Diversifying Africa funding sources

Boosting economic development on the African continent took a significant step forward on Sunday as the African Union (AU) and the Arab Bank for Economic Development in Africa (BADEA) launched the Arab-Africa Financial Consortium (AAFC) in Accra, Ghana. This groundbreaking initiative aims to bridge the financing gap in Africa's development agenda, unlocking new opportunities for growth and prosperity. CNBC'S Africa reporter David Alabi spoke with Rene Awambeng, Founder & Managing Partner, Premier Invest. Africa has long been a continent rich in resources and potential, attracting foreign direct investment due to its burgeoning population and demand for infrastructure, healthcare, and education. However, over the past few years, private equity investments in Africa have been declining. The aftermath of the COVID-19 pandemic has increased risk perceptions and debt levels in many African countries, deterring large private equity funds from investing. This has created a gap in funding, which is now being filled by indigenous African capital and debt capital providers. Rene Awambeng highlighted the challenges faced by African countries, such as rising living costs, food and fuel imports, and climate change impacts like droughts in Southern and Eastern Africa. To address these challenges, Premier Invest has set up a fund manager in the Middle East to attract capital for Africa, focusing on key sectors like trade finance, energy, and agribusiness. The trade finance vertical aims to provide short-term liquidity to finance trade with commercial banks, while the energy fund seeks to improve energy capacity through renewable and fossil fuel energy projects. Additionally, the agribusiness sector is vital for achieving food sufficiency in Africa by promoting domestic production. Awambeng emphasized the importance of utilizing Africa's arable land, water resources, and favorable climatic conditions to boost agricultural output and reduce food imports. Premier Invest sees itself as a facilitator for the development and growth of African countries, working with various partners and investors across the continent. The conversation also touched on the challenges faced by African central banks in managing high interest rates and inflationary pressures, which impact borrowing costs and overall economic productivity. Despite these challenges, there is a growing trend of African sovereigns and corporates tapping into the bond market for funding. Countries like Kenya, Cote d'Ivoire, and Togo have successfully issued bonds, with more African entities expected to explore this avenue for financing. Premier Invest is currently working with a development finance institution to issue a global medium-term note worth $500 million in the third quarter of this year, reflecting the growing confidence in African debt markets. The launch of the Arab-Africa Financial Consortium represents a crucial step towards addressing Africa's financing gaps and unlocking its vast economic potential. By attracting capital, fostering partnerships, and investing in key sectors, African countries can pave the way for sustainable growth and prosperity, ultimately transforming the continent's economic landscape.