Investing in Africa’s Infrastructure
To generate ideas on how to most effectively deploy private sector investment in Africa’s infrastructure, the Milken Institute in collaboration with the U.S. Agency for International Development, convened experts from the public and private sectors for a Financial Innovations Lab in October 2015. The Lab provided a deeper dive into the 2014 Lab on Investing in Energy Infrastructure in Africa. Participants discussed the types of products that could be most effectively deployed in Africa, the policy and capital markets development that would be necessary to deploy capital , and the types of products that the domestic and international investors could participate in.
Lab participants identified a number of barriers to investment, including:
- Credit and sovereign risk
- Financial risk and limited product offerings
- Deal Implementation
Operational solutions to address these risks such as creating a deal “exchange” and a shadow ratings system were explored. These solutions would create a framework for investors to increase liquidity and transparency in an otherwise less well-known market. The Institute’s report further outlined financial solutions to attract institutional investor capital. These solutions included the creation of project bonds to raise both domestic and international capital, infrastructure debt funds that would lead to the creation of a synthetic secondary market to enhance liquidity, infrastructure banks and quasi-public permanent capital facilities that would leverage public funds to attract private investment through public private partnerships, and
equity funds with the government serving as first-loss capital