Speaker 1: Bloomberg Audio Studios, podcasts, radio news. It is hot outside
Speaker 1: and it's all anyone wants to talk about. As I
Speaker 1: record this, Europe is in its third heat wave in
Speaker 1: the last six weeks and records are tumbling everywhere. Grids
Speaker 1: are strained as more energy is needed to power fans
Speaker 1: and air conditioning, and the hot weather comes with the
Speaker 1: lack of the faintest breeze, meaning wind turbines un generating
Speaker 1: as much electricity. Nuclear plants have also been forced to
Speaker 1: power down because they can't cool as much as is
Speaker 1: needed for safe operation. But here's the thing. While the
Speaker 1: system is under stress, at least here in Europe we
Speaker 1: have a grid. In many parts of the world, especially
Speaker 1: in Africa, hundreds of millions of people still do not
Speaker 1: have access to reliable electricity, and year after year, as
Speaker 1: we make this podcast, the problem doesn't seem to be
Speaker 1: getting any better. In fact, since President Trump got into
Speaker 1: office last year, Western countries have cut development finance, the
Speaker 1: type of money that was crucial to bringing electricity to Africans,
Speaker 1: among other small matters such as food security and basic
Speaker 1: health support. This is zero. I am Afshadrati and this week,
Speaker 1: why is it still so hard to get climate finance
Speaker 1: to developing countries. Here to answer that question and many
Speaker 1: more is Philippe Walahu, chief executive officer of the Private
Speaker 1: Infrastructure Development Group, which over the past twenty five years
Speaker 1: has helped attract over fifty billion dollars in investment into
Speaker 1: infrastructure in developing countries. Philip, welcome to zero.
Speaker 2: Thank you.
Speaker 1: So you are CEO of the Private Infrastructure Development Group,
Speaker 1: one of the auganizations which has so many other organizations,
Speaker 1: has these acronyms that in the development finance will have
Speaker 1: become many and just so that we give some examples,
Speaker 1: there is BIGCFAIIB and these are not even the biggest
Speaker 1: ones in that sphere. So perhaps you can just start
Speaker 1: with giving us an overview of what PIDG does and
Speaker 1: what kind of infrastructure projects you build.
Speaker 2: I will, and on a light note, I was telling
Speaker 2: someone at one of the roundtables yesterday that I think
Speaker 2: my next project in the year or two will be
Speaker 2: too rebrands because the Private Infrastructure Development Group is of
Speaker 2: lengthy and there's got to be something a bit shorter
Speaker 2: and catchy. So in a nutshell, the best way to
Speaker 2: think of us is we work along the life cycle
Speaker 2: of an infrastructure asset from early stage project development all
Speaker 2: the way to construction and operation, and in so doing
Speaker 2: we make available number of products, including early stage patient capital.
Speaker 2: So this is to actually develop projects growth equity, so
Speaker 2: for projects that are trying to expand, local currency guarantees
Speaker 2: a big part of what we do, and then long
Speaker 2: term debt finance. So effectively we cover the full capital
Speaker 2: structure and the life cycle of an infrastructure asset.
Speaker 1: And in doing infrastructure, how much of your infrastructure nowadays
Speaker 1: is climate focused?
Speaker 2: So when we launched our new strategy in twenty twenty three,
Speaker 2: which runs to twenty thirty, we committed to having fifty
Speaker 2: to seventy percent of our projects in the climate finance space,
Speaker 2: and we have met that target. We'll probably at the
Speaker 2: media point, I think at sixty percent right now.
Speaker 1: So in twenty twenty five, your report says you've committed
Speaker 1: about a billion pounds to thirty three projects and that
Speaker 1: has attracted a further four point one billion dollars in
Speaker 1: co investment. Obviously, one of the metrics on which institution
Speaker 1: like yours take pride is this multiplier where you bring
Speaker 1: in public money from governments, but then that helps bring
Speaker 1: in private capital to build these projects because there's just
Speaker 1: a lot more private capital in the world. Talk me
Speaker 1: through some of these projects. Give me an example that
Speaker 1: you're proud of in the past year that you funded,
Speaker 1: or something that's been completed.
