Business
Public Private Partnerships: Sub-Saharan Africa’s Top 5 Opportunities
Tanzania
Tanzania is blessed with various natural resources, which makes it a favored destination for foreign investment. The country is home to various minerals, including gold, diamonds and coal, but the sector has not witnessed expected growth. Furthermore Tanzania’s natural gas boom has, in part, been overshadowed by the one south to it in Mozambique and, in part, subdued by the country’s mass infrastructural challenges across all sectors. The country requires an estimated $6 – $8 billion to keep up with expected infrastructure needs through 2020.
Tanzania has enjoyed strong growth over the past decade, growing at nearly 7 percent between 2004 and 2013. The International Monetary Fund (IMF) estimates that the Tanzania’s economy could grow by 7 percent annually for the next few years. But, unless greater participation from private investors comes, infrastructural development, specifically with ports, airports, energy and rail, will fail to sustain IMF projections.
A change in the law and regulations, under the Finance Act 2014, should boost PPPs going forward. Unsolicited proposals under Tanzanian law, i.e. those initiated by the private sector, no longer need to be competitively tendered, which considerably encourages the private sector to engage the immense infrastructure pipeline in Tanzania with the freedom and confidence to choose from a better crop of construction and operating partners. The Tanzania Minister of Finance and Economic Affairs Saaada Salum has stated a keen interest to ensure that fees associated with off-take agreements, particularly with tolls and energy, are in line with the expectation of private investors.
Kenya
Kenya is the bigger economy to the north of Tanzania that already has demonstrated interest and results in the PPP infrastructure space. Recent large scale projects in Kenya, including the Aga Khan Nairobi Hospital (2010), Olkaria III Geothermal Phase II Power Project (2009) and Expansion Project (2011), and the approximate $900 million Lake Turkana Wind Power Project (2014) is not only making it tangible and positive example for the East African community but also for sub-Saharan Africa.
Despite the recent successes, the country still requires an estimated $4 – $5 billion per year through 2020. An increasing need for affordable housing could also create a social infrastructural investment opportunity. The Minister of Finance Henry Rotich estimates that the Kenyan economy will expand by 5.8 percent in 2014 with growth gradually reaching 7 percent in 2017. The current President of Kenya and former Minister of Finance Uhuru Kenyattta continually insists that the Kenya government will provide an “enabling environment” through a robust legal and institutional environment.
Recent PPP-focused laws help to address the lack of debt in the market through increased public debt and Kenyan government grants. The laws also ensure certainty throughout the process. The government, in signaling high confidence in PPPs and its internal processes, estimates that 80 percent of its projects will be financed through PPPs by 2030.
Ghana
Ghana is one of sub-Saharan Africa’s most vibrant and fastest growing economies, but the infrastructural deficit is hefty. Ghana’s Minister of Finance and Economic Planning, Seth Terkper insists that the country requires $1.5 billion annually to meet its infrastructure deficit. Other analysis suggests that deficit could approach $2.5 – $3.5 billion, especially if its economic growth matches the Minister’s predicted growth of 8 percent in 2014 and potentially approaching double digit by 2016 or 2017. Such figures requires major upgrades in Ghana’s transport network (ports, road, rails) and power grid to support its booming mining and other related extracting industries (oil, gas).
