Issue #11 82382 IFC’s quarterly journal on public-private partnerships donors: Aid vs. trade In this issue investment: Seeking strong partners power: Hydro heats up water: Sanitation solutions first person: African Development Bank President AFRICA ppps IN PARTNERSHIP WITH Australia • Austria • Brazil • Canada • Catalonia (Spain) • Flanders (Belgium) • France • Ireland • Italy • Japan • Kuwait • Netherlands • Norway • Sweden • Switzerland • United Kingdom • United States • Public-Private Infrastructure Advisory Facility (PPIAF) • Global Partnership for Output-Based Aid (GPOBA) • Private Infrastructure Development Group (PIDG) • African Development Bank • Asian Development Bank • Brazilian Development Bank (BNDES) • Caribbean Development Bank • Central American Bank for Economic Integration • European Investment Bank • European Bank for Reconstruction and Development • Inter-American Development Bank • Infrastructure Consortium for Africa • Islamic Development Bank Issue #11 – October 2013 IFC Advisory Services in Public-Private Partnerships 2121 Pennsylvania Avenue, NW • Washington, D.C. 20433, USA +1 (202) 458 5326/7 • ifc.org/ppp • handshake@ifc.org Editorial Tanya Scobie Oliveira • Alison Buckholtz Art & Design Victoria Adams-Kotsch Digital Strategy Jeanine Delay Disclaimer This journal was commissioned by IFC, a member of the World Bank Group, through its Advisory Services in Public-Private Partnerships department, which helps governments improve access to basic public services through public-private partnerships in infrastructure, health and education. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. Cover photo © Eric Kidwell, Lagos, Nigeria “The problem with stereotypes isn’t that they aren’t true,” Letter from IFC Nigerian author Chimamanda Ngozi Adichie told the audi- ence at a TED talk in Oxford, England several years ago. “It’s that they are incomplete.” Throughout the lecture, and in her award-winning books set in Africa, she warns of what she calls “the danger of a single story”—the risk of critically mis- understanding entire cultures by ignoring the more nuanced, complicated elements that may not fit into a straightforward narrative. Many have been lured into the trap of the single African story. But this issue of Handshake presents readers with a more accurate—and more exciting—narrative of African progress. This is the progress that attracts investors by emphasizing partnerships between the private sector and African govern- ments committed to the best for their citizens. The stories in this issue show how public-private partner- ships (PPPs) are already lighting roads, powering homes, and keeping people healthy. As important as these existing PPPs are, the promise of PPPs in Africa is even greater, and it’s tied to changes in aid and investment structures that are already taking place. “The time is ripe for ‘smart aid,’” writes Donald Kaberuka, President of the African Development Bank, as he calls on the world to “rise above the tendency to answer modern problems by asking old questions and using old tools.” As these articles and interviews demonstrate, when govern- ments and investors forge partnerships to advance progress, they erase Africa’s “single story.” The stories that take its place—and the improvements introduced to people’s lives— will be told for generations. Laurence Carter, Director Tanya Scobie Oliveira, Editor IFC Advisory Services in Public-Private Partnerships Photo © EcoPic/istock IFC | 1 Features Governance Africa demands perspective | 16 Game changer | 24 Investors Smart investing in Africa | 26 Sovereign wealth funds | 32 Donors The road ahead | 34 Smart aid | 42 46 32 Power The outlook is electric | 46 Hydro heats up | 50 Risk & reward | 54 Powering Africa | 56 A “greener grid” | 58 In this issue 2 | IFC.ORG/HANDSHAKE Columns Water Sanitation solutions | 62 PERSPECTIVE Insights & opinions Health The hopeful continent | 06 Results build relationships | 70 IJ INSIGHT Prescription: PPP | 72 Commentary on current events The usual suspects | 10 20 COMPASS Surveying the PPP landscape Steady as she grows | 12 MONEY TALKS Financing & Funding PPPs Matchmaker, matchmaker | 30 LEGALEASE Law & legislation, decoded Legal lessons from Burkina Faso | 66 Interviews Michael Elliott: Open budgets, open minds | 20 Liyel Imoke: Crossing off healthcare needs in Cross River State | 74 IFC | 3 Contributors 42 36 Donald Kaberuka 26 Radhika Dil Andrew Alli Andrew Alli Radhika Dil is the President and CEO of the Africa Finance is a Private Sector Advisor for the U.K. Depart- Corporation, founded in 2007 to catalyze infra- ment for International Development, based in structure investments across Africa. Uganda. Thomas Clement Anton Eberhard is an associate in the French law firm of