Infrastructure development surging
● World Bank report shows private participation boosting projects in African countries to record levels
A new World Bank report shows that the rise of private participation is driving infrastructural developments in Africa at a time when economic headwinds have strained national budgets .
The report, “Private Participation in Infrastructure (PPI) 2022”, shows the number of projects and countries benefiting from private participation in infrastructure has risen to a record high.
“This can be attributed to the flow of investment levels surging in Africa during the pandemic when more popular investment regions such as East Asia and the Pacific and Latin America and the Caribbean were facing the brunt of the crisis,” the authors write.
Overall investment value to infrastructure projects last year dropped 10% from 2021, a sign of how much “black swan” (unexpected) events have hit government spending just as investment in infrastructure was ramping up, with projects in even the smallest economies attracting investment.
“In 2022, 37 projects in SubSaharan Africa received investments totalling $4.9bn [R89.4bn], which represented 0.25% of the region’s GDP.
“This marked a 10% decrease in investment levels from the previous year,” the authors said.
The report acknowledges the spread of the projects reaching 19 countries in SubSaharan Africa, the highest recorded number in the database’s history.
The largest investments were made in the power sector, with a significant portion of investments directed towards SA, which had experienced low levels of investment.
Other PPI projects were launched in countries including Benin, Botswana, Burkina Faso, Cameroon, the Democratic Republic of Congo and Ivory Coast, Gabon, Kenya, Lesotho, Madagascar, Malawi, Mali, Mozambique, Nigeria, Senegal, Togo, Uganda and Zimbabwe.
Egypt was responsible for 85% of the $2bn (R36.5bn) that flowed into PPI investments in North Africa and the Middle East, with Morocco and Tunisia seeing more modest PPI investments last year.
Private infrastructural project investors targeted countries with high growth potential, including small and middle-income earners.
Some, however, were out to leverage sector-specific opportunities, with emerging sectors such as energy and ICT receiving significant attention.
Other common sectors include transportation, municipal waste, water and sewerage management projects.
SA saw significant investments in the power sector because “the government has lifted embedded generation requirements, introduced emergency programmes for the state-owned power utility agency, Eskom, and eliminated the requirement for a licence for power generators”.
The state’s pledge to double its procurement of renewable energy to more than 5,000MW also encouraged private investors to the power sector.
In some countries, private participation in infrastructure investments had significant economic value besides the long-term impact they will have when the different infrastructures are operationalised.
“Benin and Lesotho, for instance, saw their first PPI transactions in the past 10 years,” the authors say, noting that most investment deals in the two countries were in the renewable energy sector.
In Benin, the opening of its energy market to independent power producers saw a consortium of GreenYellow and Egnon commit to developing solar PV plants with a 50MW total capacity of more than US$421m (R7.6bn).
In Lesotho, the Electrification Financing Initiative invested in a project-finance vehicle led by OnePower to construct 11 solar mini-grids for rural communities.
Senegal is also ranked top among the 18 countries of the International Development Association
— a World Bank wing that supports countries with some of the lowest GDPs.
The West African country’s PPI investment last year was from two projects, the Malicounda dual-fuel power plant and the port of Ndayane, totalling $1.3bn (R23.7bn).
According to Solomon Quaynor, Africa development bank vice-president for private sector, infrastructure and industrialisation, African governments have little fiscal room owing to “black swan” events in the last three years.
Therefore, “we have to really look at alternatives to leverage limited fiscal space and also innovative ways to crowd in the private sector”, he said.
Even as Africa looks beyond national budgets to fund development, Quaynor said countries could leverage alternative sources, including assets managed by African sovereign wealth funds, pension funds and life insurance pools.
“They are all estimated at over $2-trillion [R36.5-trillion]. ”—