OTHER JURISDICTIONS Q&A
this is how much you should compensate us; not us as a company but us as the project and you are part of this project because you will own a share of it. Minority ownership by government is often an important compo- nent for a successful PPP. The good thing about this is that once the proj- ect gets a return the government will get its fair share. This is something that not long ago nobody would have thought would ever happen. It is very important to make sure that you understand the framework and you play by the rules of the land, then if there is a change in power you won’t have a new minister saying that the approval was with the former minister and that you now need a new approval or worse, the concession granted is cancelled. In projects where the state still owns its stake regardless of the change in government there is less likelihood of problems.
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people are willing to pay if the source is reliable. If you look at a country like Nigeria, most of the industry is working on petrol driven generators, which are very expensive. If you can provide a reliable source of energy cheaper than the fuel generators it will make a huge difference. We need to see that some of the transactions from the Nigerian power privatisation programme have closed successfully, that it can be done in Nigeria and that you can take a long-term approach in a country where a lot of people are not taking a long-term approach.
Energy takes a lot of time to develop a project. When you look at a
Projects, which have procured this Guarantee, will be in a beneficial position to bring down the overall cost of the project thereby making it more attractive to other investors
The bridge in Abidjan is pretty ground breaking because it was the first
PPP in West Africa and it is one of the few transactions that on paper we have tried to get everything right. It was a very complex transaction, well structured with all the appropriate hedging in place. The sponsors were the Bouygues Group and you have a mix of international banks, DFIs and local institutions. If we can get this right most of the countries will be able to fund their own infrastructure development at an affordable price.
Are there legal changes across the continent you would like to see taking place? We would like to see more of a regional approach to a legal framework, whereby you could have the same framework whether you are doing a bid in Kenya or in Tanzania, for example. I am not sure I am seeing this de- velopment today. It would require more from governments. OHADA for me is the first step and I would like to see the equivalent in East Africa and in Southern Africa, the SADC region is particularly fragmented from a legal point of view. Another challenge would be to see a regional legal framework that could take into consideration the development of PPPs. At the moment you have some states that are looking to implement PPP frameworks to make sure that they can attract capital and ultimately make their country more appealing to investors but we haven’t necessarily seen the same shift on the legal side. We have heard that there is an initiative taking place in SADC for a regional PPP unit but we are not certain of its progress.
There is a huge demand for cross-border investment in Africa particu-
larly in the transportation sector amongst others and there are a lot of loans available from the World Bank and the African Development Bank, but when you are doing a cross border transaction which legal protection do you chose, will you be getting, which laws are you applying? It has be- come almost impossible to plunge directly into cross-border even when you have been able to attain financing.
What are the most dynamic infrastructure sectors? It would be energy and transport. In power, what we are seeing is that
county like Ivory Coast and look at energy, 20 years ago energy projects were done by the national company but today 80-90% of the production is coming from companies that didn’t exist 20 years ago. The distribution is now managed by the private sector and investors are more confident that they want to do investments. The expertise was there before but not the way to do it. It’s not just words to say that there needs to be more pri- vatisation, that governments need to put more into private sector hands and that this will attract investors. Contrary to popular belief, in sectors like telecoms the public here can pay, especially in this growing middle class.
What trends are you seeing in how investors are participating in in- frastructure projects? Most infrastructure players are very clear on their strategic criteria, re- quirements and terms for projects, meaning that they are all looking for good quality concessions, for strong legal agreements and that these are covered ideally by a proper political risk insurance, including insurance for breach of contract in respect of the undertaking provided by govern- ments. The fact is that you can attract both types of global and diverse in- vestors over a long-term investment horizon but you can only do it if you believe that you know you are going to Africa and can de-risk the project. Because when you then present the transaction, whether it’s in Johannes- burg, New York or London, the investors won’t think “you are going to Africa and you are going to lose all of our money”. No, look at the struc- ture that has been put in place. You have less risk in the Bujagali Dam power project in Uganda than many projects in the UK or Spain.
What is your approach? What we decided was that either directly or through our portfolio com- panies we would jump into projects at an early stage and try to bring in development institutions such as the African Development Bank or the IFC, local banks, financiers and commercial banks. In the last four years we have tried to facilitate and encourage very early stage development with the local sponsors. What you often see is a ‘when you’re ready come and see us’ approach. We are taking some early stage risks to make it work; but ideally you need to start working with your sponsors at an early stage to make sure that everything is done correctly and on terms that would be acceptable to our investors.
How have investors taken to this approach? I think these structures are quite new in the sense that in the past what you would have seen in the infrastructure sector was only big sponsors, but today with this approach, as long as people are serious and hard work- ers, you can fund local developers and early stage developers. This simply wasn’t done before... but that’s not to say that it wasn’t achievable, it just means that they need more help to gather all the expertise that there is around them. In infrastructure there are not a lot of projects and they take a long time to develop. If you are confident that you have done everything you needed for a successful and bankable project there is no reason why the project can’t close. So far we are pleased with the support and appetite to do projects in Africa coming from African pension funds, but we are hopeful that once more of these well-structured types of transactions are being closed more and more we will be able to tell other investors a better story, because I can tell you now even when you go outside Africa, many people still see Africa as extreme risk and you need to be able to illustrate that we are not taking the type of risk they believe we are taking, at least in infrastructure.
78 ENERGY & INFRASTRUCTURE | SUB SAHARAN AFRICA 2013
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