Alard leads the Management Programme in Infrastruc- Guiramand Allemand Moussy and was formerly ture Reform and Regulation at the Graduate an associate at Gide Loyrette Nouel specializing School of Business at the University of Cape in PPPs in the developing world. Town. Ananda Covindassamy Richard Eckrich is Managing Director of Sequoia Energy is an executive with the Russian Direct Invest- Markets Finance. ment fund, a $10 billion sovereign wealth fund. He has worked in infrastructure investment in John Crothers Africa and the Commonwealth of Independent is a partner in the international law firm of States throughout his career. Gide Loyrette Nouel who specializes in PPPs and Project Finance in the developing world, Robbert van Eerd advising governments, developers, and financing is an infrastructure analyst with the Transport, institutions. Water, Information, and Communication Technology’s Infrastructure Policy Unit at Jeff Delmon the World Bank. is a Senior PPP Specialist in the Finance and Private Sector Department of the Africa Region for the World Bank, based in Tanzania. 4 | IFC.ORG/HANDSHAKE Katharine Gratwick Julius Ngonga is an independent energy analyst specializing in is a Transaction Advisory Services Partner with Sub-Saharan electricity policy and IPPs. Ernst & Young based in Nairobi, Kenya. Maximilian Heyde Emmanuel Nyirinkindi is a Project Manager for Environment and is a Senior Manager for IFC Advisory Services Energy projects in Sub-Saharan Africa at KfW. in Public-Private Partnerships. Jane Jamieson Catherine O’Farrell is a Senior Water Specialist for IFC Advisory is a Principal Investment Officer for IFC Advi- Services in Public-Private Partnerships. sory Services in Public-Private Partnerships. Donald Kaberuka Frederic Pia has been President of the African Development is an associate in the international law firm of Bank Group since 2005. He was Rwanda’s Min- Gide Loyrette Nouel who specializes in PPPs in ister of Finance and Economic Planning from the developing world, advising governments and 1997 to 2005. developers. Ryan T. Ketchum Jean Philippe Prosper is a Partner in the Energy and Infras- is IFC’s Vice President for Latin America and tructure team at Hunton & Williams the Caribbean and Sub-Saharan Africa. LLP, based in London. Jemima Sy John Kjorstad is the global business leader for private sector is the Editor of Infrastructure Journal, a global development for the Water and Sanitation Pro- online news and data resource providing infor- gram, a multi-donor partnership administered mation and analysis across key sectors within by the World Bank. project and infrastructure finance. John Leber INTERVIEWEES is an Investment Officer for IFC Advisory Services in Public-Private Partnerships. Michael Elliott is the President and Chief Executive Officer of Jason Zhengrong Lu ONE and Vice Chair of the World Economic is a Senior Underwriter at the Multilateral Forum’s Global Agenda Council on Poverty Investment Guarantee Agency (MIGA), the and Sustainable Development. political risk insurance arm of the World Bank Group. Liyel Imoke is Governor of Cross River State, Nigeria. He Marie Marconnet was formerly a Senator in Nigeria’s National is a manager at Castalia Strategic Advisors Assembly and a Federal Minister of Power in Washington, D.C. and Steel. IFC | 5 the hopeful CONTINENT By Jean Philippe Prosper, IFC & Emmanuel Nyirinkindi, IFC 6 | IFC.ORG/HANDSHAKE Photo © Andrew Ashton PERSPECTIVE More than a decade ago, The Economist christened Africa “the hopeless continent,” lamenting its prospects for growth and change. Today, the tide has turned. In 2013, the very same magazine lauded the improvement in lives in Africa over the past decade, and declared that the next decade will be even better. Many of Africa’s economies are among the world’s fastest growing. At least a dozen have grown by more than 6.0 percent annually for six or more years. But success gives rise to new challenges. Although private investment is no longer novel in Africa, it does not yet meet growing needs. A younger population and expand- ing middle class have new demands. Infrastructure bottlenecks threaten sustained development. Public-private partnerships (PPPs) are an important vehicle to help Africa confront these challenges. A widely cited World Bank Group study from 2009, “Africa’s Infrastructure: A Time for Transformation,” found that infra- structure has been responsible for more than half of Africa’s recent growth and has the potential to contribute more—but at a cost. Africa’s conventional infrastructure, which includes roads, electric- ity, and water, requires $93 billion in new investment annually. Some of this can be financed domestically, but the report esti- mates that the annual infrastructure funding