Africa continues to be an attractive destination for Foreign Direct Investment (FDI), obviously because of the premium investment returns the continent offers. The continent also has enough assets to attract more investment. One major challenge in attracting funding for our numerous infrastructure investment opportunities is our inability to package our projects. Project preparation significantly unleashes investment value to investors. Our inability to properly prepare projects for PPP funding is one major reason for Africa’s huge infrastructure gap. Conference participants were unanimous on this point. They also believe that the enabling regulatory and legislative environment is not conducive for PPPs as funding tools. It is important to fix this to improve investor confidence.
We need to streamline our regulatory framework to replicate international best practices. This will improve investor confidence. The use of guarantees as a funding tool needs to be adopted as a major policy shift. North African countries have engineered local solutions to funding challenges in PPPs. Africa needs to create and pursue more homegrown policies to solve the infrastructure gap in the energy sector.
Lack of coordinated operational, technical and financing solutions for the myriad of energy projects scattered around the sub-region is a major gap. The sub-region needs to adopt a regional approach to the deployment of infrastructure in the sector. The West African Power Pool project for instance needs to be pursued better than we have so far.
Structured Finance solutions have shown to work very well in some countries, particularly because of weak balance sheets of power generation companies in the sub-region. This practice allows perceived weak power generators (who are mostly state-owned) to access funding to maintain and develop infrastructure. Technical losses in the sector are also pervasive across the sub-region. It is crucial to deal with these to ensure that power utility companies are profitable and sustainable.
It is important to harmonise PPP laws and regulations across the sub-region. With common PPP policies, we would be able to attract funding into large regional projects. For investors within the electricity market, the scale is a major decision variable.
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