About AIPF | AIP Facility

Risk managment

through an integrated multi-disciplinary team of professional service partners

About AIPF

The African Infrastructure Preparation Facility (AIPF) is a first-of-its-kind on the continent to offer as a pipeline of bankable infrastructure projects as attractive investment opportunities for development finance institutions, private sector investors and other funders. AIPF is a revolving facility with no closure date. AIPF has a target capitalisation of R570 million and intends to invest R 1,23 billion in infrastructure project preparation over a period of 10 years, which is expected to unlock over R 12 billion worth of capital projects.

“While there is plenty of private-sector interest in financing bankable projects, the available project-preparation resources are insufficient to advance the projects to a bankable state; thus the pipeline of well-prepared projects is meagre, and investment opportunities are limited.” WEF, 2015

The Need for Project Preparation Funding

Despite the progress made, most developing countries still suffer from insufficient access to quality, reliable infrastructure. Preparing infrastructure programmes to attract private investment is a complex and demanding challenge, especially in the African context. While there is abundant private-sector interest in financing bankable projects, the available preparation resources are insufficient to advance projects to a bankable stage; hence the pipeline of well-prepared projects is scarce, limiting investment opportunities.

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Early stage project preparation is the most capital starved segment of the infrastructure preparation cycle, and thus development of new bankable projects is significantly impaired.

AIPF Funding Focus

Infrastructure Project Preparation Facilities Principles for Success

In 2015, the World Economic Forum (WEF) published its “key principles for improving project preparation facilities”, aimed at reducing early stage risk, improving effectiveness, and increasing the attractiveness of this market to infrastructure investors. AIPF incorporates these principles by design, as described below:

Clear objectives and a focussed strategy

The AIPF has applied this approach to its strategy development with clearly identified strategic objectives.

A self-sustainable financing model

The AIPF will recover project preparation costs from the sponsor or at financial close with a reasonable margin to offset losses from unsuccessful projects. With this approach the AIPF has an incentive to optimise the preparation period in order to convert effort into benefit as soon as possible.

Excellence in portfolio management

The AIPF implements a stage gate review mechanism within the project preparation cycle that identifies “unfeasible” projects early in the process, thereby minimizing costs. The objective is to allocate the funds optimally and to apply a portfolio approach to project preparation investment.

Cost-efficient and value-adding advisory services

AIPF adds value to projects as it has the expertise, experience, networks and knowledge to ensure preparation of a very high standard, at reasonable cost and within an acceptable timeframe.

Stringent governance and accountability

The Facility as a legal entity with its governance and management structures will ensure effective fund management and reporting based on statutory and corporate requirements and an agreed investment strategy.

AIPF Strategic Objectives

Complement financial and institutional resources from like-minded investors for the preparation of infrastructure projects.

Focus on project preparation with emphasis on feasibility studies, assessment of institutional, technical, financial, environmental, legal and social modules of the project and the key promotor.

Improve the risk/return profile for investors through diversification of portfolio and set criteria for country exposure limits.

Shorten the approval times of project preparation, thereby lowering the transactional costs of project preparation.

Increased throughput of projects to financial close as a result of improved project screening, selection and modelling.

Unlock project opportunities through origination capabilities.

Leveraging concessional and grant funding for the Facility.

Capitalise on existing relationships with entities and professional service providers in Africa.

Focus on best risk management practices.
Adhere to sound governance principles.

To stimulate economic activity and social development on the African continent by enabling infrastructure development.

Development Impact: a core value

It is the vision of AIPF to stimulate economic activity and social development on the African continent by enabling infrastructure development. This is defined by AIPF as its Development Impact. With this end in mind, AIPF maintains an emphasis on the socio-economic impact and sustainability of the infrastructure projects it will unlock on the continent. This is reflected in AIPF’s investment mandate. The necessity of infrastructure in the African context is driven by the need for sustained social upliftment and economic growth in societies across the continent,

and its implementation impacts on the socio-economic landscape around a project. AIPF considers it critical to address socio-economic risks and opportunities on a local level in the early stages of project development. The development impact considerations of AIPF specifically consider the social elements of globally recognised ESG criteria, focusing on the impact of its business on local communities and stakeholders, and the economic, social and environmental sustainability of its infrastructure project portfolio.

Throughout the project screening and selection process, the development impact of each project is assessed and opportunities for increasing socio-economic benefits are explored. Through this approach, the pipeline of fundable projects generated by AIPF is an appealing destination for development finance institutions, socially responsible investors, impact investors, and donors.

A focus on development impact

encourages sustainable development practices throughout the infrastructure development lifecycle;
encourages blended funding and cooperation between different parties in the investment spectrum, as both socio-economic value and financial returns on the portfolio are prioritised; and
provides an opportunity for the private sector to generate more value for its portfolio of projects, for investors and for society at large.