gap is likely to reach over $30 billion. THE INFRASTRUCTURE FUNDING GAP Private investors have a growing interest in Africa, and enormous financial capacity relative to Africa’s needs. By creating PPP structures, public service needs can be met through incentives to private investors that need to receive fair and attractive risk- adjusted returns on investments. IFC | 7 PPPs are already familiar to Africa and gaining HEALTH traction. From just $1 million in PPP activity in 1993, private investment of $13 billion was Healthcare is a sector where a new PPP model is being channeled into infrastructure by 2008. attracting more attention. Support services have The global financial crisis slowed the flow, but a been contracted out and new buildings delivered recovering global economy, coupled with Africa’s by private investors, while clinical services have bright growth prospects, positions PPP models remained in hands of government providers. to be the wave of the future. As a previous issue of Handshake described in detail, a groundbreaking healthcare PPP in Lesotho paved the way for further successful partnerships in Africa. In 2006, the government The potential for PPPs in Africa is of Lesotho launched a project to ensure the seemingly limitless relative to its long-term improvement in healthcare with a current level. New opportunities PPP to build a state-of-the-art 425-bed National will arise as PPPs expand further Referral Hospital. The Queen Mamohato into new sectors such as social Memorial Hospital, as it is known, now serves a services, tailor themselves to small wide population. and large projects, and appeal to The Queen Mamohato Memorial Hospital local or regional investors along- project is only the beginning for healthcare PPPs in Africa. Following a tour by officials of Cross side larger, international players. River State in Nigeria, officials engaged IFC to advise on structuring a PPP for the design, con- struction, equipping, and operation of a 105-bed The range and size of PPP projects has been greenfield hospital in the state capital of Calabar. changing as new countries and types of inves- In June 2013, an agreement was signed for the tors have become involved. Until recently, development of a new hospital on a design- infrastructure PPP projects were concentrated in build-operate-transfer basis with an estimated sectors such as power and telecoms and usually capital cost of $37 million. involved large investments with foreign spon- More on this groundbreaking PPP, including an sors taking the lead. More recently, the range of interview with the governor of Cross River State, sectors in which PPPs have been implemented can be found in the following pages. These and has expanded, more innovative projects have other examples demonstrate how PPPs can assist been undertaken, and local and regional inves- in efficiently delivering better healthcare services tors have become involved across a wider range to Africa’s people. of countries. 8 | IFC.ORG/HANDSHAKE WATER The rebuilding of the electricity system in Liberia is a good example of PPPs’ potential. In Water has traditionally been a sector where PPPs 2008, just five years after a civil war destroyed have been used to deliver services. Previous proj- the power infrastructure, the government ects have tended to be large-scale investments engaged IFC to attract a private operator. With aimed at providing bulk water supplies to urban the assistance of donors, they worked toward centers. More recently, the focus of PPPs in the reconstructing the power system in the capital, water sector has turned toward encouraging the Monrovia. In 2010, Manitoba Hydro Inter- private sector to provide water to smaller rural national commenced a five-year management centers. contract. By 2012, over 12,000 new connections In 2007, IFC signed a mandate with Uganda’s had been made, revenue increased by 160 per- government to implement the Small Scale Infra- cent, and losses decreased by 21 percent. Earlier structure Provider Program. The program helped this year, the contract was extended and its scope local investors provide water in some towns increased. while also helping municipalities to manage Liberia is not the only country considering PPPs these contracts and improve access to finance for to support the rebuilding of critical infrastruc- the service providers. The first five-year contract ture. Burundi, Democratic Republic of Congo, was awarded to a local company in 2010 to Sierra Leone, and South Sudan are all actively provide services in Busembatia. In its first two considering or pursuing PPP programs. years it added 400 new connections, double the previous number, and added 17 standpipes If Africa is to continue to grow—and maintain where none existed