InfraCo Africa to invest $15m to anchor pioneering new guarantee company
InfraCo Africa, part of the Private Infrastructure Development Group (PIDG), has announced that it will invest $15 million into a newly established guarantee company, alongside a $5 million commitment from Cardano Development.
Established by InfraCo Africa and Cardano Development with support from PIDG and FSD Africa, the new company is modelled on InfraCredit Nigeria and InfraZamin Pakistan, aiming to unlock local capital into sustainable infrastructure and projects that improve climate mitigation and adaptation and deliver on the SDGs. InfraCredit Nigeria is an infrastructure guarantee facility established in 2017 by PIDG company GuarantCo and the Nigeria Sovereign Investment Authority. InfraCo Africa became InfraCredit’s third investor in 2020. PIDG has sought opportunities to replicate this innovative model in other geographies, including establishing InfraZamin Pakistan. FSD Africa has also extended grant funding to Cardano Development valued at nearly $297,000 for the establishment of the new company, and GuarantCo is exploring the possibility of providing a contingent capital facility to the company in the near future.
The initial focus of operations will be in Kenya, which holds significant wealth in pension, life insurance and private wealth funds. However, Kenyan infrastructure projects and other cash-flow based investments are largely reliant on US dollar denominated bank loans, which seldom offer the length of tenor required for successful developments and which expose borrowers to currency exchange risk.
InfraCo Africa’s chief investment officer, Claire Jarrett said, “The new guarantee company seeks to issue up to $100 million of local currency guarantees in its first few years of operations. Kenya’s capital markets are developing quickly and it is hoped that access to local currency guarantees will enable institutional investors such as pensions and insurance funds to invest into high-quality assets whilst also supporting businesses to secure the finance needed for them to deliver vital new infrastructure, underpinning economic development across the country.”