Despite the pandemic reigning havoc across the globe, the total value of money used in financing long term projects in Africa rose to an all-time high in 2020.
The total value of project financing that reached a final close, stood at $30.07 billion in 2020, the highest in a decade, according to Linklaters.
That’s double the $12.65 billion value of deals recorded in 2019, despite both years having a similar number of projects at 28.
Project finance is the longterm financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors.
Andrew Jones, Head of Linklaters’ Africa group, said: “Like all countries, the major economies in Africa were impacted by the Covid-19 pandemic. It’s therefore interesting that the continent recorded its highest level of project financing in a decade last year. This is indicative of the resilience and sound fundamentals of the continent and how the region continues to present exciting opportunities for long-term investors.”
Mozambique recorded the highest deal value in 2020 at $22.6bn, thanks to the Area 1 Mozambique LNG project, the country’s first onshore LNG development.
Morocco, Nigeria, Guinea, Uganda and Cote d’ivoire were the only countries to record multiple project finance transactions this year at 6, 4, 2, 2 and 2, respectively.
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Mozambique has recorded the highest deal value at $48.02bn in 12 projects in the past decade, with South Africa recording the highest level of activity, with 103 projects totalling $20.43bn.
According to Linklaters’s research, in the past decade, French sponsors have been the biggest investors in Africa, sponsoring 53 projects totalling $46.57bn followed by Japan (10, $31.6bn), the US (47, $26.95bn) and India (11, $25.85bn).
In 2020, the Renewables sector recorded the highest volume of deals, with 13 totalling $1.592bn, whereas the Oil and Gas sector, although low by a number of transactions, clocked the highest value of deals at $26.14bn.
The Oil & Gas sector also witnessed the highest value of deals in the past 10 years at $85.73bn, while Renewables have witnessed the highest volume (177).
“Economic expansion plans, favourable demographics and natural resources, and the need to generate large scale employment and infrastructure development will ensure continued growth for the sectors. This also means that strong growth will continue in energy, transportation and mining,” Jones said.
