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Africa should embrace private sector infrastructure investment

19th June 2017 BY: Irma Venter
Creamer Media Senior Deputy Editor

The public sector in Africa should understand and nurture the idea that increased private sector investment in infrastructure is the best way to achieve “intense job creation”, and to incentivise funding and skills transfer, says Nigerian Society of Engineers infrastructure and public-private partnerships (PPPs) committee chairperson Chidi Izuwah.

He says it is important for the African public sector to create a solid legal and regulatory framework in order to attract investment. Equally important is building effective PPP units and to put in place an integrated infrastructure plan.

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African countries should also focus on developing their domestic capital and debt markets. They should also insist on transparent procurement and contract sanctity.

“Capital is a big coward. It will only go where it knows it will come back from,” says Izuwah.

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His advice to the private sector interested in investing in Africa is to know that the African investment environment requires persistence, resilience, a long-term view and the appropriate risk tolerance.

He suggests that corporate entities develop a deep knowledge of markets they are targeting, in an effort to understand the local dynamics.

It would also be appropriate to have the outlook of an entrepreneur or an engineer when considering investing in Africa, rather than a financier’s hands-off approach.

There should also be the awareness of community engagement as a core priority and not a mere add-on.

Izuwah adds that African countries should consider a number of infrastructure finance options, and not only the traditional avenues, such as China infrastructure finance deals, unsolicited proposals, asset recycling and securitisation, PPPs, Islamic finance, Diaspora bonds, as well as the better use of national budgets.

China Africa infrastructure deals currently reach around $14-billion a year.

UK Trade Commissioner for Africa Emma Wade-Smith notes that while the number of PPPs in the UK can reach around 50 year, Africa averages only 2.5 a year.

African Sunrise Partners founder and MD Melissa Cook says although it may differ from country to country, Africa’s economic challenges currently outweigh its political challenges.

She notes that she perceives, for example, that the private sector can see that it would have great benefit to upgrade old colonial railway lines, but that it is difficult to quantify these benefits.

Decision speeds can improve within governments, she adds.

African Sunrise Partners is a US-based intelligence and advisory service.

It is “extremely important” that the African Union and African regional associations become involved in building much-needed railway infrastructure on the continent, adds Izuwah.

While a new railway line from Nairobi to Mombasa may benefit Kenya, more benefits will be derived from a railway line that reaches from Kigali, in Rwanda, to the port city of Mombasa.

There is an urgent need to break down political barriers, says Izuwah.

* Izuwah, Wade-Smith and Cook spoke at Africa Rail 2017, held in Sandton on June 13 and 14. 

EDITED BY: Creamer Media Reporter
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