Africa Finance Corp. Plans More Eurobonds for Infrastructure

  • Lender sold 100 million Swiss francs of Eurobonds in July
  • More borrowing planned as further projects are identified

The Africa Finance Corp., a development-finance institution that funds infrastructure on the continent, plans to sell more Eurobonds to support energy-generation and logistics projects.

The Lagos, Nigeria-based lender, which has financed projects in 26 African countries, has scope to borrow more offshore in its $1.5 billion funding strategy after raising 100 million Swiss francs ($103 million) in a debut three-year Eurobond in July, said Ini Urua, senior vice president for east and southern Africa. It will go to the market as funding needs grow with new projects, he said in an interview Wednesday in the Kenyan capital, Nairobi.

“As you commit you want to make sure you replenish your stockpile to commit more,” Urua said. In “the next few years, we may need to issue another Eurobond.”

Sub-Saharan Africa needs to invest at least $93 billion annually until 2023 to overhaul its decaying transport and energy facilities, with two-thirds of that amount required for entirely new infrastructure, according to Deloitte LLP. Only about $25 billion is being spent on capital expenditure, it said in a 2013 report.

‘Big Appetite’

The dilapidated state of electricity, water, roads and information and communications technology infrastructure in sub-Saharan Africa cuts economic growth by two percentage points annually and reduces productivity by as much as 40 percent, according to the African Development Bank.

AFC, whose biggest shareholder is the Central Bank of Nigeria with a 43 percent stake, has committed about $4.5 billion toward projects in all regions of the continent across all sectors. It plans to more than double its equity base to about $5 billion over the next five years, from $2 billion currently.

“When you have that big an equity base, you can raise funding,” Urua said. “We can always raise funding on the basis of a strong financial position.”

AFC has a “big appetite to move into infrastructure” and hasn’t been “doing badly in terms of getting returns” on projects its financing, Urua said. Its shareholders also include African financial institutions.

“You have people who have money who are looking for secure assets,” he said. “You have people who need money to put on to good assets.”

Financing Potential

In Kenya, the lender is looking at the transport and electricity sectors. It’s already provided facilities to Kenya Power and $50 million Athi River Mining Ltd. 

“There is also potential for oil and gas play as industry develops,” Urua said.

The company is holding "preliminary" discussions with the government of Djibouti, where there is potential to finance port expansions and transform the Horn of Africa nation into a logistical hub able to service Ethiopian traders, Urua said. Its also sizing up the potential in the Democratic Republic of Congo, he said, without elaborating.

Whilst investors are willing to put into African projects, “the constant is always political risk and how you can solve that,” Urua said.

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