Potential benefits include desirable returns; opportunities to mitigate risks and high environmental and social impact potential
New findings indicate that organizations should be proactive with their infrastructure investment strategy and should be considering the benefits of investment in Sub-Saharan Africa (SSA) according to Investment in African Infrastructure: Challenges and Opportunities, research issued by Mercer and Mobilizing Institutional Investors to Develop Africa’s Infrastructure, (MiDA). The paper identifies key challenges and opportunities for mobilizing institutional investors for the financing of public infrastructure in SSA.
“While many investors are cautious about investing in Africa, our research shows that concerns regarding risk can be effectively mitigated in partnership with development finance institutions and the potential upside for investing in the region can be compelling especially in this persistent low-yield environment,” said Alex Bernhardt, Principal and US Head of Responsible Investment, Mercer. “Moreover, by investing in sustainable infrastructure assets in Africa, asset owners have a unique opportunity to contribute to the achievement of the Sustainable Development Goals.”
The research was facilitated by MiDA, a partnership between the National Association of Securities Professionals (NASP) and the United States Agency for International Development (USAID) Office of Private Capital and Microenterprise and the Africa Private Capital Group of the Southern Africa Mission. The initiative seeks to facilitate and expand opportunities for infrastructure investment in SSA for investors seeking higher returns while making a meaningful impact on development and advancing US interests in the region.
MiDA also seeks to increase opportunities for US financial services providers looking to deepen relationships with African institutional investors that currently hold an estimated US$1 trillion in assets, of which billions are invested in the United States.
“We engaged Mercer in a collaborative effort to investigate both perceived and real barriers to, and opportunities for, increasing institutional investors’ allocations to SSA infrastructure. We were also seeking strategic recommendations on possible courses of action that we could take to further our objectives,” said Aymeric Saha, Managing Director, MiDA. “Across the African continent, infrastructure investment has lagged investment in other developing economies, and there is growing consensus across African countries and among the international finance community that private investment will be necessary to meet economic and social development goals.The time for asset owners to act is now, for their own potential benefits as well as benefits for this region.”
The findings reveal the need for infrastructure investment, the historical underinvestment in the region, how existing risk perceptions compare with the reality of investing in SSA infrastructure and describes several opportunities for asset owners to creatively address real challenges of investing in the region. Through interviews with 11 leading infrastructure investors globally — seven asset owners and four asset managers, collectively controlling more than US$1 trillion in assets — the research also details the characteristics of African infrastructure investors.
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