Private equity seen as key to Africa's infrastructure speed up

Vuyo Ntoi, AIIM's Head of Southern & Central Africa is quoted in an article following his insights on mobilising private equity for infrastructure development presented at the Botswana Resource Sector Conference on 14 June 2016.

The private equity industry is playing an increasingly critical role in funding the infrastructure deficit in
Africa. This is according to the latest figures from the Southern African Venture Capital and Private Equity
Association (SAVCA) 2016 Private Equity Industry Performance Survey.

Erika van der Merwe, SAVCA CEO, private equity investment in African infrastructure has been an
emerging theme over the past decade.

The survey showed that of the R165,3 billion in assets under management in Southern African private
equity in 2015, around R23,8 billion (14.5%) were from funds with a dedicated infrastructure mandate.

This proportion was up from 7.6% in 2014. Nearly one fifth (23.2%) of the industry’s unrealised investment
portfolio in 2015 was in infrastructure. Of the transactions concluded by Southern African private equity
managers in 2015, 14.2% were in the infrastructure sector.

“Private equity funds from various regions have been investing actively in infrastructure projects across
sub-Saharan Africa, in the energy, transport and ICT sub-categories,” van der Merwe said, and added
that this trend was set to continue.

“Investment into African infrastructure offers compelling exposure to African growth, while simultaneously
helping to drive that growth. Unlike performances in other world regions, infrastructure assets in Africa
continue to offer private equity-style returns, and moreover enable private equity to invest in scale on a
continent where there are limited investment opportunities of sufficient size,” she said.

Vuyo Ntoi, investment director and head of Southern and Central Africa at African Infrastructure
Investment Managers (AIIM), agreed that private equity infrastructure in Africa would continue to grow
and attract new players, while creating a positive impact for consumers.

“In large, well-organised infrastructure markets on the continent, there has been a demand for investment
opportunities,” he said. “For instance, the South African renewables market has attracted attention from
international private equity investors, creating a more competitive environment for project equity. The
result of this has been positive for the South African power consumer, who will receive very competitively
priced renewable energy.”

“Private investors in infrastructure projects, especially through private equity vehicles, have proven over
time that they can deliver infrastructure services at competitive tariffs, whilst at the same time ensuring
that risks related to cost overruns and time delays are not borne by the consumer, but rather by the
private sector service providers,” Emile Du Toit, head of PAIDF 2 at Harith General Partners said.

The positive knock-on effects of infrastructure investment are significant, including the fostering of crossborder investments and facilitating regional integration. Additionally, these open up new opportunities for
add-on or related investments. For example, a toll road project creates the scope for property
development, and a host of other down-stream investment activities.

“Private equity investment in Africa can and does serve as a catalyst for development on the continent,
in a way that fosters the achievement of targeted and specified developmental goals: Growth prospects
are enhanced if infrastructure is made more efficient and can better support the flow of economic activity,”
van der Merwe said. “Moreover, because this asset class entails equity ownership, the fund manager
has influence and can define and shape the philosophy and principles by which the funded organisations
and projects operate. Through its growing participation in African infrastructure, private equity will
continue to demonstrate its capacity for functioning as a force for good,” she concluded.