Speaking at a KPMG-convened Africa Conversation, titled ‘Challenges and Opportunities in African Infrastructure’, Piet Sebola, Project Manager at the Passenger Rail Agency of South Africa, added that along with bankable projects, the successful achievement of financial closure for projects is a major concern.
“Infrastructure projects take a long time to implement, starting from feasibility studies and then taking them through to the market to assess. By the time a project is announced and financial closure is achieved, a long time passes. We will have to develop a pipeline of projects which are bankable in order to leverage private capital.”
De Buys Scott, CEO for the KPMG Africa Global Infrastructure and Projects Group (GIPG), advanced the need for catalyst infrastructure projects and the need to retain the public private partnership (PPP) framework.
“We know PPPs for well over a decade. Why develop new PPP models in different countries? We can adopt a framework that has gone through the test of time, is acceptable to funders and can address the need (for funding).
“In refining some of our interventions, we need to move away from developed market basics and look at the conditions in a particular developing market context. We need to take local market conditions into consideration. A lot of the time, developed market conditions are not relevant to developing conditions. This applies to Africa where market and regulatory complexity require agility and flexibility.”
The ideal funding model for development would incorporate foreign aid, foreign investment, private sector participation and public sector involvement. In addition, Chinese models of investment in the continent have created a new model for infrastructure development. While focused on extractive activities, African governments have been keen to ensure that infrastructure development has been part of the deals struck.
“We have looked too closely at the demand-side of the capital-flow equation,” said King’ori Gathinji, Executive Director of the Drummond Investment Bank from Nairobi, Kenya. “If we look at the supply-side, a lot has changed if we look at China and the east. China has been much more open in seeing Africa as an investment destination.” A challenge accompanying Chinese mining extraction is based on a concomitant need for investment in infrastructure. The fact that many African countries are looking east as they look west has also contributed to the changing the dynamics of capital flows, he added.
Further enabling developments for infrastructure business opportunities have included the aggressive approach by African governments to tackle corruption, reduce restrictions to trade and stimulate the creation of enabling business environments. While challenges still remain, a broadly positive political will has also contributed to the creation of conducive business conditions.
“Africa is gaining much more significance in terms of the global investment landscape. We are having this conversation at a time when (the continent is) drawing much more attention from across the globe,” said Gathinji. East Africa has seen a growth in activity in the development of road infrastructure, information and communication technology (ICT) and the power and rail sectors. The East African economic community has also achieved a fair level of regional integration which serves to facilitate continued infrastructure growth.
“Infrastructure in Africa,” said Scott, “requires catalytic interventions. This can be accomplished through close cooperation between the public and the private sectors. There has to be a realisation, however, that together we can deliver infrastructure and public good simultaneously.”