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Challenges faced in the African Infrastructure space

It is common knowledge that African infrastructure projects are sitting with a total funding deficit of up to 50%. The question being posed is how can we fill this chasm and ensure bankable projects are realised, allowing infrastructure development to support required economic development.

We at the Academy have made it our mission to understand the challenges in the infrastructure finance space. The market response has indeed been overwhelming, with many across sectors expressing the need for support in this arena.

A number of challenges have arisen within public private partnerships, where the full potential of these agreements have failed to realise. Investors are wary of the length of processes when dealing with public sector institutions, as well as the fact that decision making capabilities lie with government more often than not. Blurred roles and responsibilities can delay approval processes, complex regulatory and policy frameworks create uncertainties and land ownership can be tricky to deal with.

In many cases the projects span cross border, heightening the risky nature of the project landscape through encounters with non-tariff barriers and complex or immature regulatory environments.  

For small and large projects alike, there is a need for innovative solutions to these challenges. Ensuring project bankability, as well as sourcing affordable finance to ensure these projects realise, need to be prioritised. There are several questions being posed such as; do these projects need to be repackaged to attract investors and what creative finance mechanisms are available to support credit health and sustainable viability?

Utilising financial and philanthropic resources, aligning incentives and project goals, as well as balancing real and perceived threats will go a long way to addressing the risks inherent within the investment.

Ultimately, projects in Africa are viewed as high risk but also high reward. Overcoming difficulties such as socio-economic and political concerns, as well as fluctuating currencies, emphasise the need to mitigate risks as far as possible. Expecting the unexpected and ensuring a pre-emptive approach to managing finance risk is vital.

Infrastructure Finance workshop
21 - 22 November 2016, Johannesburg
View full workshop details and brochure here