Will the Africa50 Fund, the brainchild of the African Development Bank, finally begin operations this year?
The fund, seen as the vehicle to help accelerate the continent’s infrastructure development needs, has been in the works for more than three years now. The bank proposed the establishment of the fund following calls from African heads of state for such a mechanism in 2012. Fundraising efforts among African stakeholders — governments, investors, pension funds and the private sector — began immediately afterwards, amid much speculation on when the fund would launch operations.
Outgoing AfDB President and Africa50 Fund Chair Donald Kaberuka himself made several forecasts over the past couple of years on when the fund would be open for business.
Africa is on the move, but infrastructure investments are lagging behind. A massive new multilateral fund has set out to change that, and speed up project design and preparation in the process.
Proponents of the fund are optimistic the fund will finally begin operations at the end of 2015. Acting CEO Alassane Ba told Devex the fund has already secured commitments of $800 million from the fund’s founding shareholders — including seed funding from AfDB — and has at hand $150 million.
This, he says, is “good enough” to begin operations, although admits the fund is still looking to secure further concrete commitments from a wider number of stakeholders. Devex understands that discussions were scheduled Monday at a board meeting at its headquarters in Morocco, but the meeting was subsequently postponed until July 28.
The fund, Ba says, already has a list of 10 priority projects in the pipeline. Although these remain “very confidential” at this stage, the fund’s acting CEO hinted that about 80 percent of the projects are in the sectors of energy and transportation, both of which have huge demands across Africa.
The fund’s other focus sectors are in mining, ICT, and water and sanitation. Ba said these priorities will also help meet the continent’s health needs, with health systems strengthening an issue gaining traction on the continent following the recent Ebola outbreak.
“The first thing that you need to improve the health system is energy, electricity. If you’re lacking electricity, how can you improve health? If you don’t have enough transportation means, how can you improve health? It’s not possible,” he said.
With an AfDB shareholder quoted in an Africa Research Institute paper in May as saying Africa50 is “going through teething troubles,” will the list of tasks still to be completed throw up more obstacles in advance of starting operations?
Between now and its launch, Ba explained that the fund needs to increase the number of staff members at its disposal, hone its business processes, build internal capacity for lending, as well as taking care of “all the financial needs that would be required for a project to work.”
But does this mean that the net will be widened in the search for adequate funding?
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Initially, the fund wanted to restrict shareholdings only to African entities, but now Ba said the fund is opening up to accommodate non-African actors — provided they are financial institutions or private companies.
The decision could be traced back to the fund’s early objectives and the popular narrative that’s continuously raised across the continent — for Africa to fund its own development and be the master of its own destiny.
But to be free from the many constraints limiting banks such as the AfDB, whose governance structures, Ba said, “do not help them to be a very agile institution,” it was decided that the fund would become a separate, commercial entity outside the AfDB group.
One of the major issues raised by the bank’s presidential candidates in the elections concluded in May concerned shortening lengthy working processes at the bank, for instance, the time between project approval and funding disbursements.
Despite being a commercial entity, however, the fund will act much like a development bank in the sense that projects will be identified not just according to their financial viability, but also taking into account their development and social impact.
The fund will also assess whether proper environmental and social safeguards are in place, he said, essentially applying the same criteria used by the AfDB when choosing and funding projects.
“Being only financially viable is not enough. It’s what we call the double bottom line,” the acting CEO concluded.
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