Eyes on Africa(4)

Chris Josselyn explains why it’s high time that infrastructure investors take the African infrastructure proposition seriously.

Here’s a riddle that’s easy to figure out but hard to solve:

Who produces the same amount of energy each year as Spain but has 20 times as many people?

For investors gathered at this week’s G8 Africa Infrastructure Investment Conference in London, the answer – from Gary Quince of the European Commission’s EuropeAid programme – was obvious enough: Africa.

How to build the infrastructure that is needed to solve Africa’s power problem is of course a much tougher question. But if the 200 or so delegates gathered at the Forum were any indication, it’s about time the infrastructure investment community took the Africa opportunity seriously.

This is not to say that no one has yet shown interest. China has recently acted as the main driver of infrastructure development in the region. India’s private sector has likewise been active in Africa. And among private equity firms, Aureos, Actis, Development Partners International and Prescient Fieldstone Investment Management are just a few of the names that already have a footprint on the continent.

But take a look at any ranking of large infrastructure funds in the market and the big multi-billion dollar pockets of cash are hardly eyeing Africa. That’s because, on the whole, the regulatory framework and cross-border cooperation necessary to lay the foundation for private investment has, admittedly, been slow to come.

Individually, though, there’s a different story to be told. Some of the continents’s largest economies are now laying the requisite foundations very quickly: Nigeria, second only to South Africa in terms of GDP, is leading the charge in terms of embracing private sector participation in infrastructure development.

Nigeria is currently in the process of introducing legislation to facilitate private investment in its infrastructure. It is also working on new rules attempting to stamp out corruption – often one of the biggest factors scaring off investors from African opportunities.

And on the back of a number of PPP projects, including an integrated power scheme, the country is now planning a host of further initiatives. Among these are a series of federal road concessions covering a large portion of the nation’s highway network. Nigeria’s Federal Housing Authority is also actively exploring PPPs to handle its chronic shortage of affordable housing.

Ghana is also starting to recognise the benefits of private participation in infrastructure, as is South Africa, with next year’s World Cup pushing through several major infrastructure projects. Of the recent Gautrain commuter rail project’s $3.2 billion cost, almost $400 million came from the private sector.

So pockets of opportunity are finally opening up – progress that should not go un-noticed and un-rewarded by private sector capital. Otherwise, riddles like the one about Africa’s inadequate energy supply will, unfortunately, continue unsolved.