The Infrastructure Gap

In his February 2017 op-ed in the Harvard Business Review entitled: What Africa Can Teach the United States About Funding Infrastructure Projects, John Macomber talked about what he called the “Infrastructure Paradox”:

There is plenty of capital in the global financial system: upward of US $20 trillion invested in fixed income securities alone between pension funds, insurance companies, endowments, sovereign funds, and wealthy families. Most of these securities are yielding from zero to 2% annually. There is a giant search for yield in the financial markets. There is also massive need for infrastructure investment. Why can’t the funds and the projects get matched up? This is often called the “Infrastructure Paradox.”

It’s an insightful article and I encourage you to read it. The converse situation is prevalent in West, Central and East Africa (what we call — emerging-Africa): a scarcity of affordable (and unaffordable) capital due to the shallower local capital markets, impediments to the flow of this capital between countries and challenges on the repatriation of income. There is a giant search for capital, despite an abundance of very high yielding business opportunities.

We at OBSIDIAN have built our business on resolving this paradox. We work to bridge the gap between the low-yield capital markets of the “west” and the high yield business opportunities in emerging-Africa. This is not simple to do, but it is both profitable and incredibly rewarding.

Infrastructure projects in emerging-Africa are different from those elsewhere because they are rarely upgrades to outdated pre-existing systems. Most projects are completely new and are bringing life-changing opportunities to families and communities across the region.

One 100 megawatt power plant can provide electricity for over 100,000 homes (at typical western energy consumption levels). Just think, that’s at least 100,000 families whose daughters can spend less time performing manual household tasks because of powered labour saving devices and more time on their homework, or researching on the internet, or learning to code.

That is why we are not fans of development aid, charitable donations or handouts — we support and deliver responsible, for-profit, infrastructure. That is real, sustainable change for the low, low price of $100m — a tiny slice of the $20 trillion looking for yield. What’s really cool is that this money will be returned, with a profit, providing a good return to yield-hungry investors and releasing additional capital that can potentially be used to fund future power projects.

Truth is, emerging Africa’s isn’t facing an infrastructure paradox, but an amazing infrastructure opportunity.