Africa

Details

  • Industry: Infrastructure, Government and Healthcare
  • Type: Business and industry issue
  • Date: 10/26/2011

PPPs are the framework for African infrastructure development 

African infrastructure development faces a key challenge in attracting private sector and foreign direct investment. Fortunately, catalyst projects can encourage investment in infrastructure development and thereby stimulate growth. This is on condition African nations address the need for bankable projects and the successful financial closure of projects.

The Public-Private Partnership (PPP) framework

 

PPPs have reliably funded infrastructure projects across Africa for more than a decade. The PPP funding model does not need to be reinvented for different countries. A PPP framework that has gone through the test of time is acceptable to funders and, if it addresses funding needs, can be adapted to various situations.

 

In refining some of our interventions, Africa needs to move away from developed market basics and look at the conditions in a particular developing market context. We need to consider local market conditions. All too often, developed market conditions are not relevant to conditions in emerging economies. This applies to Africa, where market and regulatory complexity require agility and flexibility.

 

Chinese investment flows

 

The ideal funding model for infrastructure development in Africa incorporates

 

  • foreign aid
  • foreign investment
  • the private sector
  • the public sector.

 

In addition, Chinese investment in the continent has created a new model for infrastructure development. While focused on extractive activities, African governments have been keen to ensure that infrastructure development is part of the deals struck with China.

 

African governments should not become fixated with the demand-side of the capital-flow equation. Much has changed on the supply-side since the rise of China and its eastern neighbours. The Chinese are more than willing to see Africa as an investment destination, partly because mining for export to China creates a concomitant need for infrastructure. Many African countries can now look east as well as west, thereby fuelling the changing dynamics of global capital flows.

 

Other enablers

 

Other encouraging developments for business opportunities in African infrastructure include:

 

  • governments’ aggressive approach to tackling corruption
  • the reduction of restrictions to trade
  • the creation of enabling business environments.

 

While challenges remain, a broadly positive political will has also contributed to the creation of conducive business conditions.

 

Africa is increasingly significant on the global investment landscape. East Africa, for example, has seen growing activity in the development of road infrastructure, information and communication technology, 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.

 

Conclusion

 

Infrastructure in Africa requires catalytic interventions. This can be accomplished through close cooperation between the public and the private sectors. There has to be a realisation that, only together, can we serve infrastructure needs and the public good simultaneously.

 

Contact

Contact
De Buys Scott
Global Infrastructure &
Projects Group
Tel: +27 (0)11 647 8982
debuys.scott@kpmg.co.za