The African Development Bank (AfDB) has said the total assets under management alone by pension funds, sovereign wealth funds and the insurance sector in Africa is about $1.8 trillion; monies that can be leveraged on to develop infrastructure in Africa. The President of the Bank Dr. Akinwumi A. Adesina, also said the institutional investors hold a large pool of capital that need to be mobilized and channeled into financing of infrastructure.
Dr. Akinwumi gave the indication in a keynote speech at the UK-Africa Investment Summit, on “Sustainable Infrastructure Forum.” The side event was organized as part of the UK-Africa Investment Summit. “Total asset under management alone by pension funds, sovereign wealth funds and the insurance sector in Africa is about $1.8 trillion. Tapping just a fraction of this into infrastructure will go a long way to close the infrastructure financing gap,” he said.
He however noted that for that to effectively happen, many reforms are needed. “One is to designate infrastructure as an asset class for institutional investors. Meeting their infrastructure allocation targets would require them to hire quality staff who understand infrastructure,” he said. The AfDB president also noted that “a critical constraint to investments in infrastructure is the high level of risks, ranging from project risks, financial risks, operational risks, and political risks.”
Thus “de-risking instruments such as partial risk and partial credit guarantees are quite effective in leveraging private sector investments.” According to him, there’s so much to do to help close the infrastructure financing gap in Africa. But “progress is being made as Africa witnessed an increase in infrastructure financing to $100 billion in 2018, an increase of 24 percent over 2017 and 38 percent over 2015-2017 on average.”