Both on and off the continent itself, Africa’s infrastructure gaps are seen as a huge investment opportunity. The AUDA-NEPAD session on ‘Scaling Risk Mitigation to enable Greater Pension Fund Investment in Africa’s Infrastructure: The African Infrastructure Guarantee Mechanism’ was organised as part of the 3rd African Pension Funds and Alternatives Investment Conference.
It was well attended by an audience mostly composed of industry players – private pension fund administrators, trustees, asset managers, government pension funds and development finance institutions. This grouping clearly demonstrates the interest to develop such initiatives to scale up greater investments in the African infrastructure space.
The session was moderated by Dr Morgan Pillay Senior Infrastructure Finance Expert from GIZ, who presented the objectives of the AUDA-NEPAD session. To objectives were; to gauge the appetite of institutional investors (pension funds) for the implementation of the African Infrastructure Guarantee Mechanism and discuss its financial potential; and to make use of the Pension Fund conference platform to consult on what can make the concept a reality. This includes possible implementation strategies and concrete action steps towards scaling risk mitigation and an African Guarantee Scheme to enable the mobilisation of African pension fund investment for African infrastructure.
The session panel, with representatives from the AUDA-NEPAD, the African Development Bank; the Development Bank of Southern Africa and the Trade and Development Bank gave its interpretation of the African Infrastructure Guarantee Mechanism as instrument of risk mitigation. Industry players were requested to give their thoughts on how the development of such initiative could bring value in facilitating alternative investments in the African Infrastructure space.
Deliberations included working with development partners in the development of similar initiatives such as the African Development Bank and its co-guarantee platform with an emphasis on the infrastructure window for which component the African Infrastructure Guarantee Mechanism strategy could be leading the mechanism. Maintaining dialogue with the pension funds on what type of transactions that can be structured using this mechanism was also highlighted as key.
A strong recommendation to have a comprehensive early stage guarantee that could cover development and construction risk was also made, as well as the need to understand what the challenges are, and strengthen existing mechanisms through African Union continental coverage. The need to work on building countries’ own institutional investors that are best suited to take up currency risks as opposed to relying solely on foreign investors was also brought to the fore.
Participants were also informed of the AUDA-NEPAD Institutional Investors Forum that will be taking place in Dakar, Senegal, later this year, at which a roadmap on implementing the concept will be tabled.