African Development Bank (AfDB) has teamed up with major African investors to generate up to $450 million in the first instance to finance a Pan-African Infrastructure Development Fund (PAIDF).
PAIDF, a close-end private equity fund will invest in infrastructure projects in the energy, transport, ICT, water and sanitation sectors.
The bank will contribute $50 million to the fund and another $1 million to the management of the fund which has been approved by the Board of Directors of AfDB.
The fund's objective is to invest directly in infrastructure projects in all regions of Africa as well as investments in securities of companies that own, control, operate or manage infrastructure and infrastructure-related assets.
It may also participate in joint ventures with corporate and governmental partners. The fund will focus on very large scale investments where it can make equity investments of $25–$120 million.
The fund is a 15-year limited-life company that will be registered in Mauritius. At the first closing, its capital should be $450 million.
The potential investors of the fund will include the Public Investment Corporation (PIC), which is the biggest pension fund in Africa with assets under management exceeding $90 billion, the key being the Government Employees Pension Fund. PIC manages equities which accounted for approximately 10 per cent of Johannesburg Stock Exchange (JSE) market capitalisation.
The two other co-sponsors are DBSA and the ADB which are premier direct foreign investors in Africa with wide experience in private equity issues. Sanlam, a leading financial service group in South Africa, listed in the JSE, with more than $50 billion under its management.
Eskom Pension & Provident Fund (EPPF) and Metropolitan are both reputable and highly regarded South African pension funds.
The fund is seen as a real lever for mobilising investment funds in the priority sectors of African economies which include infrastructure, finance and agribusiness.
By 2015, the fund is expected to mobilise investments to the tune of $9 billion to $14 billion in various economic sectors. According to the investment plans, the fund would contribute to the creation of some 50,000 jobs.
The fund is expected to open at least two regional offices with full authority in the North, West and East Regions, within two years of its operations. ADB and DBSA will have a veto in the investment committee and will participate in the selection of its independent members.
The fund will be managed by the PAIDF Management Company. The DBSA and the ADB will each be entitled to at least a 10 per cent shareholding in the management company. The management team will own 40 per cent of the PAIDF Management Company and the balance will be held by the PIC.