How to partner with the US and drive change in Africa
The United States International Development Finance Corporation (DFC) facilitates the financing of private development projects in lower- and middle-income countries. The DFC’s Regional Managing Director for Africa is Vibhuti ‘Vib’ Jain. In episode 9 of the Invest Africa podcast, Brendon and Rudolf speak to Vib about the DFC’s investment plans for Africa, her general views on the market, how the US approach in Africa differs from China’s, and how things have changed since Joe Biden took office.
“There is growing interest from US companies to invest in Africa,” says Vib Jain. “It’s tremendously exciting.
A Yale graduate and Harvard alumnus, Vib started her career as a corporate lawyer in New York. She was always drawn to emerging markets, however, and eventually followed that path by joining the Millennium Promise, an NPO co-founded by the famous economist Jeffrey Sachs, which seeks to end extreme poverty around the world.
The Millennium Promise brought Vib to Africa for the first time, where she “fell in love” with the landscapes and the people. She also saw first-hand how governments in developing countries are often unreliable, apathetic or over-stretched, and how real change can only be affected by partnering with private-sector industries like fertilizer companies, pharmaceutical companies, bed net companies, telecom providers and the like.
She moved to South Africa permanently six years ago and put those lessons into practice with Power Africa – a US-funded project dedicated to clean energy generation and energy access for the continent’s poorest communities. She travelled all over and met leaders and project managers, deepening her ties in the region and setting her up to take charge of the DFC when it was formed in 2019, after the Overseas Private Investment Corporation (OPIC) merged with the Development Credit Authority (DCA).
Changing with the times
OPIC was fairly unilateral in its approach to development funding – it provided credit and political risk insurance to eligible enterprises. “The DFC is different,” Vib says. “It has acquired new flexibility and new financial instruments. We continue to provide debt and political risk insurance, but we have expanded our eligibility criteria and we can now take equity in companies and funds – we’re working hard to build this portfolio out.
“We’re a federal government agency, so naturally we have a preference for US companies, but you don’t have to be American to apply. We can partner with any private sector company that delivers development impact and aligns with US foreign policy.”
What’s the deal cap?
“There’s a broad range,” Vib explains. “The minimum investment is $1 million and the maximum is $1 billion. We won’t fund 100% of a deal, which means the total project size on the lower end is usually above $2 million. We do deals across all sorts of sectors and we have specialised teams to keep the focus on impactful development – one team for smaller deals and another for deals over $50 million, usually infrastructure projects.
“On the equity side, we have a mandate limiting us to no more than a 30% ownership stake in a company or fund. Our focus for direct equity is on growth-stage companies, especially companies that use tech-enabled solutions. We’re also always willing to talk to fund managers whose objectives align with our own.”
A new administration
The DFC faced its first presidential transition only a year after its launch, but the overall mandate is the same under Biden as it was under Trump.
“We have $7.8 billion in active exposure in sub-Saharan Africa, over 300 transactions,” Vib says. “These span almost every economy on the continent. The objective is to do even more. We want to amplify our activity in renewable energy, food security, healthcare and mobile connectivity. The Biden administration has a strong focus on climate-friendly investing, global health security – especially after Covid-19 – and the empowerment of women. These are areas that we will continue to target. Worldwide, for example, the DFC has catalysed more than $7 billion for women-led businesses, or businesses that empower women in general.”
How to get involved
Powerful nations are scrambling to get their teeth into Africa, but Vib is quick to point out that the approach of the US differs to that of China or Russia: “We support investment that will deliver long term benefits to communities and the environment. We only partner with private businesses that deliver projects built to high standards. Attention to quality means projects help to achieve growth and stability in countries where they invest. It’s a relationship built on mutual respect.”
The newly formed African Continental Free Trade Area (AfCFTA) is an exciting development. “We see it as a key building block to enable business across borders,” Vib says. “The cost of moving goods, people and information is more expensive by a multiple in the developing world – we have to bring those costs down. The free trade area is a step in the right direction.
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