Interview: Sarvesh Suri, IFC Regional Industry Director For Infrastructure & Natural Resources, Africa
The IFC's commitment to Africa is stronger than ever.
The recent wave of military-backed coups across West Africa will not discourage the IFC, the private sector arm of the World Bank Group, from lending to the continent.
“It does give the investor a pause, but that is where the development institutions such as ourselves and the World Bank Group come in,” Sarvesh Suri, the IFC’s regional industry director for infrastructure & natural resources, Africa, tells ConstructAfrica in an exclusive interview. “We look at what role we can play and how we can mitigate the risk for investors.”
Suri explains that the IFC specifically focuses on developing and supporting the private sector rather than making investments that directly benefit governments.
“The people and private sector are still open for business,” he says, adding that all IFC-backed projects in the affected countries are continuing to perform well. (In Gabon, the latest country to experience a coup, the IFC provided US$58 million in financing in 2016 to support the upgrade of the 650km Transgabonais rail line between Franceville and Libreville.)
The strength of the IFC’s commitment to Africa is evident in the record level of financing it extended to the continent during the past fiscal year.
In 2022/23, it provided US$11.5 billion of funding across 40 countries - its largest ever annual commitment for Africa.
Suri explains that the increased investment was a response to the accumulation of challenges affecting the region: the pandemic, the economic fallout of the Ukraine war, and food and energy price inflation.
“We see an increased countercyclical role for the IFC in such circumstances, so we really stepped up our support,” he says.
The good news is there appears to be no limit to the IFC’s appetite to lend to the region.
“In terms of investments and mobilisation, we would like to do at least as much as we did last year and if we can do more even better,” Suri says, when asked about lending for the current financial year. “There is so much requirement for financing across all sectors… and in my own sector infrastructure, the needs could not be greater.”
Recent infrastructure projects supported by the IFC include two 500MW renewables projects in Egypt, port and railway investments, and the liberalisation of the telecoms market in Ethiopia.
Suri is especially proud of the latter project. The IFC’s advisory mandate culminated in the award of Ethiopia’s first private telecoms licence in 2021, following an open and competitive bid round. The sale of the licence to Safaricom Ethiopia is expected to generate up to US$8 billion in new investments over the next decade, in addition to the US$850 million licence fee payment.
Suri emphasises that the IFC helped to open up the sector in a transparent way.
In June, it provided a further US$260 million loan and equity investment to support the construction of the licensee’s greenfield telecoms network across Ethiopia, while the World Bank’s Multilateral Investment Guarantee Agency (MIGA) provided a 10-year guarantee of US$1 billion to cover the equity investments of the shareholders.
“This company is doing very well; the last I heard they already had 3.5 million customers,” observes Suri, adding that Safaricom Ethiopia is already looking to branch out into mobile finance products.
Using its capital, expertise and influence to create new markets and opportunities in developing countries is the core remit of the IFC.
Triple-bottom line approach
When it comes to selecting which projects and programmes to support, Suri says the IFC takes a triple-bottom line approach covering developmental impact, governance and financial sustainability.
Developmental impact means the impact for the private sector investor and the economic impact, such as job creation and new infrastructure development. When it comes to governance, the IFC looks for best-in-class environmental, social and governance (ESG) practices, making sure the community around the projects benefit and the project itself is well-structured and managed. The projects also need to work on a commercial level in order to be financially sustainable on a long-term basis.
“We see ourselves as a pioneer investor in the investment and infrastructure development space,” Suri states. “We want to undertake the first projects in a particular sector.”
In Ethiopia, discussions are already underway to auction a second and third telecoms licence, following the success of the first licensing round. The IFC is likely to support the new licence holders through their first few years of capital expenditure while they get established, but commercial banks will eventually take on the risk.
Suri highlights the Dakar toll road in Senegal as another IFC-backed project that has enjoyed particular success. It was the first public-private partnership arrangement for the construction of a road in West Africa.
France’s Eiffage won a 30-year concession to build and operate the 25km toll road from Dakar to Diamniadio and the IFC acted as the lead arranger for the €230 million project. The road was completed in 2013 and had such a clear developmental impact, slashing commuting times from more than two hours to less than 30 minutes that a second stretch of the toll road was built out to the airport and commissioned in 2016.
Suri notes that community engagement is critical for project success in Sub-Saharan Africa. “It is of critical importance to make sure that the communities around the project are fully supportive of the project and also benefit from it,” he says.
The IFC has ESG performance standards for investments and companies to achieve which include early and continual community engagement, detailed stakeholder mapping of communities economically and physically displaced by projects and a fair, inclusive and transparent compensation process for those impacted.
“We also make sure there are appropriate grievance mechanisms built into the community stakeholder engagement plan,” he says. “This is one of the areas where our clients say they derive the maximum value out of the IFC, ensuring the projects are appropriately structured, engage with the communities in the right way and also lead to development impact.”
Again, Suri emphasises the need for transparency throughout the project development and says the IFC ensures all project documents are publicly available online.
Suri has more than 20 years of development expertise. Before joining the IFC, he worked at MIGA. The most common problem he encounters in executing infrastructure projects in Sub-Saharan Africa is logistical. Many of the investments are in remote areas and getting access to the project site for workers and materials is a recurring challenge. Experience has taught him the importance of companies keeping a larger inventory of spares and construction materials to keep project implementation on track.
The IFC has a burgeoning pipeline of projects that it is working on including a solar project in Tunisia which is nearing financial close, several port projects, a rooftop solar programme, and a new leasing initiative for modularised solar and battery storage systems with Norway’s Scatec. Digital infrastructure is another area of focus.
Suri sees an expanding role for the private sector as a key future trend for infrastructure in Sub-Saharan Africa, particularly in the power sector, where independent power projects, distributed generation and mini-grid solutions all have a role to play. He also predicts there will be many water projects seeking private participation in Africa. And while great strides have been made in building renewable generation capacity in recent years, Suri notes that transmission infrastructure has been overlooked and offers huge opportunity for private investment.
He highlights green hydrogen as another important trend for the future, tipping Egypt, Morocco, Mauritania, Namibia and South Africa to become exporters within five to 10 years.
He also expects to see more funding given to municipalities and cities to build resilience against climate change including through investments in storm water drainage systems and sea walls. In June, the IFC approved a US$100 million, 15-year loan to support the City of Johannesburg Metropolitan Municipality’s capital investment programme for the 2022/23 financial year.
Suri says he has detected a greater willingness among donors and multilateral agencies to work together of late, and this can only be positive for those looking to deliver new infrastructure investments in Sub-Saharan Africa. “Everybody sees that the needs of the region are so great that none of us can fulfil them alone.”