Coronomics: The private equity & infrastructure impact

The coronavirus pandemic has disrupted industries across the globe, and the private equity and infrastructure sectors in Africa are no exception. The outbreak of COVID-19 has led to widespread production shutdowns, supply chain disruptions, and restrictions on movement, impacting existing projects and future investments in the mining, energy, and infrastructure space. Kieran Whyte, Partner and Head of the Energy, Mining, and Infrastructure Practice at Baker McKenzie, and Graham Stokoe, Africa Private Capital Leader at EY Africa, discussed the implications of the pandemic on private equity and infrastructure development in a recent CNBC Africa interview. The Chinese economy plays a significant role in African infrastructure development, with China being a key investor and partner in various projects on the continent. However, the current crisis has highlighted the vulnerabilities in the sector, as projects face challenges in meeting timelines and financial requirements. Supply chain disruptions, port closures, and restrictions on movement have added complexities to project execution. Private equity firms are also bracing for impact, especially in sectors such as hospitality and the supply chain. Graham Stokoe noted that the private equity space globally is better equipped to handle the current crisis compared to the 2008 financial downturn. He emphasized the importance of focusing on portfolio companies, managing cash flow, and leveraging operating partners to navigate through the challenges. Development finance institutions are expected to play a crucial role in bridging the infrastructure gap in Africa, especially in the absence of Chinese investments at full capacity. With the need for alternative sourcing of materials and equipment, due diligence on supply chains is becoming more critical. The cost of borrowing and stimulus packages from development finance institutions will also play a significant role in supporting ongoing and future projects. Private equity firms are advised to remain proactive and seize growth opportunities post the downturn by investing strategically in undervalued companies. The current situation calls for collaboration between stakeholders, including government entities, development finance institutions, and private equity firms, to mitigate the impact of COVID-19 on infrastructure projects in Africa. By adopting a proactive approach and leveraging available resources, the industry can navigate through these unprecedented times and emerge stronger in the post-pandemic era.