Africa

The International Finance Corp. expects to invest at least $4.3 billion in sub-Saharan Africa in 2013 with a focus on energy and transportation, said Jin-Yong Cai, executive vice president and chief executive officer.

That’s an increase from a record $4 billion put into the region this year, he said in an interview in Dakar, Senegal’s capital, yesterday.

The World Bank’s lending unit aims to be “the key facilitators or catalysts for private-sector development which is the fundamental driver for economic growth,” said Jin-Yong, a former Goldman Sachs Group Inc. partner who was appointed to the IFC post in August. “Africa is our priority globally,” he said.

The IFC has invested across the continent this year, from a hotel in Burundi to power projects in Kenya. Growth in the region of 840 million people is forecast at 5.4 percent this year and 5.3 percent in 2013, outpacing global projections, according to the International Monetary Fund.

In Senegal, where electricity shortages caused riots in 2011, key impediments to economic growth include the cost and supply of energy, Jin-Yong said. Senelec, the country’s national power utility, has debts of 150 billion CFA francs ($294 million), according to a company report.

Economic Bottlenecks

“I don’t know any other places where the electricity price is so high, but even with that high price the supply is not sufficient,” he said.

Jin-Yong met with Senegalese government officials to discuss areas where investment can improve growth.

“We are looking at several key sectors, not only private- sector participation, but to fundamentally deal with some of the key bottlenecks in this economy.”

The IFC also plans to invest in agribusiness and transportation, Jin-Yong said. “Unless you have decent infrastructure, you can’t have scale, and if you don’t have scale, you can’t really achieve any competitiveness in the business,” he said.

Six sub-Saharan African nations including Angola and Kenya may each raise at least $500 million in debut foreign bond sales in the “next few years” to fund infrastructure spending, Moody’s Investors Service said.

Rwanda, Tanzania, Uganda and Mozambique may also sell their first foreign-currency bonds, setting a benchmark yield for companies, including state-owned ones, that may want to borrow from overseas markets, Aurelien Mali, a senior analyst, wrote today in an e-mailed report.

“There is significant potential in Africa for the increased use of international capital market finance,” Mali said. “International debt issuance will likely be led by the region’s sovereigns, driven by the need to finance a portion of their infrastructure needs.”

Economies in sub-Saharan Africa excluding South Africa, have traditionally been more reliant on selling securities maturing in two years or less in domestic markets, which are often less liquid than developed ones, as well as sourcing donor aid, commercial bank loans and private credit, he said.

That’s changing as international bond sales over the past year by Namibia and Zambia, which were oversubscribed by five times and 20 times respectively, highlight that investors’ appetite for riskier, higher-yielding debt is rising, he said.

Even still, “funding via international debt securities, albeit growing, will likely remain a limited portion of gross capital inflows to the region,” Mali said.

Infrastructure Spending

Inadequate road networks, power generation and water supplies shave at least two percentage points off sub-Saharan Africa’s economic growth annually, according to the World Bank. Infrastructure development in the region requires an estimated $93 billion a year of investment to overcome capacity shortages, the Washington-based lender said on its website.

Thirteen of 54 countries in Africa have issued foreign- currency denominated debt on international markets, Mali said.

Overseas debt issuances from African nations have been hampered by the fact that some have no sovereign credit rating, are contending with political instability or lack the resources to go through the process, he said.

Source: Bloomberg