Posted on Wednesday, 08 April 2015 14:04

Finance: There is a real increase in cross-border business

By Nicholas Norbrook

Photo©Africa Finance CorporationBacked with public and private money since its founding in 2007, the development finance institution is pouring money into infrastructure schemes across the continent.

The Africa Report: What will you be using your balance sheet for in 2015?

Andrew Alli: We have a number of potential projects across the continent: port infrastructure in Côte d'Ivoire, various projects in the Nigerian transportation sector as well as a coal project in Mozambique. There are quite a few others in our pipeline, some of which I can't disclose at this stage. But there will probably be a similar level of investment this year as last year, which is in the $800m range.

You have a fair number of projects in Côte d'ivoire. What is it that allows them to move at such a pace, given they were fighting not so long ago?

If you go back to the history, [Côte d'Ivoire] was always a leading economy for West Africa. They have a certain degree of human capital which might not be present elsewhere. And though, of course, it was eroded by the decade-long conflict, a large part has remained. It's also the largest economy of the countries in that zone, so there is a great deal of potential for projects. And, finally, the government really does want to get something done.

You have got West African banks operating in East Africa, and East African banks looking to come into West Africa

The Africa Finance Corporation (AFC) has an interesting structure, with public- and private- sector money. What are the advantages of this hybrid structure for infrastructure finance?

I think it is a large advantage. On the one hand, you have the public side of this finance, so we have the status and access of some of the other DFIs [development finance institutions]. But the private side of it injects a certain commercial realism into how we do our business, which makes us a little bit more nimble and commercial in our approach to things. This ultimately, I think, leads to better-structured projects. It also allows us to be more flexible and reactive than some other organisations.

Does building up the AFC brand give you access to cheaper finance?

It's possible, but I'm not sure it will have such an impact on the liability side as on the asset side. The people who are providing finance will ultimately do their own due diligence on us and form their own opinions. But it does make investors more willing to sit with us than if they had never heard of us.

Do you see a greater interest in working across borders from African management today?

With the private sector, particularly in the past decade, there has really has been an increase in cross-border business. Ten years ago or longer, it was really mainly South African companies that invested in other parts of Africa. Now you will find many more companies from different African countries running operations outside their home market. You have got West African banks operating in East Africa, and East African banks looking to come into West Africa. Telecoms is operating on a pan-African basis.

There has also been some improvement – though not as sharp – in intergovernmental cooperation. In many regions there is one dominant economy that everyone else is scared of being overwhelmed by. Cultural differences between Francophone and Anglophone [states], and just the normal kind of politics have made it difficult. But there have been things like the West African Power Pool, which is developing projects in the Economic Community of West African States.

How might the general slump in commodity prices hit African economies?

It can be both a positive and a negative. On the negative side, countries that are dependent on commodity exports could be hard hit. On the plus side, it does provide an opportunity for investors to come in at relatively low prices. ●

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