Ecobank mobile app demos at the Nigerian launch. (Image source: Ecobank)
In an exclusive interview with managing director and regional executive for the groups CESA region Samuel Adjei, African Review learned in its December issue how the launch of a new cache of digital mechanisms underpins a wider plan to spark greater financial synergies across East Africa
The growth of Islamic financing in Africas infrastructure. (Image source: Katrina.Tuliao/Commons)
As featured in the latest issue of African Review, Islamic finance remains a niche in Africa but it is growing, driven in part by the continents urgent need for new and innovative ways to fund infrastructure development
Morgan Lewis looks at the financing of infrastructure projects in Africa. (Image source: NJR ZA/Commons)
Bruce Johnston and Helena Guidolin at Morgan Lewis write for African Review, looking at financing infrastructure projects in Africa, focusing both on the energy and local financial sectors and how they are funded
Extracts from this piece first appeared on our sister publications magazine, Oil Review Africa. The full article with exclusive, unseen content will appear in Oil Review Africas digital copy in January.
Financing infrastructure projects in Africa will undeniably help to unlock the economic potential of the continent. Finance for investment in African infrastructure is hindered however, by various factors relating to the complexity, size and viability of infrastructure projects generally.
In energy-related infrastructure projects, there are continuing challenges in project planning and preparation that need to be surmounted to ensure a bankable proposal that is attractive to investors.
Local financial markets are less developed, which means more cross-border lending in US dollars. National oil companies sometimes lack the expertise and financial resources to develop some projects. Undoubtedly, there is a need to accompany physical infrastructure development with other required elements such as upskilling of labour, regulatory adaptation, and streamlining of administrative requirements. Projects can take longer to develop, which may lead to early decisions that impede a later financing.
Determining viable processes by which funds for project development can be raised is pivotal and requires a clear understanding of the options available for financing, taking into consideration the specific nature of differing projects. In time, however, the methods and sources of financing oil and gas projects worldwide will be used in Africa.
The basic premise of this article is that commercial decisions made early in an oil or gas project in Africa often preclude certain types of financing at later stages. This is often because decisions about financing are not made at the start of the oil or gas project.
Equity
The exploration phase in an oil and gas project is the most risky. The risk/reward ratio therefore needs to be as high as possible. Equity is the most appropriate tool for financing the exploration phase.
Equity is also more expensive than debt and operates to dilute the ownership of the sponsors.
The traditional model is distorted because big international oil companies can raise equity from the stock markets more cheaply than an oil project can raise debt. International oil companies therefore have a strong preference to finance oil and gas projects in Africa using equity rather than debt.
Despite this, taxation systems in many countries operate so that interest is tax deductible but dividends are not. This often means that there is debt financing of oil or gas projects in Africa which, in economic terms, is really an equity financing.
The full version of this article will appear in the next issue of Oil Review Africa in January. The latest issue can be found here.
The AfDB has committed a second tranche of US$500mn to support energy projects in Egypt (Source: Shutterstock Paul Vinten)
The African Development Bank (AfDB) yesterday signed a US$500mn loan agreement to support Egypts Economic Governance and Energy Support Programme Phase II
China Africa Development Fund invest US$4bn in African infrastructure projects. (Image source: CAD Fund/Commons)
The China-Africa Development (CAD) Fund invested a total of US$4bn in Africa as of the end of November 2016, Chinese authorities said last week
The Carmix 3.5TT is renowned for its robust performance in concrete mixing. (Image source: Carmix)
Genuine Volvo Parts are specifically developed, tested and approved to get the very best results from your Volvo machine. (Image source: Volvo CE)
The Cat G3520 Fast Response natural-gas generator set is available for dealers around the world. (Image source: Cat)
The transaction will give TotalEnergies an interest in hydropower projects in Uganda, Rwanda and Malawi. (Image source: Adobe Stock)
Hyde Johannesburg marks a major milestone for Ennismore as the brand’s first hotel in Africa. (Image source: Ennismore)
The solution provides the accuracy and speed needed to isolate unstable batteries before they become a safety risk. (Image source: Brady)
COP29 concluded with the Baku Finance Goal agreement. (Image source: UNFCCC)
The Lintec CSD2500B ensures uninterrupted operations, and its modular construction delivers cost efficiencies and easy installation. (Image source: Lintec & Linnhoff)
• Genie has sought to improve quality and total cost of ownership. (Image source: Genie)
The flexibility of the solution enables it to accommodate various courses in the hydraulic and pneumatic training environment. (Image source: Bosch Rexroth)
