Financing infrastructure, energy projects

© Sandor-Jackal – za.fotolia.com

Several financial experts shared their views on the African scenario, and possible models to fund opportunities in infrastructure and energy projects, on the second day of the EMRC's Africa Finance and Investment Forum.

Bridging the gap

Given that half of global population growth will take place in Africa in the next 35 years, the World Bank predicts that there has to be a $100bn investment for the continent to bridge the infrastructure shortfall.

"The fiscal capacity of government and aid is not enough, and funding will have to come from the private sector," says Paul Boynton, CEO: Old Mutual Alternative Investments, South Africa.

This boutique wing of Old Mutual is responsible for infrastructure, private equity and impact investment.

He uses the renewable energy programme in South Africa as a successful example of private sector involvement in projects of this nature.
"It's world class," he says, in terms of how the bidding process has been structured.

"At the end of process 8000MW of renewable energy will be supplied, and to date half of this amount is already contributing to grid."

As a result of the competitive bidding process, both government and the consumer will benefit in terms of tariffs," he explains.

Ticking the boxes

Tali Levin is the impact projects developer for Milcom, Israel, and she says that when her organisation looks for projects in which to participate, it has to tick certain boxes, namely:

• long-term sustainability
  
• beneficial to the citizens, economy or the environment,
  
• and a defined timetable with rapid deployment and visibility.

The types of projects Milcom engages in cover water, agriculture and energy. This includes water treatment and purification to fulfil health and sanitation objectives, and protected crop production using greenhouses and tunnels, as well as aquaculture and poultry projects to provide food security.

Levin describes financing these projects as four interlocking circles comprising government, private investment, commercial banks and development banks, any combination of which can be used to fund projects. She adds that insurance covering any aspect of the project is the key in making it easier to finance.

Investing for sustainability

"Without power there is no production, without roads there is no transport and with no ports there is no export," says DEG director: regional office, Southern Africa, Michael Fischer, to emphasise the importance of a sound infrastructure for economic growth.

DEG promotes business initiatives in developing countries that contribute to sustainable growth and improved living conditions for the local population, by making long-term financing and advice available to private enterprises investing in these countries.

"So what is the role of the private sector in infrastructure development?" he asks.

Firstly, the right framework has to be put in place by the public sector to incorporate the private sector.

Also, private sector involvement should not necessarily be limited to the big-ticket items of an infrastructure project. For example, supplying food to workers and other ancillary enterprises can also be regarded as private investment.

The Africa Finance and Investment Forum took place at the Lord Charles Hotel in Somerset West from 24-26 November 2015. For more information, go to www.emrc.be.