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Merchant Bank (RMB) plans to ramp up its project finance business across the
continent and aims to hire more bankers this year, a senior executive said on
Wednesday.
The investment banking arm of lender FirstRand [JSE:FSR] has been a major player in South African project finance and is
increasingly looking to do deals elsewhere on the continent, said Werner van
Oudenhove, RMB’s head of infrastructure finance.
"Our activity levels across Africa last year were very good, in excess of 10 deals, and we expect that to continue in the year ahead,” he told Reuters in an interview.
Deal flows have been lethargic in Africa, falling from a peak of $8.8bn in 2007 to $2.7bn last year, in line with the rest of the world, according to Thomson Reuters league tables.
Global project financing - where banks arrange a mixture of
debt and equity to help fund large developments - fell to $135.8bn in 2010,
from $198.6bn in 2007.
RMB has been a leading player in South African project
finance and plans to duplicate that success across the continent by adding more
staff to the 12 it currently has in the sector.
“Five years back there wasn’t a clear view into Africa, but
in the last three to four years, RMB’s international strategy is Africa. We
have to make it work,” he said.
RMB is keen on energy projects in countries neighbouring
South Africa, where electricity production is lagging demand.
The African economic powerhouse has been a power exporter,
but will soon have to buy from neighbours such as Namibia, Botswana and
Mozambique, which are sitting on coal reserves.
“We are looking closely at the privatisation of the power
sector in Nigeria and various opportunities in (the) SADC (Southern Africa
Development Community) area. There are a lot of opportunities on the supply
side,” Van Oudenhove said.
“Bankable” projects
RMB is also eyeing opportunities in private infrastructure
projects by the mining sector. Rail and road growth has stalled across Africa
because it is still largely in the hands of governments.
“We really believe that the private sector on the mining side is going to have to unlock that. Build your rail line, expand your port to allow you to get your commodity out.”
RMB focuses on arranging and underwriting debt, but will
also take equity stakes, either as a core investor or a partner.
The continent had plenty of capital for “bankable” projects, Van Oudenhove said, but many governments had been slow in changing regulations
to attract investors.
Rules governing pension funds could, for example, be tweaked to enable them to invest in long-term infrastructure assets, he said.