Speaker 2: I could go on and on, but let's give a
Speaker 2: couple of examples. We did a water project on a
Speaker 2: PPP basis, a public private partnership in Kigati in Rwanda,
Speaker 2: which is up and running and doing quite well. That
Speaker 2: provides putable water to half a million people in Kigaty,
Speaker 2: so it's a significant investment. When we were working with
Speaker 2: the developer, there were a number of features that included
Speaker 2: elevating the control centers, using submarine cabling and in both
Speaker 2: cases to ensure that during the flooding, both would be
Speaker 2: able to continue operation and provide portable water to Kigai,
Speaker 2: and indeed have been floods and they've been able to deliver.
Speaker 2: In Madagascar, we supported a solar power project Madagascal, because
Speaker 2: of climate change, is experiencing cyclones in the way that
Speaker 2: it didn't before exponentially, and so when you're developing a
Speaker 2: solar power project, typically the poles on which are mounted
Speaker 2: the solar panels are dug at a depth of one
Speaker 2: point five meters in that project working with a developer
Speaker 2: at a higher cost, but then you make it resilient
Speaker 2: for the future cyclones. Those poles are dug at a
Speaker 2: depth of three meters which allows the power project and
Speaker 2: the panels to stay still when you have that cyclone
Speaker 2: that comes through. And these are little things that working
Speaker 2: with developers. Yes, it's going to be a little more
Speaker 2: expensive upfront, long term it pays for itself.
Speaker 1: And Madagascar of course is a place of extraordinary biodiversity
Speaker 1: sort of sits as this big island off the coast
Speaker 1: of Africa, but also extreme poverty and climate impacts, not
Speaker 1: just the cyclones with droughts have caused a lot of
Speaker 1: hunger issues. So bringing cheap, affordable power is unlocking so
Speaker 1: much potential for the country. Now let's come to issues
Speaker 1: that are holding you back. We are seeing a growth
Speaker 1: in right wing movements across the world, especially here in Europe.
Speaker 1: Many of your funders are in Europe. How do you
Speaker 1: make the case for overseas development finance to the people
Speaker 1: in Europe who are who are right now choosing these parties?
Speaker 1: You know, how would you make the case for somebody
Speaker 1: living in an English village that the UK giving your
Speaker 1: money is a good use of their taxpayer pounds.
Speaker 2: It's a yes, it's a fair question, and I think
Speaker 2: it goes back to the point about us actively diversifying
Speaker 2: the source of capital and also finding and ensuring that
Speaker 2: we reach a path where that capital is no longer
Speaker 2: needed and so that there's a downward trend to our
Speaker 2: need for capital from the six governments because it will
Speaker 2: instead be coming from private sources.
Speaker 1: But don't you need to convince these governments, who then
Speaker 1: need to convince the people that this is still a
Speaker 1: good use of their money. What are you doing to
Speaker 1: help these governments make the case for overseas development.
Speaker 2: So what we try to show is that every dollar
Speaker 2: that is put in is going to membilize a larger
Speaker 2: amount of capital that would have otherwise not flowed to
Speaker 2: those countries. We can talk about the is it sixty
Speaker 2: seventy percent climate finance which helps reduce emissions across the globe.
Speaker 2: We could talk about how many, what percentage of emissions
Speaker 2: is or are the countries in which we operate responsible
Speaker 2: for Whilst in the North we are responsible for the
Speaker 2: large majority of those emissions.
Speaker 1: There is a moral argument, there's a justice argument, But
Speaker 1: what is the self interested argument that you would make
Speaker 1: to a villager that you know ten pence of your
Speaker 1: annual tax is going to go to PDG.
Speaker 2: So, in doing the work that we do, and we've
Speaker 2: only talked about renewal space is obviously much more than
Speaker 2: is happening. You're helping build and strengthen economies locally. It
Speaker 2: is in no one's interest, whether you're the small village,
Speaker 2: whether you're in London or you're in Paris to have
Speaker 2: economies tumble. In the emerging markets which we operate, that
Speaker 2: will have a ripple effect. And I need not describe
Speaker 2: that ripple effect. I mean it manifests itself in many ways. Immigration, unemployment,
Speaker 2: and where that leads is not a pretty.
Speaker 1: Broad well, refugees and then the right wing movement that.
Speaker 2: Grows stay away from that one.
