Investment in African Infrastructure: Challenges and Opportunities

Risk Perceptions Among Asset Owners May Be Overblown

Home to over one billion people, Africa is the most youthful continent on the planet with the fastest rate of population growth. Countries across the continent have suffered from chronic underinvestment in infrastructure however, requiring significant increases in private spending to meet international peer best practices and even more to meet Sustainable Development Goal (SDG) targets.

OECD asset owners collectively hold more than $55 trillion in AUM, with approximately 1% of that figure, or $550 billion, allocated to unlisted infrastructure assets. As an illustrative figure, less than one-quarter of a percent, or $127 billion, of total OECD asset owner assets would be needed to meet Africa’s infrastructure needs and SDG targets for energy, water, and sanitation according to GI Hub data.

MiDA (Mobilizing Institutional Investors for the Development of African Infrastructure) engaged Mercer to investigate the barriers and opportunities for increasing institutional investors’ allocations to Sub-Saharan African (SSA) infrastructure.

Investor challenges we uncovered

• Clarifying the Role of SSA Infrastructure in Investors’ Portfolios
• The Necessity for Patience and Long-Term Commitments
• Risk Perception and Reality Gap
• Regulatory Inhibitors
• Gaps in Financing

Key opportunities to drive impact and Growth

• Collaborative Investing/Club Deals
• Education on Risk Mitigation
• Engaging Local Investors
• Development Finance Institutions Investment Partnerships
• Enhanced Refinancing Opportunities
• Aligning with Climate and Sustainability Targets