before. All the improvements its promise as “the hopeful continent”—it must added no increase to the tariff. The operator was leap forward in developing its infrastructure. funded by a $100,000 loan from a local bank. Resources from governments and donors are As with Lesotho’s Queen Mamohato Memorial insufficient to meet this challenge. Smart, well- Hospital, the example of Busembatia is now designed PPPs can make a significant contribu- being used as a model. South Sudan is looking tion to fill this gap. to roll out a similar program in several of its The potential for PPPs in Africa is seemingly smaller urban centers. limitless relative to its current level. New oppor- tunities will arise as PPPs expand further into new sectors such as social services, tailor them- INFRASTRUCTURE selves to small and large projects, and appeal Wars and civil conflict have had a devastating to local or regional investors alongside larger, impact on African infrastructure, and increas- international players. In Africa, as in the rest ingly private investment has become part of of the world, PPPs can step in to help where the solution. the need is greatest. h IFC | 9 Photo © Frederic Role THE By John Kjorstad, Infrastructure Journal USUAL SUSPECTS Every infrastructure development project has its is domestically financed, with the central govern- Casablanca moment, when the authority shows ment budget being the main driver of invest- up and asks his men to “round up the usual ment. However, governments in the region are suspects.” increasingly seeing the need to bring new sources Instead of launching into a murder investigation, of funding to the table, and they understand the project managers are identifying and pricing wider benefits private capital might deliver in its risks—those dramatic complications that range public services. from mildly annoying construction delays to the Following the resource boom of the past decade, kind of catastrophic financial disasters that can there should be sufficient capital in Africa to destroy companies and ruin reputations. These support commercial infrastructure invest- unsavory characters keep managers, financiers, ments. Many countries in the region have seen and consultants up at night, because they know this potential increase and offer investors an that their entire careers might rest on seeing the attractive pipeline of growth opportunities for unforeseen and managing it appropriately. developing public-private partnerships (PPPs). Critically, however, most countries also lack a THE NEWEST GENRE significant track record. More countries operat- Mitigating risk is a key challenge in any country, ing privately-owned projects and concessions but across the African continent—with several are needed to instill confidence and ultimately rapidly emerging markets for infrastructure attract cheaper, more conservative international investment among its countries—it requires a capital. heightened sense of awareness. Private invest- All things being equal, African PPPs have to ment in Africa’s public infrastructure is grow- work harder to reach financial close than similar ing, but it still has significant maturing to do. projects in other parts of the world. While the Currently a large share of Africa’s infrastructure gap between the more mature markets in Aus- 10 | IFC.ORG/HANDSHAKE IJ INSIGHT tralia, Europe, and North America and those of Suddenly ECAs and DFIs were in the spotlight emerging markets is narrowing—and probably again, and developers hoped they could help is not as great as people might think­ —it clearly fill the finance gap left by the collapse of com- still exists for many investors seeking long-term mercial debt markets. This trend, along with the certainty. emergence of more local capital funding, is at the core of new research Infrastructure Journal and POLITICAL RISK IS THE VILLAIN the international law firm Baker & McKenzie This is where development finance institutions have just published. and foreign export credit agencies have a huge role to play in progressing African infrastructure. THE PLOT THICKENS In a line-up of the usual suspects, the more At the heart of the story is Africa. No longer sinister looking character is always political risk. plunged in Joseph Conrad’s darkness, the While Development Finance Institutions (DFIs) continent is evolving so fast that external finance and Export Credit Agencies (ECAs) offer a vari- professionals can’t keep up. According to IFC, ety of wider benefits (and often cheaper capital), PPPs in Sub-Saharan Africa have increased from no product or aspect of their involvement is a half a project a year between 1992-2001 to two perhaps more important to foreign private inves- projects a year from 2002-2010; around seven to tors