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Harnessing Existing Facilities to Promote PPPs
for Infrastructure Investment and Service
Delivery in SADC

• 5th-6th December 2006
• Industrial Development Corporation, Johannesburg

NKOSANA MOYO MANAGING PARTNER-AFRICA
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Funding Mechanisms

• The Issues
• Categories of infrastructure
• Risks
• Viability
• Quantum of capital required
• Economic vs financial returns
• Participants and risk sharing

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Categories of Infrastructure

• Telecommunications
• Power generation
• Transport/Water

• Modula, prepayment, remote control
• Off take agreements, timeframe/payback
• Capital/tariff/demand and ability to pay/moral
  aspects of suspension of service

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Key Investment Risks

• Political
• Stability, expropriation, change of rules,
  enforceability of contracts, price controls,
  remitability
• Financial
• Exchange interest rates,
• Commercial
• market size growth
• Performance
• Economic vs financial return

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Commercial Risk

• Demand levels
• Poor/non existent information base
• Political stability assurance
• Growth projections
• Tariff levels and ability to pay

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Viability

• Determinants of viability
• Addressable market size
• Economic growth rates
• Consumer behaviour
• Ability/willingness to pay
• MTN in Nigeria
• Getting it wrong the right way
• Multiple purchase of handsets

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Quantum of capital - overcapitalisation

• E.G. transport and power
• Large amounts per contemporary consumer
• Resultant tariff too high
• Solutions
• Commercial/non-commercial blended funding
• Underwritten returns
• Public infrastructure privatised at notional or
  adjusted cost

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Economic vs financial returns

• Infrastructure as an economic foundation
• Reduces cost of doing business
• Attracts further investment e.g. fdi
• Improves security
• Accelerates economic growth
• Expands tax base
• Broad benefits public goods in nature
• Cost benefit suggests PPP investment

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Risk/reward sharing

• Political risk
• Lay off to public sector
• Early stage financial risk
• Lay off to public sector
• Commercial risk
• Hard to ascertain upfront
• Should reduce over time
• Underwrite minimum returns and share upside

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PPPs

• Challenges
• Dominant logic socialisation
• Making money vs protecting consumers
• Public goods vs returns to investors
• contraction in economic timelines
• Western economies evolution
• Contractual mindset
• Providing for the unforeseen

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Conclusions

• For PCCs and LMICs
• Political risk is canvas on which economic
  activity takes place
• Information paucity makes risk pricing very
  difficult
• Infrastructure is a catalyst for economic growth
• Benefits of infrastructure diffuse and more of a
  public good than private good
• Private sector alone unlikely to have appropriate
  financial products for developing infrastructure
  in PCCs and LMICs

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Contact details
Nkosana Moyo Managing Partner
Tel [phone] nmoyo_at_act.is
Address London office 2 More London
Riverside London SE1 2JT United Kingdom