New chief at British International Investment unveils Africa vision

British International Investment (BII) has grown its portfolio at a brisk pace in recent years, increasing the value of its holdings from £4.736bn ($6.43bn) in 2019 to £7.319bn ($9.94bn) in 2023.

Much of this represents fresh investments that the UK’s development finance institution (DFI) has made in Africa, which accounts for around 60% of its total portfolio.

South African Leslie Maasdorp, the recently appointed CEO of BII, says Africa will remain the largest regional focus for the institution as it seeks to intensify its activities in frontier markets across the continent.

“We have deepened our focus on frontier markets – countries that do not have a track record of huge multinationals making investments,” he tells African Business, citing examples like Sierra Leone, Benin, Ethiopia, Liberia, and DRC.

Prior to his appointment at BII in Autumn 2024, Maasdorp served as vice-president and chief financial officer of the New Development Bank – formerly the BRICS Development Bank – in Shanghai for nine years. He had previously served in numerous private sector and South African government roles.

Frontier markets tend to have high growth potential due to factors such as untapped natural resources, young, growing populations, and rapid urbanisation. However, many of them are still not considered investable by private investors due to multiple risks ranging from weak legal and regulatory frameworks to underdeveloped infrastructure.

Maasdorp believes that BII and other DFIs play a crucial role in mitigating some of these risks and paving the way for increased private investment in African markets.

“We are focused on helping these countries create a favourable investment climate. For us, it’s not just about making an investment in a company; it’s about creating a favourable and conducive investment climate so that we can mobilise others to come and invest alongside us,” he says.

Boosting private sector confidence

Maasdorp says that BII has joined forces with other European DFIs to push for reforms they believe will help make African frontier markets more investable. He points to policy changes that BII, alongside France’s Proparco and the Netherlands’s FMO, are advocating for in Sierra Leone’s energy sector.

“We have partnered with other DFIs, in this case FMO and Proparco through ARIA (Africa Resilience Investment Accelerator), and we’ve identified the factors limiting other foreign investors from investing in that market.”

“In energy, for example, we have advocated for the necessary policy reforms that give private sector investors the confidence to invest.

“Investors need to know that if they invest there, the government won’t change the rules of the game down the road. Energy compacts help achieve this. An energy compact literally means these are the things that the government and the regulators agree to do, which will then unlock the investment to flow from private investors.”

Maasdorp points out that BII’s cooperation with other European DFIs extends beyond policy advocacy to include co-investments in promising African enterprises.

“We have common investments already with a number of (European) DFIs,” he says. 

“There is scope for us to converge our approaches so we can look at development impact through the same lens. We can harmonise our approach to, for example, climate and the way that we do our due diligence before we invest in companies.

“The aim is to ensure that we become more efficient, more streamlined, and make it easier for an investee company, let’s say, to get a co-investment from another DFI alongside BII,” he adds.

Ramping up climate and energy finance

In 2024, BII invested £708m in climate finance, representing 41% of its overall commitments for the year. This marks a significant increase from £80m in 2020. Currently, climate finance accounts for over 26% of BII’s total portfolio, up from just over 15% three years ago.

“In our existing strategy, we have a target of 30% of all of our investments to be in climate finance. We’re already exceeded this target as over the last three years, we did $2.2bn of investment and 40% was in the climate finance domain,” he says.

He argues that the institution is ramping up climate finance in order to secure hard-won development gains.

“When you look at the commitments made by the Labour government and statements made by various ministers, they emphasise the importance of the climate agenda and how the climate crisis is going to undermine the development progress that we have made,” he says.

“The UK is very committed to continue playing a leadership role in the climate domain, and BII is the lead vehicle through which the UK exercises that leadership in climate.

“We continue to believe that there is a very deep and interconnected relationship between the climate emergency and development. We have to look at the world through the lens of helping our countries of operation to be more resilient against the impacts of climate change,” he adds.

Extending electricity access to the approximately 600m Africans who are cut off from power is another crucial priority for BII, Maasdorp points out.

“Energy and the provision of power has the highest priority and will continue to be the number one sector that we invest in. 80% of the world’s population without electricity resides in Africa,” he notes.

“We have been significant investors in energy over the last decade and a half, and that focus will continue because we now have Mission 300, which is the initiative by the World Bank, African Development Bank, and other DFIs, to electrify the next 300m households in Africa. We are part of this campaign,” he adds.

Beyond energy, BII will also prioritise investments in infrastructure, digital access and inclusion, and agriculture.

Navigating the funding challenge

Turning to the broader development finance landscape, Maasdorp admits that Africa is facing monumental challenges in the face of shrinking donor contributions from the UK and other major western partners.

In 2023, the UK spent £15.3bn ($20.7bn) on official development assistance (ODA) or roughly 0.58% of gross national income (GNI). Amid higher defence spending, this has been slashed and is projected to fall to around £9.2bn or 0.3% of gross national income in 2027 – the lowest level since 1999.

Maasdorp is, however, confident that BII can navigate this challenging development funding environment.

“Yes, the environment around official development assistance has changed. Numbers are reduced, but BII has the necessary capital to drive its agenda for sustainable and impactful investments into the medium term,” he says.

“Although we’re operating in a limited fiscal space, we have a business model to be self-sustaining. When we make equity investments, we get income from those investments and are able to recycle the capital into new investments. So, we are not 100% dependent on annual transfers from the government,” he continues.

He contends that Africa’s development model must shift from one reliant on aid to one fuelled by private investment from commercial sources – a transition he says BII is actively promoting by leveraging its capital to attract additional private funding to African economies.

“We want to be more catalytic in the way we deploy our finances. We want to invest in such a way that our $1 of investments can mobilise $4 or up to $5 from commercial sources,” he says.

Tapping domestic capital

Maasdorp sees an opportunity for African nations to engage domestic institutional investors more strategically in development projects, particularly in infrastructure.

“Countries like Nigeria and South Africa have got huge amounts of savings in pension funds and insurance companies… institutional capital that can be very successfully invested into infrastructure.

However, he points out that a majority of these pension funds and asset managers often invest off-shore because they believe they can get more stable, and secure financial returns. “Some of them invest even in Europe, even though they’re based in Africa.”

“So for us, long term success is about getting these countries to focus on domestic resource mobilisation so that we are able to complement efforts by the governments and private sector domestically to grow those economies.”