than their ability to mitigate political risk. nine in 2011; and more than 30 in 2012. Investors do not want to be left on their own if Perhaps equally as telling is the migration of things go wrong. They want to know that these professionals. Traditionally, Africa’s indigenous important political institutions will stand behind talent might have left the continent seeking them and facilitate a reasonable resolution with attractive opportunities in the more mature the local government or authority should a chal- financial markets of Europe and North America. lenge need to be overcome. However, people interviewed for Infrastructure This increased emphasis on having DFIs and Journal’s report have commented on a reversal ECAs involved in international projects is that sees not only African executives returning important in the current banking climate. DFIs to the continent, but also native European and and ECAs have been supporting infrastructure North American professionals attracted to the investment for decades, but they’ve not always wide variety of development opportunities and been seen as essential. Eight years ago, interna- the region’s long-term growth potential. tional project finance banks aggressively operated What is unfolding in Africa is dramatic. in a competitive and liquid market where it was Although it is still not without turbulence, never widely believed that if a deal could be done, it has the continent’s future seemed so bright and could be sold on. However, as the market tight- optimistic. Private investment is happening in ened and syndication slowed, banks infrastructure, and it looks like the beginning became far more conservative. of a beautiful friendship. Just keep those usual suspects in check. h IFC | 11 COMPASS STEADY as she GROWS By Robbert van Eerd, World Bank Investment in African infrastructure was up 33 percent in 2012 compared to 2011, reversing a trend of decreasing investments. In 2006, the continent attracted almost $25 billion of investment, dwindling to $13.6 billion in 2011. Last year’s rebound brought investment back up to the ten-year average of about $18 billion, caused by a hike in the energy sector. Photo © Simon Davis/DFID, Construction in Addis Ababa, Ethiopia 12 | IFC.ORG/HANDSHAKE INVESTMENT IN AFRICAN INFRASTRUCTURE (1990-2012) 2012 US$ billions* Number of projects 30 60 25 50 20 40 15 30 10 20 5 10 0 0 1990 1995 2000 2005 2010 2012 Energy Telecom Transport Water & sewage Number of projects Source: World Bank & PPIAF, PPI Project Database *Adjusted by US CPI ENERGY subscribers—providers receiving investment in 2012 had over 700 million subscribers. Three Private investment in the energy sector reached new mobile providers emerged in 2012: Haatif $8.3 billion in 2012, reflecting financial close Telecom (Somalia), Smile Communications of 25 new projects, including those in Côte (Uganda), and Africell (Democratic Republic of d’Ivoire, Ghana, Kenya (2), Morocco, South Congo [DRC]). Africa (18), Uganda, and Zambia. Together they added a total of 3312 MW to the African energy grid (1076 MW in South Africa alone), at an TRANSPORT average cost of $2.5 million per megawatt. Close to $20 billion of private investment flowed into Africa’s transport sector since 1990: $14.5 TELECOM billion in seaport projects, $3.3 billion in rail- road projects, and the rest split between airports Telecom has seen huge growth across Africa. ($1.5 billion) and roads ($0.7 billion). Reflecting More than $50 billion was privately invested a decrease since 2006, only one transport deal between 1990 and 2012 through fixed, mobile, closed in 2012: the Blaise Diagne International and multi-service providers. The average Airport, a management contract in Dakar, telecom provider in Africa has 4.4 million Senegal. IFC | 13 WATER & SEWERAGE Water and sewerage in Africa has received $3.3 billion TOP COUNTRIES RECEIV- in investments since 1990. Activity was slow in the early ING INFRASTRUCTURE 1990s, at its peak during the boom years 2007-2008, but INVESTMENTS (1990-2012) then slowed as the global financial crisis settled in. Two large concessions closed in Egypt in 2010 and Algeria in 2009, worth $475 million and $468 million in invest- SOUTH AFRICA ments respectively. Of the total 44 projects, there were 28 GDP—$555 billion management and lease contracts, 13 greenfield projects, Population—53 million and two concessions. Investment—$47.6 billion TOP DEALS BY COUNTRY EGYPT (1990-2012) GDP—$519 billion Population—85 million The largest African countries, measured by their gross Investment—$26.7 billion domestic output, have attracted the lion’s share of invest- ments in private participation in infrastructure. South NIGERIA Africa, Egypt, Nigeria, and Algeria attracted 65 percent of investments