Building tomorrows Africa today: Keynote address at AFC Live 2017. May 16, 2017

Your Excellencies, Honourable Ministers, Distinguished Guests, Ladies and Gentlemen.

Good Morning and Welcome!

‘Africa needs to find ways of enabling infrastructure development if it is to reach its fullest economic potential. If we are to achieve this, the public and private sectors will need to work in unison.

I am Andrew Alli, President and Chief Executive Officer of the Africa Finance Corporation — AFC.

It is my privilege to welcome you today to AFC Live 2017, the second edition of our infrastructure investment summit.

2017 marks AFC’s 10th anniversary. This summit is designed to look back over the last decade, to assess the lessons we’ve learnt, the progress we’ve made and collectively to plan for the future.

We believe that we must share our experiences, intensify our efforts and focus on practical solutions that we can scale up to address the enormous challenge, but also the major opportunity, that investment in African infrastructure represents.

To set the scene, and hopefully create structure for debate, I want to walk you through a short summary of the AFC story, and how we see Africa’s infrastructure sector evolving.

When AFC was established in 2007, Africa was experiencing GDP growth rates consistently in excess of 5% annually, and investor interest in the continent was strong. The so called Africa rising story was just gathering momentum, but central to the debate about the sustainability of growth, was the infrastructure deficit and how to bridge it.

That debate remains as relevant today, as it did then. The scale of the challenge remains, but the environment within which we are operating has changed.

Global economic conditions since 2015, when commodity prices started to fall, have served to demonstrate the on-going vulnerability of many African economies. This is particularly the case for those still overly reliant on commodity exports for government revenue.

Our host Country, Nigeria, along with Angola, Zambia, Mozambique and many other countries have all experienced significant economic stress while Africa’s average growth rate in 2016 declined to 1.6%, according to the IMF. A consequence of this is volatility in government revenues, and thus a reduced ability to spend on infrastructure and other social programs. Prior to now, many African countries have not done enough to create an enabling environment or to make the investments that foster the growth of diversified economies. This is exacerbated by the fact that top-line GDP growth did not translate into inclusive socio-economic development.

As a result, the infrastructure challenge that we set out to address in 2007, might be even more important now, than it was then. The evidence is clear to everyone: In order to escape the boom and bust of the commodity cycle, African governments must re-focus on addressing the impediments to sustainable and inclusive domestic growth. At the heart of this is addressing the infrastructure deficit.

Today, despite some early challenges, AFC is a formidable pan-African corporation with the balance sheet to raise financing on a project by project basis. AFC has contributed to the elevation of African Infrastructure as an asset class, in and of itself. As a direct result more industry players have entered the market than was the case at the inception of the Corporation in 2007.

I want to share some of the successes we have been able to achieve in our decade of operations, and to give you an insight into our thinking for the future. I hope this can help shape the discussions that we have throughout the day.

When AFC was established we had assets of US$1.1 billion. By the end of 2016, we had grown that to US$3.4 billion and delivered record annual profits of US$115 million for our shareholders. We have continued to progressively grow our asset base and deliver improved profitability since inception and are targeting an asset base of US$5 billion in the medium term. This financial stability and growth is a fundamental part of our success, which I believe has been built on a foundation of three pillars:

1. A strong capital base and supportive shareholders.

2. A strong and committed team. We have deliberately focused on recruiting the best talent, globally exposed, but with a commitment to Africa’s growth and development.

3. A very strong corporate governance structure, developed to world class standards.

These foundations have helped us establish a platform for sustained corporate growth, and we have leveraged on it to deliver on various projects in our priority sectors.

Since we last convened AFC Live in 2014, we have:

- invested US$2.5 billion in projects, including in Guinea Conakry, Gabon, Rwanda, Cameroon and of course Nigeria.

- raised US$3.5 billion in capital from a range of sources, including recently tapping the Eurobond market for US$500 million, and launching the first Sukuk, for US$150 million, by an African Supranational Entity earlier this year.

- expanded our geographic footprint, with 14 member countries now, and US$4 billion of investments in the last decade in over 26 markets.

- established our first ‘Platform’ company focused on Power, in partnership with Harith General Partners. (A model that I will come back to later).

- continued to focus on project development as a core activity, and one of the areas we have chosen to devote special attention to. In 2016, we launched the Africa Infrastructure Developers Association (AfiDA).

- diversified our advisory practice to provide services to companies, institutions and governments looking to optimise their infrastructure resources. We have been appointed and acted on mandates in Nigeria, Rwanda and Djibouti.

At AFC, we believe our core role comes at the earliest stage of project conception and development. While international capital will follow and may be crucial to bridging the investment gap, private capital, domestic or international will not come to African infrastructure projects, if Africa does not focus on the development of bankable and sustainable projects. By focusing on supporting project development and using our local knowledge and sector expertise to identify and mitigate risks, AFC comes in to transactions at an earlier stage than many investors.

We believe one of our principal roles is to accelerate the number of viable, bankable projects across the continent, creating the market for other forms of capital to follow, and ultimately bridging the investment divide that currently exists.

I am delighted that today, the project development space in Africa is considerably more vibrant than when we started. We are no longer alone. We have much more competition and many more sources of capital, and that can only be healthy for the continent.

Going forward, we recognise that we must bring this decade of experience, and the partnerships and friendships we have formed with those of you in this room, to accelerate and deepen the interventions we can deliver.

At AFC, we are particularly interested in two key areas.

The first, is the need to focus attention on companies that can deliver scale across multiple markets, in our target sectors. We want them to be more catalytic. Our Joint Venture with Harith General Partners is an example of this in the power sector. By combining the assets of two investors, we have created a company with over 1500MW of capacity installed or under construction, which provides power to 30 million Africans. The joint venture has the capacity to execute more, and larger projects and to attract significant levels of capital. This is a model we believe can work across our target sectors and we will be focusing on these scalable investments and structures over the coming years.

The second area is currency. If the commodity price issues of 2015 and 2016 have taught us anything, it is that dollar denominated financing in emerging markets creates risk, which acts as a major obstacle to financing projects. We believe much more must be done to develop local currency financing solutions. Longer term and cheaper capital needs to be available domestically. Clearly we cannot deliver this on our own, but it is fundamental and something we should all be working together to address. We will be making it a core focus over the next five years.

Finally, I want to conclude by saying that while the levels of investment, financial returns and number of deals are important measures of our success as an institution, they are nothing if we are not delivering tangible benefits. I am proud that our investments (many of which are highlighted in a number of publications you will see over the course of this conference) are delivering real change on the continent, whether we are increasing the power output of generation companies in Nigeria, building the roads that people use for trade in Southern Africa, or processing natural resources into value added products for African consumers.

The legacy that AFC leaves and will leave behind is not only the physical structures of roads, power and manufacturing plants, oil and gas processing facilities; but also the human capacity it develops and IS developing, the socio-economic change it has driven and in some instances led, the communities it has ENRICHED, the economies it has contributed to through direct and indirect development, the partnerships, the footprints it has made across the continent, and above all, the ‘SOCIAL DIVIDEND’ it has given back to civil society across this continent we call….Africa.

Thank you all for coming, I hope you enjoy the conference and we look forward to many more years of fruitful collaboration.