What billionaire Dangote can teach Africa about financing infrastructure

Africa has become accustomed to talking about capital as though it is something the continent lacks.

But Neo Mooki Watson, chair of the Botswana Stock Exchange, argues that this is no longer true, pointing to figures that show substantial pools of capital already exist across the continent.

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“Botswana alone has around US$20 billion sitting in bank deposits. Across Africa, there are trillions of dollars circulating through pension funds, insurance companies and financial institutions,” she says.

Mooki Watson was one of the panellists discussing the architecture of African capital at Standard Bank’s Africa Unlocked conference in Cape Town on Thursday.

She describes Africa as operating a multi-trillion-dollar financial economy on the plumbing of a corner shop.

The capital exists and so do the investment vehicles, including venture capital, private credit, project finance and blended finance. The problem is that these sources of funding operate in silos rather than as part of a coherent financial ecosystem.

The Dangote example

It didn’t take long before the discussion turned to African billionaire and industrialist Aliko Dangote.

His refinery in Lagos was repeatedly cited as an example of what becomes possible when ambitious projects are backed by the appropriate financing structures.

David Pilling, the Financial Times’s Africa editor, said the refinery was built on unstable ground, with no existing port capable of handling what was needed.

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There were not enough trucks. Logistics had to be created almost from scratch. During the Covid-19 pandemic, the project came under immense financial pressure and, for a while, its future hung in the balance.

Pilling said Dangote wasn’t just building a refinery. He was building the country the refinery needed.

Structuring capital differently

For Mooki Watson, the conversation has shifted away from finding capital towards structuring capital differently.

Not every investor wants to finance a billion-dollar company.

“Some will want to fund portions of a project, such as digital infrastructure, manufacturing or logistics. It’s about breaking complexity into investable pieces.”

The objective, she says, is to allocate risk intelligently so that different pools of capital can be deployed where they are most comfortable.

“None of this happens by itself. Someone has to connect the pieces.”

That, increasingly, is the role African financial institutions are being asked to play.

Helmut Engelbrecht, regional chief executive for Africa Regions at Standard Bank, noted how dramatically the banking landscape has changed. Global banks that once dominated African finance have narrowed their footprint on the continent, while regional banks have stepped into that space.

Replicating success

Pilling believes Africa also remains poorly understood internationally.

Investors often see one large, complicated continent rather than 54 distinct countries.

Because of a lack of data, every deal is treated as unique, requiring teams of lawyers, advisors and consultants to structure transactions from scratch.

A better approach, he argues, is to replicate.

“The structures exist. Successful projects should become templates that can be deployed again and again across the continent.”

That is precisely what the Dangote project demonstrates. The procurement lessons can be replicated. The financing structures can be replicated. The ambition can be replicated.

Dangote himself is already replicating the model. Following the successful start-up of his 650 000-barrel-a-day refinery in Lagos, his next fuel-processing project is planned for Kenya.

From potential to leadership

None of this can happen without leadership though, Mooki Watson cautions.

She says Africa has spent decades speaking about potential.

“But potential does not finance infrastructure. Potential does not create jobs. Potential doesn’t manufacture.

“Leadership does.”