How to encourage investment in Africa’s energy sector
The Guardian’s expert panel suggests how African governments can attract foreign investors to energy projects.
Prioritise the energy sector: Political will goes beyond campaign speeches and rhetoric, governments need to figure out how to fund this sector. They need to look at public private partnerships (PPP), accessing international capital and debt capital markets, foreign parternships such as Power Africa and also tapping into the diaspora. Jacqueline Musiitwa, founder, Hoja Law Group, Kigali, Rwanda @nubiancounsel
Approach it from all angles: There is no monopoly on the way to develop power infrastructure. It can vary from off-grid to mini-grids to on-grid, from small-scale to large-scale, from government-owned, to private-sector, to community-owned. Oliver Johnson, research fellow in sustainable energy, Stockholm Environment Institute, Nairobi, Kenya @SEIresearch
Don’t neglect existing power plants: It can cost less to upgrade and refurbish existing, inefficient and “dirty” power plants [than build new ones]. Showing you have the capacity to strengthen existing infrastructure will build investors’ confidence for bigger projects. Christina Ulardic, head of market development Africa Swiss Re Corporate Solutions Zurich, Switzerland, @SwissRe_CS
Support intra-regional trade: Currently trade between African countries is very low – an estimated 10-12% of the continent’s total trade. Over 80% of Africa’s exports are shipped overseas, mainly to the EU, China and the US. But we can’t discuss increasing intra-African trade before we discuss restrictive immigration policies. Christina Ulardic
Reduce the red tape at borders: For trade facilitation, governments need to update their valuation of goods so that essential items, such as generators, don’t get stuck in customs. Preclearance of goods is essential. Andrew Herscowitz, coordinator, President Obama’s Power Africa and Trade Africa initiatives, Power Africa, Washington DC, @aherscowitz
Tell more positive stories: African governments and media need to be more proactive in sharing their successes in energy and development. These need to be backed up with data on returns, challenges that are surmountable and also demonstrate impact for competitiveness and inclusive development. Jacqueline Musiitwa
Strengthen project management: Currently many African governments have poor project appraisal systems, a high degree of informality and an absence of effective management. They are also often subject to undue political influence for personal or political gain. Where this occurs there is a high risk for potential corruption and mismanagement and it will dissuade the private sector from investing in this market. John Hawkings, programme manager, Construction Transparency (Cost), London, UK, @costransparency
Ask potential investors what the obstacles are: We ask our partners what the critical barriers are that hinder your project or prevent your investment. We then try to work with the partner government to focus on resolving that particular issue. Once that barrier is broken down for one deal, it opens the door for others. Andrew Herscowitz
Encourage financing of PPP projects: Governments need to develop capacity, firstly to meet equity and debt financing needed by infrastructure projects, and secondly, to effectively manage the PPP process. The Henri Konan Bédié Bridge in Abidjan was the result of an excellent partnership between the state and private capital because every stakeholder took on and managed their share of risk. Professor John C. Anyanwu, lead research economist, African Development Bank, Abidjan, Cote D’Ivoire @jcanyanwu
Tap into the diaspora: Not enough governments look at their own citizens and diaspora to fund large projects. Apart from offering incentives to come home and provide much needed skills, diaspora bonds – government bonds targeted at a country’s diaspora – are a useful instrument. John Anyanwu
Use early investments to illustrate that projects are viable: Better preparation is key for leveraging private capital as financiers are often reluctant to invest when projects are still in their high-risk initial stages. Lida Fitts, regional director (acting), Sub-Saharan Africa, U.S. Trade and Development Agency, Washington, DC, USA @ustda
Don’t compromise on quality: The most qualified bidder must win the bid and price alone shouldn’t be selling point. As we are seeing with many of the new roads in the region, cheap is expensive in the long run because roads get potholes after a rain season or two. Jacqueline Musiitwa
Push for open contracting: This would help with transparency of the contracting process. If the public were privy to deal information, it would ensure greater accountability and push governments to ensure that winners of bids adhere to struck construction timelines. Jacqueline Musiitwa
Create cost-reflective tariffs: The tariff should compensate the investor for the cost of construction, maintenance and the cost of fuel. This is crucial to keep the investor on board for the whole of the project’s life. David Humphrey, global head power and infrastructure, Standard Bank, Johannesburg, South Africa
Read the full Q&A here.
Source: The Guardian
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