Speaker 1: Why is that difficult for you to say?
Speaker 2: Though, no, it's not difficult, But you're absolutely right. It's
Speaker 2: so the point that I'm making.
Speaker 1: The connection is pretty clear. Is it politically not feasible
Speaker 1: to make of f actually correct statement? No?
Speaker 2: Absolutely, And so for us building strong economies, which then
Speaker 2: rebuts the arguments made by some elements on the right
Speaker 2: wing of the political spectrum helps. Well, I'm not sure
Speaker 2: it helps that people have in trench views, which in
Speaker 2: many instances they do have in trench views.
Speaker 1: But there is a problem clearly that because of lack
Speaker 1: of clear communication from governments, from financiers, and not blaming you,
Speaker 1: but just the whole community as a whole in showing
Speaker 1: the good that is happening that results in benefits to
Speaker 1: Western people and Western citizens, and something needs to be
Speaker 1: done to fix that communication gap because without fixing it,
Speaker 1: you are getting people making choices that are detrimental and
Speaker 1: they don't know about it.
Speaker 2: I couldn't agree with you with you more. The ability
Speaker 2: to communicate more widely the good that comes out of
Speaker 2: what we do is something that we have to work on,
Speaker 2: and you can include us in the mix because we
Speaker 2: have to do better. The bad stories sell and that
Speaker 2: is then latched on by these movements that you talk about.
Speaker 2: So I, as CEO, have a responsibility to get that
Speaker 2: word out. And if I'm building a state of the
Speaker 2: art treatment facility in Kigali that's providing water to half
Speaker 2: a million people, something we can all be proud of
Speaker 2: and something that I need to be able to communicate
Speaker 2: more effectively.
Speaker 1: If you look at the six governments that fund you UK,
Speaker 1: Netherlands with zil in, Australia, Sweden and Canada, or really
Speaker 1: any Western government right now, they're cutting their eight budgets,
Speaker 1: they're cutting their climate finance funding. This is a time
Speaker 1: when actually you need more development finance going into emerging
Speaker 1: economies which have been hit by dead burdens, which are
Speaker 1: struggling to be able to raise capital for very basic
Speaker 1: important projects for themselves. So this must have made your
Speaker 1: job at PIDG interesting more difficult, I'd.
Speaker 2: Say more interesting. So the massive drop in overseas development
Speaker 2: assistance or ADA as we call it, I think we've
Speaker 2: seen it coming and so for the past two three
Speaker 2: four years we've been quite busy exploring other avenues to
Speaker 2: diversify the funding base. And so, for example, if you
Speaker 2: look at our debt fund, which is the oldest instrument
Speaker 2: in the group, is now able to attract private capital
Speaker 2: private funding lines anywhere between five and ten years. So
Speaker 2: we have attracted people like Alliance in Germany. We have
Speaker 2: attracted Standard Bank appso Bank Standard Chartered SNBC in the UK,
Speaker 2: Phoenix now known as Standard Life that's on the dead side.
Speaker 1: And they're coming in into a development finance institution.
Speaker 2: Why for two reasons. One it allows them to get
Speaker 2: into the development space and diversify their own exposure and
Speaker 2: through a trusted vehicle. So you know very quickly if
Speaker 2: you look at our debt fund with exposure to twenty
Speaker 2: six countries between Africa and Asia and ninety percent in Africa,
Speaker 2: the fund itself or the portofit of projects is listed
Speaker 2: implicit rating of B minus that, according to the rating agencies,
Speaker 2: should produce an annual loss of one hundred to one
Speaker 2: hundred and fifty basis points. In reality, our last rate
Speaker 2: is twenty basis points and our recovery rate is higher
Speaker 2: than what you would find in Europe and North America
Speaker 2: at seventy eight percent.
Speaker 1: Does that, though, then lead to changing the rating itself
Speaker 1: because I have heard this before, which is there is
Speaker 1: a perception of risk in emerging economies that is not
Speaker 1: bearing on the reality. And this happens across many different
Speaker 1: types of capital stacks and different types of projects. But
Speaker 1: then it is the ratings agencies that really are able
Speaker 1: to drive large amounts of capital towards projects. Do they
Speaker 1: look at your performance and go we actually must correct ourselves.
