While Africa has huge potential particularly in the infrastructure sector, bankable investment opportunities in Africa must be unlocked, according to Shem Simuyemba, Coordinator for NEPAD-IPPF.

The NEPAD Infrastructure Project Preparation Facility (NEPAD-IPPF), a multi-donor Special Fund hosted by the AfDB, has advocated the establishment of a regional information hub to advertise bankable projects in Africa.

NEPAD-IPPF proposes that each country should have a window linked to the centralized hub as part of an overall objective to unlock bankable investment opportunities in Africa.

“It would be both a ‘project hub’ and a ‘help desk’ - a centralized IT platform for bankable projects which potential investors can access. Such a hub could be housed by the AfDB to ensure credibility and confidence by both project owners (governments) and potential investors,” Simuyemba said at an assessment and programming session to develop a pipeline of bankable infrastructure projects for three years, 2018-2020.

Simuyemba explained that the ‘one-stop-shop’ initiative would not just be a listing of projects, but a differentiation of the ‘financial-readiness’ of the projects in terms of all the key returns that investors look for: assurance of transparent procurement practices, tenure, risk, returns, availability of co-financing, depth of local capital markets, among others.

“The important point to remember is that projects need to be bankable from the point of view of the person who will provide the risk capital to make the project happen. While bankability is about figures, it is also about risk and reality and these factors all go together in making an investment decision,” Simuyemba said.

He stressed the need for bankable investment opportunities in Africa to be unlocked to attract regional and international investors.

Unlike other regions such as North America, Europe, Asia and Latin America, which have strong private sector project developers and sponsors, the emergence of an indigenous class of trans-continental investors such as Dangote was just the beginning for Africa.

This is attributable to a number of factors, among which is a history of state monopoly companies which crowded out the private sector and stifled its growth; heavily controlled and regulated sectors particularly in infrastructure - which did not have the necessary enabling environment and incentives for private sector participation; as well as weak capital markets.

Unlocking investment opportunities in Africa requires a number of measures to be undertaken as a matter of policy priority.

Simuyemba outlined measures to be taken to achieve this.

The first is the liberalization of sectors which are still dominated by government. 

He gave examples of the information, communications and technology (ICT) sector whose liberalization a few decades ago opened massive investment opportunities for the private sector.

He observed how African countries which have recently opened up their energy-power sectors have witnessed major investments by independent power producers (IPP) and even smaller players in off-grid green energy investments.

“The transport sector for both road freight and passengers is now vibrant because it is predominantly private sector driven. However, the same cannot be said about railways where governments still need to provide clear guidelines on an ‘open access rules’ for railway operations. Equally, despite the Yamoussoukro Decision (of an open African air transport market), investments in airport infrastructure, safety and industry have remained relatively limited. The key to unlocking investments in these sectors is clear market rules.”

“The second is the need to scale-up capacity for project preparation and development as this is the only means to assess, package and structure the projects in such a way that there is a ‘rolling pipeline’ of bankable projects.

Investors had noted that the appetite to invest depended on risk considerations which were very different depending on whether the investor was a development finance institution, a project developer or a private investor.

“To achieve this requires considerable scaling-up of capacities and resources for project preparation and development. This is a space largely neglected in terms of resources even though it has been demonstrated that $1 committed to project preparation and development unlocks between $80-100 in investment financing. Thus, a project with $10m in preparation costs can unlock between $800 m to $1bn in financing depending on the sector and project location,” Simuyemba explained.