The African Development Bank (AfDB) has recently signed a $20 million equity investment in the African Infrastructure Investment Fund 4 (AIIF4), further demonstrating the bank’s commitment to promoting private sector development and enhancing infrastructure across the continent.
As per the statement released by the AfDB, this agreement, signed on July 31, 2024, aims to strengthen the bank’s dedication to fostering private sector growth and driving infrastructure development in Africa.
The investment, approved by the Bank Group’s Board of Directors on June 19, 2024, will be financed through the bank’s ordinary capital resources designated for private sector operations.
In its statement, the AfDB highlights that Africa’s infrastructure sector offers significant investment potential due to substantial demand deficits and a lack of capital. The continent currently requires an annual infrastructure spending of $130 to $170 billion, driven by rapid urbanization and increasing local purchasing power. However, there exists a substantial financing gap of $68 to $108 billion each year.
Aiming to bridge this financing gap, AIIF4 has completed its first round of funding, securing around $230 million from international investors. The fund, with a 13-year term and a 5-year investment period, has already exceeded its initial target of $500 million and expects to conclude its final round of funding in the third quarter of 2024.
The Fund is expected to yield notable developmental outcomes, particularly in promoting private sector growth and improving household incomes. The AfDB assesses the likelihood of achieving these outcomes within the specified timeframe as high.
This investment aligns with the Bank’s High 5 operational priorities, as well as its Ten-Year Strategy (2024-2033) focused on accelerating and expanding its operations. Furthermore, the Fund’s project pipeline aligns with the Private Sector Development Strategy (2021-2025), the Climate Change and Green Growth Framework, and the Strategy for Addressing Fragility and Building Resilience (2022-2026).
Mike Salawou, the Director for Infrastructure, Cities, and Urban Development at the AfDB, expressed the bank’s confidence and support for AIIM as a fund manager. He stated, “By providing this scarce private equity investment to AIIM to bridge the infrastructure financing gap in Africa, the Bank is reinforcing its commitment and support to developing infrastructure in Africa through private sector participation. Our confidence in AIIM as a fund manager is strong, given its proven expertise and track record in driving impactful investments.”