Allianz, the German insurance and financial services company, will put $120 million into an African frontier market infrastructure program.
Allianz thus becomes the largest contributor to the Emerging Africa Infrastructure Fund (EAIF).
The EAIF is a decade-long private sector investment mobilization initiative to modernize African infrastructure, energy systems and business outreach.
London-based Investec Asset Management is the parent organization that manages and oversees the fund.
To date, the EAIF raised more than $385 million in financing to lend out as loans to back over 40 infrastructure modernization projects in Africa.
Allianz representatives said that the deal was “risk remote” because significant collateral was secured to back over 40 EAIF projects.
Claus Fintzen, chief investment officer for infrastructure debt at Allianz Global Investors, is confident in the solvency of the fund.
Several international development agencies from the United Kingdom, Germany and Sweden, among others, contributed equity to the EAIF fund.
“We would only lose money if all the other equity investors are taken out,” said Fintzen.
The EAIF fund has long-term plans and goals for its Africa infrastructure initiative. For instance, the funding will pay for decade-long projects in infrastructure-bereft African countries.
The EAIF funding initiative also strives to attract more investors in the long-term once projects commence.
Access to power, water
The EAIF funding initiative financially backs more than 40 African infrastructure projects to boost internationally-reaching frontier market growth.
Half of the planned EAIF infrastructure projects concern modernizing African energy and power plant systems. Sub-Saharan Africa has serious infrastructure shortcomings.
The aim of the EAIF fund is to shore up infrastructure which can, in turn, augment international business opportunities.
According to statistics compiled by the World Bank, only about 35% of Africans have reliable access to electricity.
In comparison, 78% of people in south Asia have access to electricity. In east Asia and Latin America, about 96% have access to electricity.
Infrastructure stability in developing countries and frontier markets is vital to attracting and sustaining international business interests.
The World Bank estimates that the gross domestic product of numerous African countries can rise by 2% with improved power infrastructure.
Numerous financial institutions, banks and Western-based development agencies also financially contributed loans to the EAIF, along with Allianz. The African Development Bank is contributing $75 million.
Dutch finance institution FMO and British Bank Standard Chartered bank each are lending the EAIF about $50 million.