Speaker 2: It's an interesting question. So the implicit rating of B
Speaker 2: minus is based on our own model language is based
Speaker 2: on Moody's and so it's generally well accepted. But yes,
Speaker 2: the discussion with rating agencies is a very interesting one
Speaker 2: at the present time. And I'm sure you're aware. The
Speaker 2: last year the md Emerging Markets and Developing Economies Taskforce
Speaker 2: was launched in the UK by the UK government and
Speaker 2: we are an active participant, as are a number of
Speaker 2: UK institutional capital providers. And there are a number of
Speaker 2: working groups, including working with rating agencies and seeing with
Speaker 2: the rating agencies how some of the structures and blended
Speaker 2: finance structures that are being put together can aspire to
Speaker 2: a different or better rating. And I think as the
Speaker 2: rating agencies will say, they're quite open to somebody providing
Speaker 2: evidence and coming to them to suggest an alternative way
Speaker 2: to suggest that their rating needs to be modified because
Speaker 2: of XYZX and so, at least in my career, it's
Speaker 2: really the first time that I've seen at a very
Speaker 2: senior level representatives from each of these stakeholders at the
Speaker 2: same table and having a very open conversation. And you
Speaker 2: will have seen some of the rating agencies last year
Speaker 2: data slight or some tweaks to their methodology which unlocked
Speaker 2: hundreds of millions of capital that can now be available
Speaker 2: because the rating changed. So those are currently active discussions.
Speaker 1: After the break. How has the emergence of cheap solar
Speaker 1: changed the climate finance landscape? If you enjoy what we
Speaker 1: do here at zero, please write us a review on
Speaker 1: Apple Podcasts, Spotify or YouTube. Recently, Roger Ig wrote, this
Speaker 1: is a fantastic show for piercing the information bubble here
Speaker 1: in North America regarding the energy transition. Thank you, Roger.
Speaker 1: We are now starting to see this across Africa because
Speaker 1: of the sheer cost of solar dropping. The amount of
Speaker 1: solar panels that have been imported across Africa over the
Speaker 1: past twelve to twenty four months have exponentially grown. I
Speaker 1: understand the point you're making about the fact that deeper
Speaker 1: structural changes require additional expense. But if solar is affordable
Speaker 1: and countries are starting to import these panels any which way,
Speaker 1: are solar projects still the ones that you want to support?
Speaker 1: Are there other types of projects you want to move
Speaker 1: on to next?
Speaker 2: So solar projects yes, because a lot of what we
Speaker 2: do is in off grid in a midigrid space. So
Speaker 2: when we're working in the north of Sierleone to provide
Speaker 2: twenty thousand people with access to electricity, these are people
Speaker 2: that have never before had a light bulb never And
Speaker 2: so those types of projects in the afterad minigrade space
Speaker 2: are not attracting capital from larger multilateral development banks or
Speaker 2: even the large DFIs because its views extremely risky.
Speaker 1: So even the Africa Development Bank would think of as
Speaker 1: he earlier on solar project to be risky.
Speaker 2: Well, something like that is going to be a bit
Speaker 2: small for what they normally do and they're going to
Speaker 2: be looking a lot at base power. So we are
Speaker 2: working with the African Devilment Bank because of their presence
Speaker 2: on the continent, but increasingly working with local or international
Speaker 2: developers in in a sense to create an aggregation platform
Speaker 2: because what happened over the last fifteen years I would
Speaker 2: call it naive money. A lot of naive capital has
Speaker 2: come into the market thinking this was the new El
Speaker 2: Dorado and there was a lot of money to be made. Well, yes,
Speaker 2: but in many cases you still required some concessional findings
Speaker 2: to make it happen. And so by aggregating on platforms,
Speaker 2: then you get the scale and then you can target
Speaker 2: a million two million people to to give access to literacy.
Speaker 1: Talk me through how closing a deal, maybe the Sierra
Speaker 1: Leone deal works. What are the big obstacles that you
Speaker 1: have to overcome, beyond the fact that size can be
Speaker 1: a problem for certain institutions to fund the same project,
Speaker 1: what do you need to do to convince yourself and
Speaker 1: of course your funders that this is worth backing.
