By Babajide Komolafe
The African Development Bank has disclosed that it will invest $30 million to facilitate infrastructure development in Africa.
A statement issuedÂ issued by the bank saidÂ â€œThe Board of Directors of the African Development Bank (AfDB) approved an equity investment of $30m to the African Infrastructure Investment Fund 2 which is the successor Fund of the African Infrastructure Investment Fund 1 and it will be a closed-end fund with a term of 13 years.
â€œThe Fund will invest in infrastructure projects such as airport, road, power, telecommunications, rail, port, water and social infrastructure, primarily in Sub-Saharan Africa.
â€œInfrastructure is the foundation of basic services, facilities and institutions upon which growth, development and interaction of modern communities depend and the African continent represents an exciting infrastructure opportunity as significant expansion potential exist in almost all African countries and in almost every sphere of infrastructure.
â€œWith a rapidly increasing population, high economic growth, gradual liberalization of regulatory structures and economic policies. The African market is expected to provide high potential over the foreseeable future as there is a pressing need to expand Africaâ€™s grossly lacking infrastructure with a view to increasing economic competitiveness.
The Infrastructure Consortium for Africa estimates that approximately $40bn per annum would need to be spent over the next decade in order to address Sub-Saharan Africaâ€™s infrastructure gap.
â€œThe Bankâ€™s participation is expected to attract other investors, strengthen transactions and build relationships between equity and debt investors.
â€œThe Fundâ€™s investment will facilitate growth and expansion in Greenfield and Brownfield projects, thus developing companies in the private sector, increasing efficiency, creating jobs and relieve government expenditure on infrastructure. All these outcomes are in line with the Bankâ€™s infrastructure orientation and the Private Sector strategy.â€
In another development, the board of the bank has approved a line of credit of $30m to the African Banking Corporation Holdings Ltd (ABCH) under AfDBâ€™s Liquidity Facility window.
The proposed Line of Credit will feature a 5 year tenor and a 2-year grace period and will benefit ABCHâ€™s banking subsidiaries in Botswana, Mozambique, Tanzania and Zimbabwe and contribute towards financing the ABCHâ€™s pipeline projects totaling $96m.
The transaction is consistent with the Bankâ€™s Liquidity Facility approved in March 2009, which constitutes part of the Bankâ€™s response to the economic impact of the global financial crisis. It is in line with the Regional Member Countries (RMC) efforts to mitigate the impacts of the financial crisis on their economies. It is also in line with the Private Sector strategy to support sound and well managed financial institutions.
By facilitating finance to target subprojects, AfDB will contribute to improve productivity of target enterprises, reduce reliance on imports, and facilitate the development and maintenance of local community infrastructure including roads, schools and health facilities. This transaction will also play a significant signaling role to other potential investors in ABCH and Zimbabwe thus enhances ABCHâ€™s and other local market playersâ€™ capacity to attract additional financing from other sources.
This Line of Credit will help create more than 5,000 jobs and consolidate over 28,000 jobs at ABCH and beneficiary subprojects level.