The CBN was launched in Cape Town, South Africa, in June 2015. The CBN aims to “crowd- in” financing and support for infrastructure projects by creating a platform for collabora- tion between the public and private sectors. It focuses on the following:
- mobilising public-sector support and private-sector engagement for early stage PIDA project development,
- project structuring, finance and operation,
- managing regional project investment risks,
- accelerating and incentivising private- sector procurement,
- developing practical and effective working relationships with African heads of state, and
- enabling governments and public entities responsible for implementing projects to access high-quality independent technical advisory services.
The CBN held three high-level forums to discuss de-risking PIDA infra- structure projects as follows:
CBN High Level Leader’s Dialogue on De-Risking PIDA In– frastructure Projects
The CBN held a High Level Leader’s Dialogue in May 2016 alongside the AfDB Annual Meeting in Lusaka, Zambia. It examined the role of the private sector in de-risking PIDA projects, hosting more than 100 indus- try leaders, CEOs and senior executives in the business sector, as well as high-level government officials and representatives of development and multilateral organisations.
The meeting emphasised the need to achieve a balance between social and commercial considerations, as well as the need for suitably-struc- tured investment vehicles and risk-return profiles to de-risk projects. Some of the challenges that have resulted in project failure were also highlighted, including flaws in investment and technology, as well as structural weaknesses of projects. The outcomes of the meeting were as follows:
- The need to simplify project preparation and implementation, noting that de-risking should take place at all project levels.
- Long-term investment strategies and commitments are catalytic requirements that need to be scaled-up to incentivise global investment flows to Africa.
- The importance of establishing an expedient and transparent procurement framework that incentivises investment into the project development phase and participation from institutional investors.
- The need to champion improvement of the enabling environment and employment of capital markets as a vehicle for infrastructure investment.
- The need to achieve investable projects through for collaborative work processes that mitigate risks in PIDA and regional projects, and that are focused on identifying project viability gaps.
- That project finance structures should be encouraged by working with an array of public- and private-sector leaders and development partners to overcome project-viability gaps, as well as support the “de-risking” and financial close of PIDA and large infrastructure projects.
- The need to scale-up and use existing and innovative risk- mitigation instruments to incentivise investment in infrastructure, working closely with finance experts and risk-mitigation labs, comprising public- and private-sector leaders.
- That a platform and process to better understand the private sector project-development ecosystem and investment criteria must be championed, together with investment in the increased efficiency of the project-development cycle.
The global public sector expects private capital, especially institutional investors, to provide significant funding for infrastructure. The match between the investment and its correlating returns for institutional in- vestors in African infrastructure projects is, in theory, aligned. This is considering that this type of investment provides institutional investors with a low interest rate environment and a predictable, inflation-adjusted cash flow that has a close correlation with existing investment returns.
Pension and Sovereign Wealth Fund Capital Mobilisation for PIDA Projects
The CBN, in partnership with the AfDB, the UNECA and Africa investor hosted a dialogue, entitled Pension and Sovereign Wealth Fund Capital Mobilisation for PIDA Projects at NASDAQ in New York. The dialogue
built on a recommendation from the de-risking report, namely to mobilise Africa’s institutional infrastructure investment community, includ- ing African pension and sovereign-wealth fund capital. This is essential to bridge the financing divide that stifles infrastructure development, as well as economic and social progress on the continent.
Leaders convened at the CBN High Level panel to discuss practical initiatives and opportuni- ties to mobilise institutional asset owners to in- vest in African infrastructure. The key message was that Africa needed quality institutions and strategies that must be deployed across the various sectors and adopted by leadership of the countries.
The event also saw the launch of the UNECA and NEPAD Agency’s publication, 16 Infrastructure Projects for African Integration. Projects profiled in the publication were select- ed by African heads of state, based on their ability to enhance regional integration within the PIDA framework and the Dakar Agenda for Action.
The meeting discussed innovative co-invest- ment models to drive investment, sustain growth and mitigate risk. Sovereign-wealth fund leaders assessed domestic and region- al-investment opportunities, including invest- ment laws, governance, portfolio and political risk considerations to optimise infrastructure investments and allocations. It explored po- tential funding for the 16 PIDA projects, includ- ing lending, soft loans and grants, to name a few, and strategic ways to mobilise sover- eign-wealth and pension-fund capital.
Africa needs to transition from a narrow focus on individual countries and domestic markets to a regionalised approach to infrastructure investment. Key recommendations from the meeting included:
- the need to mobilise domestic resource- capital, central-bank reserves, pension and sovereign-wealth assets for the continent to take the lead in infrastructure;
- the need to improve bankability and project packaging to gain increased access to capital;
- mega-projects must be broken down into smaller initiatives or phases, with shorter timelines, to make them more manageable, as well as easier to finance and implement;
- the requirement to facilitate and unlock greater participation by Africa’s private sector and sovereign-wealth funds in infrastructure development to bridge the funding divide and the dominant role of the public sector in these projects;
- the need to craft new ways to support strategic infrastructure that promotes growth, trade and development, while redressing the poor state of physical trade-facilitation infrastructure facilities throughout the continent.
The theme for the 2016 Africa Week was Strengthening Par tnerships for Inclusive Sustainable Development, Good Governance, Peace and Stability in Africa. In addition, the agency hosted the NEPAD CBN High Level Dialogue on de-risking Africa alongside the event. Key African diaspora players from the infrastructure, banking and finance, insurance and investment, as well as construction sectors convened at the event.
It served as an opportunity to leverage support through the strategic partnerships that the NEPAD Agency has developed with financial in- stitutions, and was hosted by NEPAD within the context of NEPAD’s Regional Infrastructure and Trade Programme. The NEPAD CEO’s Dr Mayaki highlighted that an increase in regional and do- mestic infrastructure projects relied upon a bot- tom-up approach in developing regional master plans, citing Agenda 2063 and its consultation process as a sound example.
The launching of the De-Risking Report at the forum, complemented by the momentum gained from other meetings, aimed to create con- fidence and attract special investment vehicles to invest remittance funds in infrastructure. The dialogue also leveraged the support of the strategic partnerships that the agency is nurturing with financial insti- tutions, such as Standard Bank and Barclays Africa.
CBN Key Results
The summary outcomes of the CBN de-risking process and dialogues noted that the need to:
- ensure recruitment of competent infrastructure experts to better prepare and package PIDA projects;
- standardise and ensure predictability of regulatory frameworks;
- improve incentives for institutional investors and increase transparency of funding plans;
- increase transparency of infrastructure development and expansion plans at the national level, as well as provide accurate datasets and detailed feasibility studies;
- further develop local capital markets; and
- consolidate political will and support for the development of infrastructure projects.