include various types of financing, such as grants and equity. Some speakers advocated for leveraging existing platforms since they could be utilized quickly and they already have operational teams experienced in screening, reviewing, and processing deals. “This needs to be under an existing platform, in my opinion, or under an existing initiative purely for the purposes of expediency because we can't allow too much time to lapse before we move into manufacturing of vaccines,” Mwaba said. “From our experience, the alternative approach of establishing a new entity may take three to four years to galvanize the type of support that is required.” These time lags can occur while establishing corporate governance structures, galvanizing seed capital, and negotiating hosting agreements, she said. “I think right now we're trying to be as efficient as possible. Time is of the essence. We're trying to get this thing done as soon as possible,” said Malick Antoine, principal investment officer at the International Finance Corporation, adding that using existing vehicles could also lead to administrative and other delays. Another option is a syndicated approach, in which a transaction is funded by multiple financiers but one serves as a lead coordinator for the project, Antoine said. This could be efficient, he said, in that it pools resources and streamlines costs. “You would basically have a massive collaboration agreement that coordinates all of the different parties,” he said. “There would be a more seamless transition to the investments.” It’s important for investments to be made in the right African nations. These can be determined by mapping out the maturity of different economies and countries’ capacity to move forward with vaccine production, Antoine said. “We're not going to build the vaccine manufacturing capacity plan in every single African country, so there is a need to essentially try to coordinate and understand which geographies we're going to basically be developing projects,” he said. Properly assessing demand is also crucial to prevent oversupplies of vaccines, said Nafisa Jiwani, managing director of health Initiatives at the U.S. International Development Finance Corporation. “We want to make sure that we're not in a situation where we've built so much capacity that there are no off-take agreements for those [manufacturing] facilities,” she said. The needs of the project must be understood and responded to in a coordinated approach, complementing the different strengths of individual DFIs, such as equity, technical assistance, or other tools, Jiwani said. While a syndicated loan might work for one project, others might need more hand-holding due to the lack of a fully enabling environment, she added. And financing is needed for creating these strong ecosystems around a project, including to ensure countries have the proper infrastructure, a strong regulatory capacity, and a workforce trained in vaccine manufacturing. This ecosystem financing is more challenging because it is fragmented. It could include funding allocated toward national regulatory authorities, which might call for a blend of grant and other financing, said Aparajita Ramakrishnan, a deputy director of donor and government relations at the Bill & Melinda Gates Foundation. “The success of an investment is actually dependent on successfully managing and financing the regulatory pieces, as well as the skills development pieces,” Antoine said. In a sustainable ecosystem, raw materials — such as bioreactor bags, tubing, syringes, and glass vials — must also be available to manufacturers, Jiwani said. “We can definitely make short-term success; I have no doubt. But our goal is to make long-term, sustainable success in the future,” she said.