A survey by The Benchmark for Investing in African Infrastructure Project Development (I4PD Benchmark) has revealed that Africa compared to all the other regions is more costly for doing infrastructure projects development.
I4PD Benchmark said that the risk premium attached to African projects was extensively higher than that of other developing country regions such as Latin America, Asia, emerging Europe and the Middle East.
Africa is the only region where the survey participants put the required internal rate of return at 16% to 20% for securing local partners, strategic investors, and international finance partners considering that they are faced with a high perceived risk and cost of capital. It is between 11% and 15% in other developing country regions.
The survey which was initiated by the Advisory Board of the African Investors African Project Developers Forum with technical support from Africa Investor (Ai) Capital and the Global Clearinghouse of Development Finance (GlobalID) showed that an immense amount of political support is needed for a project to go ahead.
GlobalID executive director Barbara Samuels, told the International Federation of Consulting Engineers (Fidic)-Group of African Member Associations (Gama) conference on African infrastructure, in Cape Town, that the benchmark was intended at identifying the obstacles to scaling up infrastructure in Africa.
“In Africa, it’s extremely important to have political support and greater support is needed from development institutions, while more investment incentives and funding for non-economic infrastructure for a project, are essential to reach full closure. It’s off the charts in Africa compared to other regions,” said Samuels.
It is also much harder to secure qualified professionals in Africa, particularly qualified local project developers as there is a shortage of qualified professionals.
The reported success rate of African infrastructure projects, gauged by those reaching financial close and able to provide services, is on average only about 20%.
This compares to 25% in Latin America, 27% in Asia and 40% in the Middle East. The project success rate for the advanced economies is reported at 46%.
The Fidic-Gama conference is the largest annual networking event for consulting engineers in Africa.
Extract from constructionreviewonline.com