PERISA case study 2 infrastructure: financing of infrastructure

Financing is a core requirement in the infrastructure development. However, local and regional financial capital markets in Southern Africa remain underdeveloped; and with the exception of South Africa, institutional and regulatory frameworks are weak, and institutional investors are largely absent. In this sense, there is no significant local trend towards medium- to long-term financing of infrastructure projects. Rather, between 1990 and 2011 only 10% of global private investment flowed to infrastructure.

Nevertheless, Southern African Development Community (SADC) member states have noted the requirement for innovation in financing to ensure the capital required for new assets and the sustainable maintenance and upgrade of existing assets. The paper makes reference that the shallowness of national utility markets in Africa highlights the strategic importance of marketing higher-value regional (multi-country) infrastructure projects to the private sector. This requires continued coordination and harmonisation of regulatory and institutional reforms aimed at promoting investment in cross-border infrastructure. In this framework, the document indicates the SADC Regional Infrastructure Development Master Plan (RIDMP), which aims at the development of an efficient and cost-effective transboundary infrastructure network.

Conclusions include:

• a concerted effort from all stakeholders is needed to ensure that the cost-effective regional infrastructure network envisioned in the RIDMP is realised
• public–private partnerships (PPPs) have the potential to improve the provision of goods and services originally regarded to be in the public delivery domain
• private-sector risks are reduced significantly when private financing is combined with public-sector or donor funding