Speaker 2: I mean, for us, it's about additionality. You're in a
Speaker 2: smile when I say this, but when I recruit someone
Speaker 2: in the final round of interviews, we say you're here
Speaker 2: to put yourself out of business. So first and foremost
Speaker 2: are we being additional? Are we displacing private capital that
Speaker 2: otherwise would go without us? And we have an internal
Speaker 2: mechanism to test that. And if we are displacing, then
Speaker 2: we're out of the deal. We shouldn't be in the
Speaker 2: deal because this is scarce capital. But beyond that, the
Speaker 2: key issue is if you look at sub Soerran Africa
Speaker 2: in particular, finding that growth equity is the most difficult
Speaker 2: part of the capital structure to find. There's plenty of
Speaker 2: capital available we're talking about pipeline or development pipeline projects
Speaker 2: that we need. Capital is there, but the equity is
Speaker 2: extremely scarce. And so when we are deploying and doing
Speaker 2: these aggregated platforms in a renewable space and solar space,
Speaker 2: finding like minded partners to put in equity. We're not
Speaker 2: talking massive amounts. We might put in fifteen, somebody might
Speaker 2: put in twenty. That is not easy. And then you
Speaker 2: have in some places to deal with regulatory issues that
Speaker 2: may or may not be a problem, terror issues that
Speaker 2: may or may not be an issue.
Speaker 1: And equity is scarce because it's riskier capital because if
Speaker 1: somebody invests in the project doesn't turn a return, well,
Speaker 1: equity holders take the losses first, whereas when you say
Speaker 1: there's plenty of capital available, that's more on the dead side,
Speaker 1: where if you lend and this project doesn't work, then
Speaker 1: at least the first moneys are recovered by the debt holders.
Speaker 2: Yes, and I suspect I don't suspect. There are two
Speaker 2: issues here. One is a risk return issue. So some
Speaker 2: developers that are backed by very large institutions view the
Speaker 2: return that is achievable in South Southern Africa in the
Speaker 2: spaces not commensurate with the risks they're taking, but equally
Speaker 2: we see people with unrealistic expectations of returns.
Speaker 1: Now, the conflict in the Middle East has created a
Speaker 1: momentum for clean energy in a way that energy shocks
Speaker 1: tend to do. We've talked a lot about that in
Speaker 1: the show. Looking at it from your perspective as a
Speaker 1: development finance institution, how have you seen the landscape change
Speaker 1: and what would that look like in the next five
Speaker 1: years that's different from what would it have been without
Speaker 1: this energy shock.
Speaker 2: So two points. First, I recently had a board meeting
Speaker 2: and we were providing an update on the impact of
Speaker 2: the Middle East war on our portfolio and what business
Speaker 2: would look like for the rest of the year, and
Speaker 2: I was sounding a conscious note as to ability to
Speaker 2: meet our targets for the year or ambition for the year.
Speaker 2: But then when I presented the business side and where
Speaker 2: we are at the mid year point, we're well on
Speaker 2: track because, notwithstanding what we're seeing in mid least, the
Speaker 2: demand and the proposals for transactions have been flowing in.
Speaker 2: And so the second point, which is extremely interesting this
Speaker 2: push for renewable as a result of what I'm seeing,
Speaker 2: is whether it's consumers or businesses. They're not going to
Speaker 2: wait for government at the top to enact the policies
Speaker 2: to ensure that we have diversified and move towards at zero.
Speaker 2: And so from that you're seeing a bottom up approach
Speaker 2: where people, individuals, communities, and companies or businesses are saying,
Speaker 2: I need stable power. And if I'm living in South Arin,
Speaker 2: Africa got abundant solar and wind hydro in some cases,
Speaker 2: so demand for us and not just us, other institutions,
Speaker 2: demand for our products is going through the rip. Frankly
Speaker 2: because of this desire to create self sufficiency.
Speaker 1: And yet if you look at the numbers, Africa accounted
Speaker 1: for just two percent of global clean energy investment in
Speaker 1: twenty twenty five. It has twenty percent of the world's population,
Speaker 1: and as you mentioned, the best potential for solar if
Speaker 1: not for anything else. Why then are the numbers so stark.
