CDC Group plc (‘CDC’), the UK development finance institution, has announced a commitment of US$75m to the Pembani Remgro Infrastructure Fund (the ‘Fund’ or ‘PRIF’), a joint initiative established by Remgro and Phuthuma Nhleko. By providing 30% of capital, CDC has played a significant role in helping the fund to reach a successful first closing of US$245m.
The Fund will invest in the full spectrum of infrastructure opportunities in Africa, covering sub-sectors such as transport, power, telecoms, water and sanitation. This includes investments in late-stage greenfield transactions, brownfield and secondary transactions, as well as logistics and engineering services companies operating within the infrastructure sector.
Generally, investing in traditional infrastructure assets provides significant opportunities for sustainable development impact, particularly in job creation. This is due to both project construction and the knock-on improvements in business productivity of businesses derived from reliable electricity and better transport and logistics.
With a strategy to focus on developing opportunities based on strategic alliances with strong local partners, sponsors and management teams, the target geographies of the new Fund include Ghana, Nigeria, Uganda, Kenya, Tanzania, Zambia, Mozambique, Botswana, Namibia and South Africa. The Fund aims to add value in areas such as governance, reporting, strategy, capital structure optimisation and technical support.
According to the Africa Infrastructure Country Diagnostic, the poor state of infrastructure in sub-Saharan Africa cuts national economic growth by two per cent every year and depresses business productivity by as much as 40 per cent. African countries lag behind their developing country peers by some way, in particular when it comes to transportation infrastructure and energy.
Despite the multitude of investment needs, private funding to African infrastructure has in recent years focused on the more developed economies of Morocco and South Africa, where recent government initiatives in the renewable energy space have attracted significant amounts of foreign capital. Across the rest of the continent private funding levels have decreased overall, leaving an increasingly greater need for investment in infrastructure development. In 2012, only 27 infrastructure projects reached financial close in sub-Saharan Africa, significantly below the 2005 peak of 42.
Commenting on the commitment, CDC Managing Director Murray Grant said:
“Backing this fund manager has been a great example of the work CDC does more broadly with first time teams, having engaged with PRIF from the beginning to ensure that the appropriate structure was used, negotiating market terms and supporting the team in establishing the right incentive structures. CDC worked hand in hand with PRIF to fully understand the strategy and the team required to execute against it. This helped the Fund attract other investors and has culminated in a successful first close of US$245m.”
Herc van Wyk, CEO of Pembani Remgro Infrastructure Managers, which houses the investment team, said:
"We are very pleased with the level of the Fund’s first closing and look forward to working with our investors as long term partners on the African continent” said “We currently have a strong pipeline and expect to commit capital to some of these transactions during this year.”
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