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Thursday, 14 June 2018

There’s a lesson to learn from China’s investments in African infrastructure

The rest of the world needs to follow in China’s footsteps and consider investing in African infrastructure, Investec Group Co-CEO Hendrik du Toit writes for the Financial Times. He argues that default rates on African infrastructure projects are among the world’s lowest, given the strong fundamentals the continent enjoys, which include a booming population and “a wave of innovation and entrepreneurship.” China, now Africa’s largest supplier of equity and debt capital, was quick to realize the endless opportunities and chose over the last two decades to make itself an “integral part” of Africa’s journey towards sustainable development. Today, Chinese companies have c. USD 60 bn in collective investments in projects across major African capitals. China is also the continent’s largest import-export destination, according to Du Toit.

Despite all that, Africa still requires a lot more capital if it’s to continue moving forward. “Estimates put the African infrastructure deficit at about USD 90 bn every year for the next decade. Across the continent, 620 mn people still don’t have electricity; 319 mn people are living without access to reliable drinking water; and only 34% have road access.” Du Toit suggests that investment vehicles such as the Currency Exchange (which hedges against FX risks in emerging markets) and the Emerging Africa Infrastructure Fund (which focuses on funding a wide range of infrastructure projects) “need to be scaled and replicated.”

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