I had the opportunity of attending the Africa PPP Conference & Showcase in London on November 10-11^th for which InfraPPP was a media partner. First of all, I would like to congratulate the team led by Mahad Ahmed, Managing Director of AME Trade, the company organizing the event. I think they did an excellent good job putting an interesting line-up of speakers and having a good turnout with a mix of public officials and private sector professionals.

In my opinion, the main takeaway of the event was that there is a big disconnection between what the African public sector wants and what the private sector can provide.

I think there was agreement in the audience on the fact that the lack of good-structured PPP projects is the real problem to have a more extended use of the PPP model in the African continent to fill the $93 billion per year infrastructure gap (World Bank).

The lack of investors and financiers willing to fund these projects is no longer an issue, as the audience and panelists agreed at the event.

From all comments at the event and in our opinion, the team at InfraPPP believes governments in Africa need to understand that to structure good PPP projects there are four key factors:

• Prioritizing projects in the PPP pipeline: As Ms. Kodeidja Diallo, the Director of the Private Sector department at the African Development Bank, said at the conference: projects need to create inclusiveness, projects must have long-term sustainability and affordability and the projects need to have value for investors and the community. In other words, it is important that we first consider projects with an existing great demand from the community and that generate sufficient returns for the investors without government support, not projects that benefit a very reduced amount of users. It may sound obvious but when ones analyzing the PPP pipelines in certain countries in Africa, this question arises.

• Selecting the right advisors for the project: This sounds also repetitive and obvious but I think that there is no a clear understanding among African public officials on the resources needed to structure a good PPP project. Hiring a team of Transaction Advisors (including legal, financial and technical consultants) clearly influences the outcome of a potential PPP project down the road. This team will advise the government on the feasibility of the project, the preparation of tender documents, the attraction of private investors (having a 2 or even 3 stage tender process and doing market sounding exercises), and the closure of financing for the project. We also consider it is important that the fees of the consultants are not mostly success-based remunerated because it creates a misalignment between the parties that may influence for the right development of the project.

• Designing competitive procurement processes: Francesco Totaro, of the European Investment Bank (EIB), highlighted this at the conference. The EIB does not consider financing a project if there was not a public, open and transparent procurement process. Attracting a certain level of competition is crucial to make sure that the community gets the best competitive deal.

• Considering national guarantees to investors: This is not something that happens just in emerging markets, we have seen as PPP projects in the UK, for example, needed national guarantees to move to the financial close. Given the political risk of certain countries in Africa and the lack of national development plans with full political support, it is important that governments show commitment to investors for the development of the existing PPP pipelines and guarantees can generate the necessary trust in the investors community.

Although the speakers explained in detail several case studies of successful PPP projects in Africa such as the Dakar Diamniadio toll road in Senegal, the Henry Konan Toll Bridge Project in Cote d’Ivoire or the Renewables program in South Africa, I did miss more information on other PPP projects that were recently signed or awarded in Africa during the last year. Examples of this would be:

• Agadir desalination plant PPP in Morocco –sponsored in 2015 by Abengoa
• University of Ghana student housing PPP project – signed in 2015 by Africa Integras
• Kennyata University student housing PPP project in Kenya – signed in 2015 by Africa Integras
• Njakwa-Livingstonia-Chitimb road PPP project in Malawi – signed in 2015 by Mota Engil
• Kigali water PPP project in Rwanda – signed in 2015 by Metito

Overall, during 2015 we recorded in our database of PPP projects (http://infrapppworld.com/project-tracker) in the transport, social & health and water & waste sectors four projects awarded, four projects that achieved commercial close, and only one project that got financial close.

Another important point that was discussed at the conference was the need of constant capacity building so that government officials in Africa are prepared on the difficult task of tendering PPP projects. As Mr. James Aiello, Senior Project Advisor of South Africa’s National Treasury, said, capacity building never ends; every year there is a need to capacitate new government officials at different ministries or the same government officials with updated practices.

We believe learning by doing is the only way for governments to attract the private sector to fund all the necessary projects through the PPP model in the continent. To have future successes, governments must start to improve their hiring, tendering and procurement processes.

Álvaro de la Maza – Partner of InfraPPP Advisory

e: ama@infrapppworld.com

One of the biggest challenges that Sub-Saharan Africa faces is the lack of access to clean water and to proper sanitation facilities. Together, unclean water and poor sanitation are a leading cause of child mortality.

In Africa alone, universal access to water and sanitation would bring an estimated annual economic benefit of $22 billion, and African women would particularly benefit from such increased access. Today, women and girls in Sub-Saharan Africa spend up to 4 hours per day fetching water; without this burden, women could increase their agricultural farm yields by 20-30%. Reducing the distance to a water source has also been identified as a way to empower women, especially regarding girls’ school attendance. Studies have shown that with clean water and accessible toilet facilities, girl school enrolment rates increase by over 15%.