Speaker 2: Still, we go back to risk perceptions, and if you're
Speaker 2: making a similar return in Europe or North America and
Speaker 2: you speak to institutional capital, they will say, and I'm generalizing,
Speaker 2: why would I go through the pain of going through
Speaker 2: my investment committee when I've got a stable return in
Speaker 2: North America and or Europe. Part of my job, which
Speaker 2: I probably spend half the time doing, is dispelling those
Speaker 2: risk perceptions. So the task force, the AMD tansports that
Speaker 2: I referred to earlier is precisely or one of the components,
Speaker 2: is precisely about demystifying the risk and helping in this
Speaker 2: case UK institutional capital. And so we've seen some timid
Speaker 2: approaches and leading the way or showing the example. But
Speaker 2: you've given the statistics. I mean there's a huge long
Speaker 2: way to go. But I the risk perception is fundamental here.
Speaker 1: And we've talked about solar and batteries and they've become
Speaker 1: cheaper and clearly people now know these things exist and
Speaker 1: they want them. But if you're thinking as an infrastructure investor,
Speaker 1: what are the types of infrastructure today that are looking
Speaker 1: like where solar batteries were ten years ago.
Speaker 2: It's a good question and I think in many of
Speaker 2: the countries we operate, you're still a day one in
Speaker 2: terms of the soul in the battery. I mean, when
Speaker 2: you talk battery, in the last two years, I would
Speaker 2: say I've seen a massive jump. So in Malawi, we
Speaker 2: worked with a Canadian developer called JCM to develop over
Speaker 2: sixty megawat's the soul Power. One of the two plants
Speaker 2: has a battery storage, the first over in southern Africa,
Speaker 2: so two years ago that's extremely rare. You're right, you're
Speaker 2: seeing it, but it's still the very I would say nascent.
Speaker 2: I do think when I look at subser in Africa,
Speaker 2: but Asia as well, where we also operate, wind hasn't
Speaker 2: been tapped into in a way that it should. Offshore
Speaker 2: wind is till something people talk about. So Vietnam has
Speaker 2: been looking at it quite closely and there's a huge
Speaker 2: potential there. It's capital intensive and so those technologies, and
Speaker 2: then you have the electric mobility. I mean there we're
Speaker 2: seeing some very very interesting things, whether it's two, three
Speaker 2: or four wheelers in Senegalo. We supported a light electric
Speaker 2: buses in Dhaka, which is quite extraordinary. So I see
Speaker 2: that sector as an ascent sector.
Speaker 1: Yeah. I mean we've talked about ethiopy and the show.
Speaker 1: We wrote a feature story earlier this year looking at
Speaker 1: it's sort of two year anniversary of putting a ban
Speaker 1: on importing all fossil fuel cars and vehicles, and as
Speaker 1: a result of course, electric cars have taken off and
Speaker 1: so have electric buses in Ethiopia. But yeah, you're right,
Speaker 1: there's electric two wheelers in Kenya and in Nigeria that
Speaker 1: are taking off now. In terms of the biggest misconceptions
Speaker 1: in investing in the global South, we've talked about risk perception.
Speaker 1: What are the others that hold you back?
Speaker 2: I think there's that continues to be a big issue.
Speaker 2: When I started out in the infrastructure space and twenty
Speaker 2: five thirty years ago, I would have slide that would
Speaker 2: talk about impediments to investing in infrastructure in South Southern
Speaker 2: Africa or Asia, and I had eight or nine bullets
Speaker 2: and one of them was a round sanctity of law
Speaker 2: and regulatory risk. Sadly, if you fast forward twenty five years,
Speaker 2: I could still use that slide, not because it's a
Speaker 2: real risk, but because it's perceived to be a real risk.
Speaker 2: And so let's look at sanctity of contracts. I can
Speaker 2: cite a number of European countries, or if we go
Speaker 2: to North America where contracts have been shown not to
Speaker 2: be the sanctity round them isn't necessarily there. So I
Speaker 2: think we paint an unfair picture when looking at infrastructure
Speaker 2: in developing economies. In terms of that sanctity of contract
Speaker 2: or breach of contract risk. I don't think they necessarily
Speaker 2: have a monopoly.
