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AIIF2 builds promise for African infrastructure

More South African investor interest; Builds on power liberalization

Africa’s burgeoning infrastructure sector took another step forward last month with the launch of a dedicated new fund.

African Infrastructure Investment Managers (AIIM) announced the close of its most recent fund, African Infrastructure Investment Fund 2 (AIIF2), with commitments of $500 million. AIIM is a joint venture operated by Australian banking group Macquarie and South African insurer Old Mutual.

Focus

The main focuses of the fund are expected to be transport and energy in sub-Saharan Africa, with investment going towards generation and distribution. The fund has attracted attention well in excess of its predecessor, AIIF, which opened in 2000 and closed at around $200 million.

In the past few years in South Africa there has been a liberalization of restrictions on the exposure institutional investors can have to investments in the rest of Africa. This has led to increased interest in the rest of Africa among South African investors.

"The relaxed rules in South Africa on exposure to African investments have meant that discussion of Africa is getting more shop-time in committee meetings at investment funds," says Andrew Johnstone, chief executive of AIIM.

However, the increased attractiveness of African infrastructure cannot be attributed solely to deregulation in South Africa. There has been increased recognition that infrastructure development is essential for growth in the region, and that private funding will accelerate this.

Loosening restrictions

Governments in the region have been moving towards loosening regulations restricting private investment in infrastructure. Furthermore, the private sector has increasingly been allowed to charge commercially attractive rates in fields such as energy, including in South Africa.

"Governments are increasingly encouraging private investment in infrastructure through liberalized regulatory controls," says Solomon Asamoah, deputy chief executive and chief investment officer at Lagos-based development finance institution Africa Finance Corporation.

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