3 questions to Marie Bouvet-Guiramand on infrastructure financing in Africa
What key trends are you currently seeing in the financing and structuring of infrastructure projects in Africa?
Compliance has become decisive in accessing financing, with increasingly stringent anti-corruption and environmental and social (E&S) requirements.
Project structuring is also turning to new sources of capital, notably concessional funding, where the State is willing to allocate part of it to lower a strategic project’s financing cost. Market participants are also increasingly seeking to secure access to foreign currency and limit their exposure to exchange rate fluctuations.
Beyond these developments, the key issue for project bankability remains a predictable and secure long-term framework. In particular, contracts must include mechanisms to address the risk of regulatory changes, especially in tax matters, and must give the concessionaire the means to enforce its rights in respect of the tariffs applied, even though investors and lenders hope never to have to invoke them, of course.
What role do public-private partnerships (PPPs) play in infrastructure financing today?
PPPs are a key lever for financing infrastructure in Africa. Their success depends on a balanced allocation of risk between the public sector and investors, which requires public authorities with the structured expertise needed to handle the technical, financial and legal challenges such projects involve. This is essential if contracts are to be implemented effectively and predictably. Coordination between the relevant authorities and transparent procedures are also critical.
Recent projects, such as the Sunu BRT in Dakar, have used two-part structures: the infrastructure component was delivered by the Senegalese authorities with World Bank support, while the rolling stock and systems were procured through a PPP backed by project financing. This approach is particularly well suited to this type of public service, where financial viability is hard to achieve without subsidies: users cannot bear the full cost of the asset through fares alone, despite its social value and development impact.
What mechanisms could further encourage local currency financing?
Developing local currency financing provides a natural hedge against foreign exchange risk. However, the tenors and amounts offered by local lenders often fall short of a project’s needs and cannot cover costs payable in foreign currency.
To expand this financing pool, greater use could be made of regional capital markets through bond issuance or through financing from local public entities or regional development banks.
