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South Africa : Greenfields investments to stimulate infrastructure capacity in fast-growing West Africa

May 10, 2014



West Africa's future as a competitive economic bloc requires new solutions in power technology and investment to improve energy access and enable the implementation of an ambitious infrastructure programme according to Standard Bank Group.

Policymakers, regional governments and investors are grappling with methods to de-risk investment in new business models. They are also looking at the technological, regulatory, financial and geopolitical factors that change the game and replicate the energy access success stories.

"The challenge for these growth markets is to find viable funding mechanisms and create an enabling environment to literally power the future of a continent that holds 15% of the world's population," says David Humphrey Head of Power and Infrastructure, Standard Bank Group.

"Coupled with funding, financial services institutions are also giving more attention to interest rate risk management and hedging products; foreign exchange, and fuel hedging; and local currency funding on a corporate, structured or project basis."

The World Economic Forum notes that together with border administration slowing inter-regional trade, the insufficient amount and quality of infrastructure is one of the major impediments to developing growth in West Africa and improving its competitiveness. Closing this deficit is part of the solution.

While over half of Africa's improved growth performance can be attributed to improvements in infrastructure, the WEF says an estimated USD93-billion is needed annually until 2020 to fund infrastructure development. Increased urbanisation, growing consumer markets and broader ties to the global economy are putting additional pressure on the need for African economies to steam ahead with these investments.

These challenges cannot be viewed in a silo and without a broader economic context. Global economic activity remains subdued, and despite signs of strengthening in high-income countries, significant downside risks persist. This affects factors such as intra-trade flows, the cost of capital equipment, and rising energy costs.

In West Africa, the surge of regional players and multinationals into the region's finance, retail, FMCG, oil, energy and mining sectors, is opening up key economic opportunities for Africa's fastest growing region. Foreign direct investment (FDI) flows to African countries increased by 5% to USD50-billion in 2012 even as global FDI fell by 18 per cent, according to UNCTAD's annual survey of investment trends reported in 2013. FDI flows to West Africa declined by 5% to USD16.8-billion, the report revealed. Of investment channeled to the two major oil-producing countries of the region, FDI to Ghana remained stable at USD3.3 billion, but inflows to Nigeria declined by 21% to USD7-billion, accounting for much of the diminished flows to the region.


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Source: TendersInfo (India)


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