Why the IFA

The problem with a great deal of the infrastructure-related investment required on the continent is that nations find it increasingly difficult to attract financing for the initial development of what they have determined to be critical, economic-growth dependant infrastructure (e.g. the first four business-linked 50 MW solar parks, which need to be developed before institutions are prepared to finance the next 100 of such parks).

National infrastructure strategies therefore all-too-often find themselves stuck within the so-called ‘missing middle’.

The Missing Middle

There are many interpretations of what we mean when we say “the missing middle”. The IFA believes that when it comes to infrastructure investment, the missing middle sits between development finance infrastructure ‘pilots’ on the one hand (often financed through special DFI/donor funds in the public sector), and the large billion dollar infrastructure developments on the other, which would be financed by multinational infrastructure investors, major finance houses and strategic donor agencies (e.g. the World Bank).

The missing middle of infrastructure investment is currently unsupported by financial institutions and as a result is stifling the economic growth of Africa.  It is precisely this infrastructure investment deficit which the IFA is attempting to fill.

The African Infrastructure Investment Deficit

The World Bank has estimated the African continent needs to spend $93 billion per year to bridge its infrastructure gap, with 44% of that in the energy sector (it estimated that  around 650m people – more than half the continent’s population – still lack access to electricity.)

Others have estimated that the overall deficit may be as high as US$130 – 170 billion per annum.

Africa 50, an infrastructure interest platform backed by the AFDB estimates overall infrastructure funding needs in Africa amounts to US$ 1,2 Trillion for the period between 2017 & 2025.

However, this is estimated to have been only 5% of the continent’s actual infrastructure investment needs during that time.

A study by Moody’s Investor Service indicated that the average default rates on project finance bank loans is lower in Africa than both Latin America and South East Asia – however those regions always seem to be able to attract more investment.  Reducing the perceived risk and increasing the ‘investment attractiveness’ of any given potential project in Africa, is therefore essential.

It is the IFA’s belief that by focusing on productive private enterprise-linked projects, we will provide a more stable source of payback for any infrastructure providers.  Our methodology seeks to validate project proposals, then identify and deliver the intermediate financings from which track record can be developed.  This data can then reduce the perceived risks to unlock more strategic public and private finance.