in infrastructure since 1990—a combined GDP—$413 billion total of $158 billion. Population—177 million Investment—$34.1 billion It is useful to note that population does not drive invest- ment: Population-rich countries such as Ethiopia (87 ALGERIA million people), DRC (75 million), and Tanzania (46 million) have received little investment—$4 million, GDP—$237 billion $2.6 billion, and $5.1 billion respectively. Population—38 million Investment—$17.3 billion SPLITTING THE SPOILS MOROCCO Africa’s investment levels have remained fairly stable since GDP—$163 billion the global financial crisis, although investment in energy Population—33 million projects has picked up in recent years. Investments are Investment—$32.4 billion largely concentrated in a handful of countries, namely South Africa, Nigeria, and the large North African coun- tries. The other 48 countries received the remaining 35 percent of investment. h 14 | IFC.ORG/HANDSHAKE BY SUBREGION (1990-2012) N Total investments: 35% Number of projects: 9% E Total investments: 14% Number of projects: 31% W Total investments: 23% Number of projects: 32% C Total investments: 4% Number of projects: 12% S Total investments: 24% Number of projects: 16% North Africa Central Africa Southern Africa West Africa East Africa IFC | 15 Africa demands PERSPECTIVE Photo © Ryan Faas/istock, Serengeti Africa is an obvious public-private partnership Africa, only about $25 billion is being spent, (PPP) opportunity-in-waiting—the continent leaving a lot of opportunity. Public finance will boasts high demand, global goodwill, and strong resolve only a small part of this need. PPPs must government support. Money seems freely avail- play their part. able. The facts speak for themselves: SO MUCH GOOD WILL. SO MUCH NEED. While aid budgets are contracting globally, there Africa boasts 12 percent of the world population is increasing support to Sub-Saharan Africa. The and staggering riches in natural resources, yet G20, G8, World Economic Forum, and others produces only 1 percent of global GDP and 2 cry out for more investment in Africa generally percent of global trade. The lack of good infra- and more PPP initiatives specifically. structure hurts, increasing the cost of imports by 40 percent and reducing business productivity by 40 percent. Of the $93 billion needed annu- SO MUCH RHETORIC. ally for infrastructure investment in Sub-Saharan Every development conference and private investment forum seems to focus on Africa as the 16 | IFC.ORG/HANDSHAKE GOVERNANCE By Jeff Delmon, World Bank place aid money should be spent and the next ect, like a good marriage, takes time and effort; dollar can be made. Heads of state and develop- trying to do things quickly and easily tends to ment institutions give lip service to the role of lead to failure. PPPs in solving every woe: lagging growth, insuf- ficient jobs, and poor infrastructure. SO MUCH GOOD WILL. Donors and companies both chase projects, SO MUCH CAPITAL. tripping over each other to “support” promising Aid money isn’t the only asset being drawn to initiatives, as each vow to show (often unrealis- the continent. As one of the world’s fastest grow- tic) results. Government officials tend to buy the ing economic hubs, as money flees from Europe pitch, but the high sticker price, or the demands and continues to stagnate in the U.S., Africa is for a blanket guarantee, lack of financing, or just getting more and more attention. inability to deliver overwhelms those hopes. And Each of the elements listed above, which should in chasing the smoke and mirrors, governments spell success for PPP in Africa, also work against often sow confusion—contracting agencies don’t it. Here’s the flip side: know whether to develop projects or wait for the illusory promises to bear fruit. Real oppor- tunities are left to wither on the vine, and good SO MUCH NEED. investors watch in dismay, unwilling to enter the The investment requirements are massive. This fray, or frustrated by real projects taken away at leads governments to expect too much from a late hour by governments wanting to go faster. PPPs and at the same time to seek something fast The lure of “standard gauge railways” in East and easy. But PPPs are neither. A good PPP proj- Africa is a case in point. Somehow governments IFC | 17 were convinced that the meter-gauge rail that temptation to spend future revenues, under- they currently have is backwards, even though mines the good work done to focus on efficiency Japan, most of India, and much of Australia run through PPPs. on meter gauge. Instead of investing in improv- ing and expanding their existing rail system, and But this “disappointment” should be seen rela- investing in standard gauge only down the line tive to the circumstances. PPPs