2021 sees surge in fundraising by African infrastructure funds with 2.14bn USD targeted

Africa-focussed infrastructure investment funds have set record fundraising targets in 2021, according to new analysis by global law firm Linklaters. A total of ten funds have set a combined target of 2.14bn USD in their latest fundraising, a marked increase on previous years and over three times the average annual amount targeted over the last ten years. This year has also seen the largest number of newly formed funds that will specifically target Africa’s infrastructure needs - at ten, up from an average of four per year over the last decade.

The analysis suggests that African nations are likely to see high levels of infrastructure spending in the years to come. Fund managers have accrued record levels of dry powder at 2.1bn USD, up 700m USD compared to 2020. Any future investments by funds would add to their combined 9.2bn USD worth of assets currently under management.

Fund managers targeting green assets

In terms of deal-making activity, infrastructure funds have been deploying significant levels of capital across Africa this year. A total of 14 deals took place in the first half of the year, with the majority in South Africa (9), followed by Namibia (2), Egypt (1), Ghana (1) and Mozambique (1).

The proportion of green assets acquired by infrastructure funds out of their overall deal-making is also the second highest since 2015, highlighting the growing appetite for investments which will assist in the climate transition on the continent. A majority, 12 (86%) of the 14, of the infrastructure deals by Africa-focussed funds in the first half of this year were of green assets, such as renewables, energy storage, battery technology and low-carbon transportation.

Andrew Jones, partner and head of Linklaters’ Africa Group, reflected on the findings:

“The face of infrastructure investment in Africa is changing. We’re seeing a greater focus on green investments by funds who are keen on responding to the urgency of the climate transition.

Whilst there is some way to go to meet Africa’s infrastructure shortfall, the record target set this year points to a shift in the right direction for future investment levels.”

Development banks and pension funds drive record fundraising

The investors into Africa’s infrastructure-focussed funds are predominantly development banks, alongside African and European pension funds. Some of the most notable institutional investors include Government Employees Pension Fund (GEPF), Africa's largest pension fund; CDC Group, the UK's development finance institution; and The African Development Bank.

Robert Cleaver, corporate partner who has advised on market-leading deals in Africa, said:

“We may start to see a readjustment of investment strategy towards certain sectors post-pandemic, such as healthcare and digital infra. However, core infrastructure financing continues to be a crucial factor in driving economic growth across the continent.

As the data suggests, institutional investors are increasingly alive to the opportunities available and we expect them to continue to deploy significant capital in a range of exciting projects over the coming decade.”

Linklaters has been deeply involved in Africa for over 50 years, working on numerous landmark transactions, and building vital business connections in every country.

From the firm’s European offices in London, Paris and Lisbon, with direct links to Anglophone, Francophone and Lusophone Africa, as well as its offices in Asia, the Americas and the Middle East, Linklaters has a proven track record of supporting clients in achieving their Africa-focussed strategies.

Recent high-profile downstream work includes advising on the financing of the largest biomass power plant with grid injection in Côte d'Ivoire. and advising the Democratic Republic of Congo on the structuring of a solar mini-grid development program.

Notable upstream client mandates include advising Partech Partners on its most recently established Africa-focussed funds, AIIM on the establishment of a sub-Saharan African Infrastructure fund and advising a major infrastructure promoter on the creation of a US$5bn infrastructure fund investing in the Middle East and North Africa.

Methodology:

• Data sourced by Preqin and is from 1st January 2021 to 30th June 2021.
• Deals by fund managers defined by deals where the acquiror is a fund manager.
• Green assets are defined as renewables, cleantech, environmental services, energy storage & batteries, EVs, digital infra, smart cities, low carbon mass transit and district heating/reconfigured power networks.