Interview: Bernie Sheahan
Africa: profitable, fastest growing market for IFC
The World Bank’s commercial investments in Sub-Saharan Africa have increased ten-fold in the last decade. Returns are “terrific” if you are willing to put in the extra work, an IFC director says.
Bernie Sheahan, Director at the International Finance Corporation.
“You can create so much value when you are coming in as a scarce resource with expertise into these places,” says Bernie Sheahan, Director at the International Finance Corporation, the World Bank’s private sector arm, in an interview with Development Today.
Sheahan is an American-French national responsible for IFC’s investments in power, transport, telecommunications and extractive industries in Sub-Saharan Africa and Latin America. He says the changes in Africa are huge.
“Sub-Saharan Africa has gone from being our smallest region of investment in infrastructure to becoming the largest today,” he says.
Average IFC investment in the region’s infrastructure was USD 200-300 million annually for the period 1998-2003. Last year it reached almost USD 2 billion.
In the same period, power investments have increased ten-fold to almost USD 1 billion last year. IFC has committed a EUR 200 million investment in a thermal power plant in Côte d’Ivoire and was involved in kicking off large-scale solar power projects in South Africa. IFC can provide both loans and equity for such investments.
Sheahan says IFC’s experience is that returns on Africa investments are “terrific” and superior to what can be achieved in Europe. According to Sheahan, IFC has very good experience with its investments in Africa with an equity real rate of return of over 20 per cent. He says the region has a long way to go to catch up, and he believes that the positive development will last.
“Africa is not only our largest market today. It is also our fastest growing, and will continue to be the fastest growing,” he says.
Sheahan points to a steady improvement in political and economic governance in Africa. Systems are maturing, he says, enabling many more opportunities compared with ten years ago. But it requires an appetite for risk and a capacity to understand those risks.
“It is not so much political risk, in the sense of political instability, [though that] is possible ... It is more that fewer things are done for you in Africa,” he says.
A successful investor has to do a lot of additional things. There are, for instance, few local consultants and suppliers available. But the “returns are worth” the additional efforts, he insists.
The Nordic countries have been critical of the fact that IFC has operated in isolation from the rest of the World Bank Group when investing in Africa. They have called for more cooperation between IFC and the Bank’s agency for support to poor countries, IDA.
Sheahan says the relationship between IFC and IDA is evolving and changing quite rapidly.
“It is going from accidental and rare to something that is common, structured and closely followed.” Sheahan says that today half of all of the infrastructure projects IFC is looking at in Sub-Saharan Africa involve other parts of the World Bank group, such as the guarantee agency MIGA or IDA. Ten years ago there was none.
“The big growth in IFC investments goes hand in hand with working much more closely with IDA and this will continue. We are going to create much more formalised structures for how we work together,” he says.