The African Development Bank joined global development finance institutions in Cape Town on Wednesday 26 February to explore effective strategies for addressing infrastructure financing gaps at the Finance in Common Summit.

During a session titled Private Sector Mobilization for Sustainable Infrastructure in Emerging Economies, African Development Bank Group Vice President Solomon Quaynor, alongside leaders of multilateral development banks, public development banks, and private sector institutions, presented the Bank's value chain approach to developing infrastructure projects.

Quaynor, Vice president for Private Sector, Infrastructure and Industrialization, underscored the Bank's shift from an ad hoc approach to a more systematic framework to attract private sector investment. "We realized that, especially in trying to get private sector sponsors involved in project development, we needed to have a more systematic approach."

Jordan Schwartz, Executive Vice President of the Inter-American Development Bank, highlighted critical challenges in infrastructure financing. "Sovereign risk is the primary predictor of investment in infrastructure. That's what drives volumes of private investment even more than contract types, pipelines and projects or even the structures and the forms of transfer or blending," he noted in his opening remarks.

Sir Danny Alexander, CEO of HSBC Infrastructure Finance, identified three key factors that drive private investment flows: "The investment will flow more to the one that has the policy frameworks that give security, that give a clear sustainable cash flow... Secondly, project preparation. We talk about this a lot, but project preparation is more expensive and more costly and more time consuming in emerging markets than it is in developed economies."

Thirdly, there are financial instruments for individual transactions or platforms that can be deployed," he said.

Quaynor elaborated on the Bank's progress in implementing its new approach, leading to the creation of Africa50, which he described as the preeminent infrastructure project developer in Africa, and the Alliance for Green Infrastructure in Africa to address the lack of bankable green infrastructure projects.

The Alliance for Green Infrastructure in Africa is trying to raise $400 million for project development and $100 million for project preparation to scale up green infrastructure development, Quaynor emphasized. "The idea is that public development banks working with local developers can also access this facility. This is a market facility where we want to create what we call a contestable market of project development."

Quaynor also highlighted the Bank Group's risk mitigation strategy: "We provide partial risk guarantees to counter-guarantee government obligations. We have a triple-A guarantee....we don't mind taking the first loss, but we don't want to have first losses that are always realized."

Pradeep Kurukulasuriya, Executive Secretary of the UN Capital Development Fund (UNCDF), emphasized the complementary role of his organization in infrastructure financing. "We are grant-funded like most of the UN system, but we're able to absorb a higher burn rate than most MDBs or DFIs."

The session also featured insights from Kishor Khumbare, Chief Risk Officer of India Infrastructure Finance Company Limited; Marta Postula, First Vice President of BGK (Poland); Woochong Um, CEO of the Global Energy Alliance for People and Planet; and Leslie Maasdorp, CEO of British International Investment.

The discussions concluded with a strong call for closer integration among development finance institutions. "It's not that we don't collectively have the instruments. We just need to be better at integrating. Integration is what we are trying to discuss, and how to better work as a system," UNDCF's Kurukulasuriya emphasized.

This year's Finance in Common Summit, under the theme, Fostering Infrastructure and Finance for Fair and Sustainable Growth, is taking place in Cape Town, South Africa, from the 26th to the 28th of February.