African LPs lead infra fund to $222.5m first close

African institutional investors are now showing their “level of comfort” with private markets investing, according to Vincent Le Guennou, CEO of Africa50 Infrastructure Acceleration Fund, which announced a $222.5 million first close last week.

Africa50 was formed by the African Development Bank following the Declaration on the Programme for Infrastructure Development in Africa in 2012. It is headquartered in Casablanca, Morocco and has received funding from 30 African countries.

The organisation’s Infrastructure Acceleration Fund (IAF) launched in 2021 as a 12-year closed-end infrastructure private equity fund. To reach a first close, the fund has secured commitments from 16 African institutional investors, including DFIs African Development Bank, International Finance Corporation, The Arab Bank for Economic Development in Africa and West African Development Bank, an Angola sovereign wealth fund, and pension funds based in North and West Africa.

Many LPs in the fund had little experience investing in private markets before partnering with Africa50, Le Guennou told New Private Markets.

“Among the investors who have invested in the asset class before, a large proportion were focused on domestic funds rather than the Pan-African funds,” he said. “The other group didn’t have any experience investing in alternative investments. So we were quite happy there was a education process here explaining what investing in a fund would mean, why infrastructure etc.”

The fund will target pension funds from the south and east of the continent as it looks to hit its $500 million target in the next 12-18 months, Le Guennou explained. The firm also hopes that international investors will be willing to engage. “Our fundraising strategy was built around the premise that it was fundamental, before trying to convince international investors to invest in infrastructure in Africa, that African institutions themselves would commit to the fund and demonstrate their level of comfort with such an asset class. We believe that what has been achieved so far will give comfort to investors who are not familiar with the continent,” Le Guennou said.

IAF is focused on “fostering sustainable development”, per the statement, and will invest across the continent in four sectors: power and energy, water sanitation, transport, and digital and social infrastructure. Le Guennou confirmed that this will include fossil fuel projects. “We’re investing in Africa, which is the continent with the lowest carbon emissions, one of the lowest access rates to electricity, and which has a lot of gas reserve. So we want to be pragmatic and we will invest in gas independent power producers for instance. We won’t do oil investment whatsoever, we won’t do coal, but gas and associated infrastructure, yes, we will be able to do that, although there will be a cap on our potential investments in that sector,” he said.