The African Development Bank (AfDB) approved on Wednesday, 28 September 2011 in Tunis an eight-and-a-half-year USD 45 million senior loan to the Emerging Africa Infrastructure Fund (EAIF), to finance its planned investment commitments and support private sector infrastructure projects and infrastructure-related companies in sub-Saharan Africa. This is the second AfDB loan to EAIF. In 2009, the Bank approved a USD 31.25 million senior loan and a USD 12.5 million standby loan facility.
Established in January 2002, EAIF has a track-record of providing long-term foreign currency debt financing to private infrastructure projects across the sub-Sahara region. While EAIF lends on commercial terms, it aims to support projects that promote economic growth, reduce poverty, and promote environmental and social best-practices. EAIF has approved over 30 transactions since inception and currently has a portfolio of projects amounting to approximately USD 500 million across the energy, telecom, transport, mining and manufacturing sectors.
This project is in line with the AfDB's focus on financing infrastructure to build a favorable environment for private sector activity and investment. The Bank's vision emphasizes support to projects in power, transportation, and telecommunications, which are all areas covered by EAIF. Since the approval of the first loan to the Fund in 2009, EAIF has worked with the Bank on several projects, such as the Addax Bioenergy Project in Sierra Leone, and the KivuWatt Power Project in Rwanda.
"Sub-Saharan Africa requires substantial investment in all the infrastructure subsectors targeted by EAIF, while the providers of long-term senior and subordinated debt on appropriate terms are limited" said Tim Turner, Director of AfDB Private Sector and Microfinance Department. "Hence, the Bank is pleased to join the Austrian Development Bank and the International Finance Corporation (IFC) in providing additional debt financing to EAIF, which has contributed to significant resource mobilization, new and improved infrastructure access and job creation."
The joint AfDB, Austrian Development Bank and IFC additional financing, which amounts a total of USD105 million, will facilitate the Fund's operations during 2012 in areas such as power, water/waste treatment and manufacturing. This will increase infrastructure access and foster a more conducive enabling environment for both investors and communities served by the projects, create jobs and contribute to government revenues.
Africa has immense infrastructure development needs which greatly exceed the level of resources achievable solely through public finances and official development assistance. This infrastructure gap is a major constraint on doing business. In addition to basic infrastructure (power, water, energy, transportation), there is also a growing demand for investments and other assistance in related sectors such as core industry, agribusiness, and natural resources. As a result, African countries appreciate the key role that the private sector plays in the development of infrastructure not only from a financing standpoint but also in terms of the transfer of expertise.
