Infrastructure funding in Africa relies on partnerships - CNBC Africa

Infrastructure funding in Africa relies on partnerships

Mining

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Construction site. PHOTO: Getty Images

According to Alan Sproule, director of Project Finance Africa of Standard Bank, infrastructure funding for power and railway projects in the continent continues to attract the most private capital. 

This is despite Africa's infrastructure funding gap of roughly 30 billion dollars. 

“Through natural resources, there's a means to make rail more affordable and bankable,” said Sproule at a panel discussion at the Investing in Resources and Mining in Africa conference on Wednesday. 

Other panel members included Daryl Govender from Eskom, and former Coal of Africa CEO John Wallington. 

Because of the continent's large infrastructure deficit, a number of private companies take on the task of funding largescale infrastructure projects. 

Sproule added that while private and industrial companies eventually build the necessary infrastructure and buildings, the finished product eventually becomes a national asset. 

“At the end of the day, it's still a national asset. The private sector's been asked to build it [the project] but it remains a national asset,” he explained. 

Major industrial operations such as mining and manufacturing, and in South Africa in particular, make up a significant amount of the country's electricity consumption. 

Despite South Africa having the largest coal reserve on the continent, electricity capacity continues to be a recurring problem and a major setback to increasing the country's economic production. 

Among the panel members was Charles Siwawa, CEO of the Botswana Chamber of Mines, who said that Botswana's little consumption of electricity, due to its small population, could assist in providing more electricity for the region. 

He added that Botswana also has the second largest coal reserve in the continent, and a partnership between it and South Africa has the potential to alleviate electricity capacity shortages and encourage intra-regional trade. 

Organisations such as the Common Market for Eastern and Southern Africa (COMESA) and the Economic Community of West African States (ECOWAS) have been established to encourage intra-regional trade. 

However, according to a United Nations 2012 report, average intra-Africa trade was reported at only 12.9 per cent for that year. 

Siwawa nevertheless cautioned against stringent requirements for international and foreign companies on doing business in the continent, as well as the involvement of government in the private sector. 

He explained that such aspects could stifle growth, and turn the region into a less attractive investment destination. 

“One has to believe that the region as a whole has the capacity to attract significant funding,” he said.

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