AFC: Africa is the next frontier for capital mobilisation

Africa is on the brink of a monumental financial transformation as the continent looks to leverage its massive pool of domestic capital to drive economic prosperity. Mohammed Abdul-Razaq, Senior Vice President and Head of Capital Mobilisation and Partnerships at the Africa Finance Corporation (AFC), delved into the strategies and innovative approaches being employed to scale domestic capital mobilisation for Africa in a recent interview with CNBC Africa. With a staggering $1.1 trillion in domestic capital spread across pension funds, sovereign wealth funds, insurance companies, and central bank reserves, the need to harness these resources for the continent's advancement has never been more critical. Abdul-Razaq highlighted the paradigm shift brought about by the COVID-19 pandemic, leading to a reevaluation of globalisation. Nations are increasingly adopting protectionist measures, prompting Africa to focus on self-sufficiency and maximizing its internal resources. This shift underscores the urgency for Africa to capitalize on its vast pool of domestic capital and chart a sustainable path towards economic growth and development. One of the key strategies discussed by Abdul-Razaq is the utilization of innovative structures to attract investments from African pension funds and insurance companies. By offering diverse, high-return, and low-risk investment opportunities, AFC has managed to secure significant funding from domestic sources, with 73% of the capital raised last year originating from within the continent. This approach not only fosters a sense of ownership and empowerment among African investors but also ensures the long-term sustainability of infrastructure projects across various sectors. Furthermore, Abdul-Razaq emphasized the critical role of development and innovation in infrastructure projects, citing AFC's success in spearheading renewable energy initiatives and carbon-neutral economic zones. By addressing the early-stage risks associated with project development and introducing novel financing mechanisms, AFC has been able to overcome barriers that often hinder infrastructure projects from reaching fruition. These efforts have not only attracted institutional investors but have also accelerated the pace of infrastructure development on the continent. In mitigating currency risks, AFC adopts a meticulous credit process that incorporates 18 years of industry insights and expertise. By structuring investments in dollar-earning sectors such as transport, natural resources, and telecommunications, AFC minimizes exposure to local currency fluctuations. Rigorous risk assessments, robust collateral mechanisms, and proactive mitigation strategies ensure the stability and resilience of AFC's investment portfolio, thereby safeguarding the interests of both investors and the corporation. Looking ahead, Abdul-Razaq underscored Africa as the next frontier for capital mobilisation, emphasizing the need to scale up efforts to address the continent's infrastructure deficit, which currently stands at $170 billion. As global geopolitical dynamics evolve and funding challenges persist, AFC remains steadfast in its commitment to driving Africa's economic transformation through sustainable infrastructure development and strategic mobilisation of domestic capital. The corporation's unwavering focus on innovation, development, and risk management positions it at the forefront of Africa's financial renaissance, offering a beacon of hope and prosperity for the continent's future.