HomeEvent NewsReporting on infrastructure investment opportunities in Africa

Reporting on infrastructure investment opportunities in Africa

Delving into infrastructure investment opportunities in Africa at Africa’s Green Economic Summit (AGES), Frost & Sullivan Africa CEO, Hendrik Malan, pointed out there are many chances being missed by investors who don’t understand ground conditions.

Malan said when “big capital” asks Frost & Sullivan about infrastructure investment opportunities on the continent they most often repeat the same two concerns. The first is there’s not enough projects in Africa from an infrastructure point of view, specifically, but definitely not sustainability-linked. The second issue is that of governance structures in Africa not being robust enough to handle large-scale capital at speed.

“On the second element we partner with IT and legal firms to help address governance issues,” Malan explained how they counter the arguments.

His AGES talk though looked specifically at debunking the first concern around a lack of projects. “There is a fallacy that there are no projects in the region. They keep on talking about it, it’s being reinforced at one conference after another,” said Malan.

Frost & Sullivan tracks infrastructure projects across Africa from announcement through development to commissioning, and though they notice many projects dropping off the list as time goes by, there are more in the offing than dead in the water.

Tracking infrastructure investment

Currently they are tracking 452 ongoing and committed infrastructure projects representing more than $450 billion in investment.

Between 2020 and 2023 they noted most of the projects are sitting at the committed stage, with 24% physically being constructed at the moment.

  • 46% committed – 296 projects ($340bn)
  • 24% ongoing – 156 projects($179bn)
  • 21% tentative – 136 projects ($427bn)
  • 9% completed – 60 projects ($10bn)
  • 1% cancelled – 3 projects ($327bn)

This works out to between 20 and 30% of projects making it through feasibility, due diligence and negotiation phases and then a 50% drop off rate so only around 10% of projects reach financial close. “The challenge is, projects have a tendency to drop off drastically from announced (tentative) to financial close.

“The problem is there is a risk/reward ratio issue. So, when we start talking to the big DFIs [development finance institutions], getting to the heart of the conversation, they say the ratio between risk and rewards is not something they’re comfortable with.

“It’s either not profitable enough or the risk associated with the project is too high to get involved… the risk dynamics on the ground aren’t well understood,” said Malan.

He has noticed that private capital is starting on take on projects that global investors won’t touch because they don’t understand the true situation on the ground.

Energy infrastructure investment dominate sustainable projects

When breaking the 452 ongoing and committed infrastructure projects down into industry type, 52% are energy related projects. The rest are:

  • 31% construction
  • 9% transport & logistics
  • 2% chemicals & materials
  • 2% mining
  • 5% other

Sustainable infrastructure systems are those that are planned, designed, constructed, operated and decommissioned in a way that ensures resilience and sustainability over the entire infrastructure life cycle. So, circularity, recycling and maintenance of a balance are points often raised in discussions around sustainable infrastructure.

Malan pointed out that energy dominates sustainable infrastructure projects across Africa, at 59% of investments currently in the pipeline. Construction is also a key sector, at 37%. Agri-processing is developing into a sustainable sector with $12bn worth of projects in process.

The other categories are transport, water, mining, manufacturing and chemicals. Top investment countries are South Africa (44%), Egypt (29%) and Mauritania (17%).

For sustainable energy infrastructure specifically, the most popular focus is green hydrogen because of Africa’s large potential for the uptake of renewable energy projects.

In total 74 projects were identified spanning 18 countries, with to the tune of an overall investment of around $247bn. Green hydrogen accounts for $194bn of that.

Source: Frost & Sullivan

Energy storage coming to the fore

The top countries hogging the green hydrogen investment are Egypt (50%), Mauritania (29%) and South Africa (14%).

Malan pointed out that they don’t think Africa can industrialise while only using renewable energy. “The infrastructure required to harvest the technology and store it, is not for free. It’s quite expensive when compared to what’s available. Our grids at this stage still need to be balanced with some sort of baseload.

“We are not going to meet our Africa 2063 goals, or SDGs if we focus purely on renewable energy, but we can develop the resource in parallel to each other. It’s not an either/or situation,” said Malan.

He says there are “lots of interesting projects around energy storage” to keep an eye on.

“There are lots of battery energy storage opportunities across the region, which translates to opportunities.”

As for South Africa’s energy crisis, “the sooner we realise that our issues will have to be solved by the private sector, not the utility, the better.

As for the rest of it

He pointed out that a big portion of Africa’s agriculture sector is export focused, so trends are determined by end-user. “hence the strong sustainability focus when it comes to agri-processing. South Africa, Ghana and Morocco are the players in this space.

This makes the fertiliser sector, a very energy intensive space, a very interesting investment space. Any company that manages to green its processes can charge a premium for its product. Up until recently Russia supplied the vast majority of Africa’s fertiliser. This means there is a deficit growing across Africa which is worsening the continent’s food shortage. “We’re a net importer of food, which is ridiculous, but there’s a whole host off issues to address around that.”

On the transport infrastructure side he mentioned Sanral as “busy with interesting things” such as recycling pavement top level for re-use.