The links between a lack of water and sanitation access and development goals are clear, and the solutions to the problem are known and cost-effective. It is estimated that every $1 spent on water and sanitation generates five-seven times more in increased economic opportunities.

However, private financing for water supply and sanitation in developing countries has lagged far behind than for other infrastructure sectors, reflecting in part the absence of private capital contributions and the lack of appetite to bear some of the risks associated with these projects.

According to the “2012 Status Report on the Application of Integrated Approaches to Water Resources Management in Africa”, by the African Union, infrastructure development and financing is one of the main priorities assigned by African countries to various water resources management issues.

As The World Bank reported in its paper “Water PPPs in Africa”, the activity has been limited but the types of projects are well documented. The different PPP schemes that water and sanitation projects can follow are:

• management contracts,
• affermages,
• leases,
• concessions or
• Build-Operate-Transfer concessions.

From 1992 to 2012 there were a total of 51 PPP in the water and sewerage (including desalination) sector in Africa. The bulk to the total investment went to North African countries, with the majority of projects in Sub-Saharan Africa leveraging private sector management skills and efficiencies rather than investments.

Some key success factors for water and sanitation PPP projects in Africa are:

• Strong political support and a long-term commitment from both partners, public and private.
• Define the exact structure and risk allocation model according to the specific transaction, market and country situation.
• Tariffs are always a complex topic, but costs need to be considered when setting water prices.
• Combine funding from the public partner with private sector skills and expertise.
• Operational efficiencies are the most consistent contribution of PPPs to utility performance, resulting in the reduction of non-revenue water, improvement of bill collections and better productivity.

The most successful schemes in water and sanitation projects with private sector participation can be developed in those markets where PPPs are already working. Therefore the markets in Africa with the largest potential are those where PPPs are already being developed: South Africa, Ghana, Kenya, Tanzania, Uganda, Morocco, Algeria, Tunisia, Egypt, Lesotho, Benin, etc; and additionally, those markets where private sector participation in water has been successfully working lately, such as Ivory Coast or Senegal.

PPPs are not a magic formula to address water and sanitation investment and development problems in Africa, but there are successful schemes in the developing world (according to the note “Water P-Notes April 2010” of The World Bank), that can be replicated in many African countries:

• Concessions with cross subsidies from electricity, surcharges or other means.
• Lease contracts with enhanced incentives for operational efficiency.
• Mixed-ownership companies.
• Concessions with public grants for some investments to minimize the impact on tariffs. 

About us

InfraPPP Advisory Services is a consultancy firm specialized in Public Private Partnerships and infrastructure-related management consulting assignments. We advise public and private clients in different kinds of advisory assignments, with a global reach

We offer a broad range of services to private investors, governments and public agencies:

• Feasibility & Pre-Feasibility Studies
• Project Identification Plans & Assessment of PPP programs
• Structuring PPP projects
• Support in PPP tenders
• PPP Capacity Development
• Creation of PPP Units

For more information please contact our partners:

Alvaro de la Maza Alba                                 Jose de la Maza Alba

+34 661 24 97 63                                          +34 639 90 63 48

ama@infrapppworld.com                           as@infrapppworld.com

www.infrapppadvisory.com – Aninver InfraPPP Partners S.L. – C/ Puerto 14 2-5 29016 Malaga (SPAIN)

Last week, we attended the Land Transport Infrastructure Conference organized by Trueventus in Manila.

Local government officials, local and international consultants, local PPP developers and other parties involved in the Philippine PPP Program got together to discuss the progress being made by the Aquino administration and also existing constraints to further develop the program.

The general feeling is that the Government has made a great job awarding up to eight PPP projects during the last three years. Things currently stand at a point that was unimaginable back when the Program was rolled out.

This is the second report as part of the activities of the World Economic Forum’s Business Working Group on Infrastructure in Africa. The Group has been created in 2012 by the World Economic Forum in partnership with the African Development Bank, the African Union Commission and the NEPAD Planning and Coordinating Agency and it has been working as a coordinated business voice to support infrastructure development in Africa and in particular help accelerate the Programme for Infrastructure Development in Africa (PIDA).

This second report of the Business Working Group, “Managing transnational infrastructure programmes in Africa – Challenges and best practices”, identifies the key hurdles that have to be overcome. It also presents a best-practice framework to guide policy-makers, sponsors and managers, and to facilitate the delivery of transnational programmes, such as the ones included in the PIDA PAP, on schedule, at cost and at the right quality.

Download full report