“The key problem in Africa is not a lack of funding, but the lack of well packaged, bankable projects”; this has been the opening remarks in most forums on infrastructure financing in Africa.
According to the Infrastructure Financing Trends in Africa Report of 2018, Africa which has a growing infrastructure financing deficit estimated to oscillate between $53 to $93 billion has not been able to attract sufficient infrastructure investment unlike other emerging regions in the world due to lack of attractive project pipelines. The lack of capacity and financing challenges for project preparation has been cited as one of the key reasons behind this.
Project preparation is multifaceted and includes a set of upstream activities and initiatives in the infrastructure project cycle meant to produce “procurement ready” projects. This includes project conceptualization, feasibility studies, deal structuring and transactional support.
According of the Global Infrastructure Hub, project preparation is a critical enabler of infrastructure development and has been identified as a key pillar in the G20 strategic road map to develop infrastructure as an asset class. As African public debt continues to grow, most of the countries are fiscally stretched to be able to increase investment in infrastructure development. This has been exacerbated by the adverse effects of the Covid-19 pandemic which has necessitated the realignment of resources to the health ministry.
As such, there is urgent need for the continent to tap into the private sector investment to augment resources and accelerate the modernization of infrastructure. How can the continent streamline her project preparation framework so as to attract more private sector into this journey?
The continent needs to develop a robust legal, regulatory, policy and institutional framework necessary to guide the project preparation process both at national and sub-national levels of government. The framework should address mechanisms that can help in the prioritization of projects so as to ensure that those that contribute towards long term economic growth are considered first. Additionally, the framework should inculcate a systematic assessment of infrastructure gaps that can aid in developing a prioritized and actionable project pipeline.
In the wake of Covid-19 pandemic, the African continent should standardize the project preparation processes so as to enable the duplication of the processes in the different levels of governments or ministries. For example, a Central Unit in the National Government’s Ministry of Transport can be deployed to help in the preparation of projects in the devolved units of Government.
As the world now focuses on building sustainable infrastructure, the African continent should continuously review her project preparation framework so as to ensure that it is resilient in the wake of global pandemics like the Covid-19. The framework should absorb the shocks caused by global pandemics and ensure that they timely deliver well packaged projects. Most importantly, the countries should seek to learn from challenges of preparing and structuring similar projects in Africa.
The project preparation framework should also identify approaches and mechanisms that can be adopted to identify, ring-fence and direct financing towards the different activities in the preparation process. Besides raising funds from Multilateral Development Banks (MDBs), the African Governments should develop Project Development Funds (PDFs) that can help augment the efforts by the MDBs led initiatives. The PDFs should be supported by effective governance, oversight, institutional capacity and sustainable financing especially in their early stages of development.