Financial Mail Infrastructure Project Finance Conference

The Conference takes place a day before the Southern African Development Community (SADC) Summit, which starts on 9 August. According to Thembekile Simelane, marketing and project co-ordinator at the NEPAD Business Foundation, “the conference provided a unique opportunity for stakeholders to find out what prospects are available for infrastructure projects in Africa and which funding institution best suits a project. With over 28 speakers from 18 different organisations, the event presented all solutions under one roof.” With the unprecedented boom of infrastructure projects in Africa, the theme of the conference was “New Conditions, Parameters and Methodologies as viewed by the Key Development Finance and Related Agencies,” with sub-Saharan Africa as the core focus.

“There has been a major increase in Foreign Direct Investment (FDI) in Africa over the last decade”, according to Duncan Bonnett of Whitehouse and Associates, one of the conference speakers. From 2000 to 2006 there was an increase of 271% in value terms - and there is little sign of this tapering off. This growth is being driven to a large degree by resources: mining activity has exploded, as has oil, gas and other sectors. Non-ferrous exploration has risen by 324% since 1999 to reach almost US$1,6bn in 2007 (Metals Economics Group). Projects in agriculture, tourism, manufacturing and social programmes have also grown significantly.

Although Africa has overtaken Australia and the USA as an investment destination in recent years, Bonnett cautioned that, whilst Africa attracts increasing FDI and development in the mining sector, current research shows that Africa has slipped behind the ex-Soviet bloc; China, Mongolia and Middle-East/Europe as a financing destination. This is particularly surprising statistics, given that these countries are not traditionally known for their mining resources.

In highlighting the opportunities available, Bonnett indicated that the boom in resource extraction has caught much of the supply side of the region off guard. “The costs of most basic inputs are creating problems for delivery of large infrastructure projects,” he said. “At a more basic level, household infrastructure developments, which have underpinned much expansion in consumption of materials in recent years, are being pressured by prices.”

Twenty three regional and international funding institutions and government structures participated in the conference. These included: The Development Bank of Southern Africa, European Investment Bank, Exim Bank, Industrial Development Corporation of South Africa (IDC), International Finance Corporation, First Bank of Nigeria and French funding agency PROPARCO, the Pan African Infrastructure Development Fund, German Investment and Development Company (DEG) and the Southern African Infrastructure Fund.

Financing options were explored by Phera Ramoeli, senior programme manager for the SADC Secretariat. “There is an urgent need to invest in trans-boundary infrastructure to support the SADC regional integration process,” said Ramoeli. “Joint planning, financing and implementation of infrastructure is the password to future success. The SADC intends establishing a ring-fenced “Project Implementation Unit” for infrastructure projects. The SADC is also looking at the “packaging” of trans-boundary infrastructure to ensure bankable projects are available for investment.

SADC and other Regional Economic Communities (RECs) have also recognised that one of the major impediments to private sector investment in infrastructure is the lack of project preparation, development, marketing and funding of feasibility studies. “The challenge is therefore to unpack proposed projects in order to develop them into a bankable state,” said Ramoeli. To address this, the SADC Secretariat will leverage funding for project preparation, development and feasibility studies.

Several prominent experts in the field of infrastructure project finance participated in the conference. Dr. Martyn Davies, chief executive officer of Frontier Advisory, gave insights into China's growing involvement in Africa, along with Windsor Chan from the China Construction Bank. Kathrin Stopford from Accolade Properties Namibia said, “The presentation was very informative, especially with regard to China's vision and strategy for infrastructure projects in Africa. The finance made available through China's (and India's) investments is impressive.”

Day one of the conference looked at the SADC region exclusively. The themes included: SADC projects, multilateral agencies and infrastructure development, development of finance institutions and Public Private Partnerships (PPPs), infrastructure funds and specialised facilities, and finally, South African development finance and related institutions. Day two was dedicated to East, West and Central Africa. The themes included an introduction to projects in these regions, Chinese and Indian funding of African infrastructure projects and infrastructure project case studies.

Taz Chaponda, chief director of PPPs from the National Treasury presented on “Strategies and Projects for Promoting Infrastructure PPPs including areas of Operation with Emphasis on South Africa” on day one, as well as “Financing raw bulk water infrastructure with reference to specific project experience.” Nyiko Mabunda from ECI Africa said “Taz Chaponda's presentations were of great value because he addressed relevant issues that affect infrastructure projects in Africa, not just in general. I liked the fact that he did not just theorise but rather he gave practical action plans.”

The event provided its delegates with not only the formal procedures of the various funding agencies but also gave valuable and practical insights that will facilitate entry into their project cycles. It was an overall success with rave reviews about the programme content and the high calibre of speakers who were present.

The event was supported by the NEPAD Business Foundation and Financial Mail, and sponsored by Standard Bank. Paul Runge, conference chairman, highlighted the need for a forum of this kind to be an annual event as the infrastructure project finance sector is ever-changing as Africa's needs evolve.