Business
Public Private Partnerships: Sub-Saharan Africa’s Top 5 Opportunities
Private equity investors have always celebrated the investment opportunities in consumer goods, financial services and telecommunications; obvious strategic plays on Africa’s growth and emerging middle class. But, investors are growingly turning their interest to sectors once perceived as ‘the leftovers’ (or better left to government officials and donors). Investors look at the continent’s need particularly for roads, ports, and electrical grids and see an opportunity for big returns.
Africa’s infrastructure problem is not a new one, but rather it is an expanding problem, as more and more is required to keep up with the robust growth across the continent. Africa’s annual infrastructure needs are estimated at $93 billion, approximately 15 percent of Africa’s GDP, with $48 million of the current bill unfunded. African governments have historically financed a substantial share of the continent’s infrastructure on balance sheet, with local banks unable to supply the amount and tenor necessary for loans, consequently leaving many projects unfunded.
Yet, as debt capital markets gradually find their footing in African countries, governments are increasingly turning to public private partnerships (PPPs) to bridge the financing gap and deliver more efficient and cost-effective infrastructure. Examples of successful PPP infrastructure investments are generally limited to South Africa and Mauritius. But, as the list of examples progressively reach other parts of the continent, this article looks at the top African countries for PPP infrastructure investors.
Nigeria
Nigeria is now Africa’s largest economy. However, the ranking cannot overshadow its great infrastructural challenge. Officials at the federal and state level concurrently identify PPPs as a strategic piece in addressing this issue, but governmental support does not necessarily mean an easy path. Political risk remains near high as the Nigerian legal and regulatory systems fine-tune the language that guides joint efforts between the federal government and regional states, such as Lagos State.
Lagos is the 7th fastest growing city in the world with a power deficit north of 2750 MW. Nigerian Finance Minister Ngozi Okonjo-Iweala pledged $1.5 billion in financing to the power sector in 2014, altogether part of the country’s goal to upgrade transmission capacity to 20,000MW by 2016.
Limiting the PPPs discussion to power in Nigeria would be a disservice by investors as the country’s GDP is expected to grow by more than 6.5 percent annually over the next two years, with growing opportunities in transport (ports, roads, rail), waste and sanitation, as well as social infrastructure (housing, education), especially as the Nigerian infrastructure deficit is measured at nearly $20 billion per year.