Speaker 1: Well, there is a way in which the climate crowd
Speaker 1: makes this point which I find a very good way
Speaker 1: of framing this, which is this an issue of injustice
Speaker 1: after all that these places have been, as you've so
Speaker 1: shown in the last twenty five years, not the level
Speaker 1: of risk that these institutions perceive, but the fact that
Speaker 1: they don't invest in them even after knowing these facts,
Speaker 1: is them choosing to essentially do injustice to these people.
Speaker 1: How much does activism of this sort help you or
Speaker 1: hold you back in making the case that these places
Speaker 1: do need more investment.
Speaker 2: I'm not sure if activism is the right word. I
Speaker 2: was talking about what we're seeing, especially since the outbreak
Speaker 2: of the war in the Middleast, is bottom up approach,
Speaker 2: and it goes hand in hand with a concept that
Speaker 2: is dear to us, which we call localized solutions. So again,
Speaker 2: when I'm looking at Africa, Asia, but let's talk about Africa,
Speaker 2: there are plenty of developers. There's plenty of capital domestically,
Speaker 2: because there's always been the assumption that when you're looking
Speaker 2: at development, it's going to be North South, but why
Speaker 2: should that be the case. So when we work with
Speaker 2: domestic financial institutions in Nigeria, we're mobilizing domestic pension funds,
Speaker 2: domestic insurance companies. We will work with domestic developers and
Speaker 2: they have a keen interest and I think all the
Speaker 2: more so since the outbreak of the war. It's been there,
Speaker 2: but I think it becomes all the more obvious that
Speaker 2: those homegrown solutions need to be to be encouraged. And
Speaker 2: a lot of the work that we do in each
Speaker 2: of our product lines is where we can work with developers.
Speaker 2: So in Nigeria, we set up a company, a guarantee
Speaker 2: company called Infracredit and this provides wraps or credit and
Speaker 2: guarantees on domestic corporate bond issuance by Nigerian corporates in Naira,
Speaker 2: the local currency. When we set that up ten years
Speaker 2: ago and nine years ago, this was a means to
Speaker 2: attract pension funds and insurance companies in Nigeria to invest
Speaker 2: in the space. They had invested zero in the INFRASTRUCTURESTIC
Speaker 2: class before that. Today you have twenty two to twenty
Speaker 2: three pension funds and insurance companies invested in the infrastructure
Speaker 2: space through these guarantees that are provided to the bonds
Speaker 2: that are issued by corporates. So it does two things
Speaker 2: for the corporates. It gives them access to a new
Speaker 2: form of capital doesn't have to be just the bank
Speaker 2: and a former capital that can go to fifteen twenty years,
Speaker 2: and in some cases will be cheaper because it's got
Speaker 2: that guarantee wrapped around the bond. And the track record
Speaker 2: has been excellent over the last eight nine years, and
Speaker 2: that's something we're replicating everywhere, so that it obviously would
Speaker 2: not be the answer to all the problems because the
Speaker 2: capital needs are much greater, but it's part of the problem,
Speaker 2: part of the answer.
Speaker 1: Sorry, And this kind of momentum that certain countries gain
Speaker 1: after they've had products of this kind introduced ten or
Speaker 1: fifteen years ago, and BIDG has a twenty five year reputation.
Speaker 1: Can you talk me through other examples of countries where
Speaker 1: you think, now that you have done the work, things
Speaker 1: are progressing on their own because private capital is doing
Speaker 1: the work and you don't have to be involved anymore.
Speaker 2: Absolutely, So, if I go back to my Nigeria example,
Speaker 2: six months ago, we exit it, so we output twenty
Speaker 2: five twenty six million dollars or twenty seven million dollars
Speaker 2: we accident. It was taken up by domestic pension funds.
Speaker 2: We've kept a small stake in ordinary shares in the company,
Speaker 2: but really small, but we've been able to acceit. Our
Speaker 2: job is done and so let somebody else take over.
Speaker 2: And it goes back to the earlier point about not
Speaker 2: crowding out. We set up something very similar in Kenya
Speaker 2: where in the capital structure aside from us, came in
Speaker 2: the Nairobi County Pension Fund. And the ultimate objective where
Speaker 2: it's three five, seven years, is once that entity is
Speaker 2: able to attract the capital, our job is done. Let's
Speaker 2: move to the next market.
Speaker 1: Good luck and thank you Philip. Thank you very much,
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