have been used (pun intended), these governments are looking in different countries to do some good things: to to invest many times the amount in develop- attract investment and efficiencies, for example, ing new standard gauge rail for questionable and to help guide public sector reforms. Where benefits to the detriment of other solutions. Real PPP solutions have flourished, governments investors and government staff dare not propose have invested time and effort. It has never been anything else. a quick fix or an easy solution. Chile spent 30 But governments should know better, as these years developing its PPP program; the U.K. took fanciful promises rarely work out; and the a decade just to get things moving; and India private sector should know better, for a project struggled through a number of failures, over- obtained in such a manner is intrinsically vulner- priced projects, and frustrations before gaining able to claims of bias or corruption, to questions momentum in PPPs. of legitimacy. And yet we look to Sub-Saharan Africa, where resources and skills are most limited, and expect PPPs to blossom overnight. Maybe our expecta- SO MUCH RHETORIC. tions need to be realigned. The shoots of progress Governments love to talk big about PPPs, but emerging in Ghana, Ivory Coast, Kenya, Nigeria, without much willingness to spend. Rarely do Senegal, and Tanzania should give us hope for they take the time to do it well, and as a result, the future. We should quit looking backwards at misunderstandings about the mechanics of PPPs unrealized and unrealistic expectations, and put persist. our hands back to the plow. There is work to be done. h SO MUCH CAPITAL. The money spent chasing investments in Africa, and the capital chasing commodities, is a vicious distraction. This promise of easy money (in par- ticular in new oil and gas countries like Ghana, Mozambique, Tanzania, and Uganda), and the 18 | IFC.ORG/HANDSHAKE NOTES FROM NGOZI “ Look at what is happening to Africa in the midst of global uncertainty. It’s not a fluke. For almost a decade, the con- tinent’s economy has been growing at close to 5 percent at a time of real global fragility. African policymakers, finally, are putting in place good economic policies and sound macroeconomic management. And throughout the crisis, they did not roll back these policies. The lessons have been learned. ” Excerpted from Foreign Policy’s “Epiphanies from Ngozi Okonjo-Iweala,” March/April 2013. NIGERIA’S PLAN FOR POWER In this CNN interview, Ngozi Okonjo-Iweala, Nigeria’s Minister of Finance, outlines what the government must do to support expansion of the power sector and make access to power achievable for all Nigerians. Photo © Jori Klein/Acumen Fund IFC | 19 OPENbudgets ONE’s push for budget transparency minds to transform Africa Photo © Stuart Isett/Fortune Brainstorm Green Michael Elliott is the President and Chief Executive Officer of ONE. He also serves as Vice Chair of the World Economic Forum’s Global Agenda Council on Pov- erty and Sustainable Development. Prior to joining ONE, Elliott served as Editor of TIME International and was on staff at The Economist, where he served as Politi- cal Editor, Washington Bureau Chief, and founding author of both the “Bagehot” and “Lexington” columns. Here, he talks to Handshake about how open budgets in Africa shape social progress and can transform civil and business engagement. Interview by Alison Buckholtz 20 | IFC.ORG/HANDSHAKE INTERVIEW tries produce are not made public. Making For African citizens who are not public eight key budget documents, including following their government’s the Executive’s Budget Proposal, the Enacted Budget, an audit report, and a citizen’s budget, activities, what can be gained by would provide a solid base for increasing budget greater engagement with their transparency, and allow citizens to get involved. country’s budget? What form should this engagement take? An informed citizenry A country’s budget not only accounts for its resources, but also outlines its priorities. When is the most important citizens engage with their country’s budget pro- tool for social progress. cess, their participation can ensure that country budgets are aligned with their preferences. Citizens’ budgets—a budget document created In the longer term, making budget information specifically for the public—simplify the com- available online in open, accessible databases will plex bureaucratic process, and make it easier not only provide data about what governments for citizens to understand how much money is are spending, but will enable citizens’ groups to going to, for example, healthcare in their district. track what resources are available, how they are This naturally brings the conversation around to spent, and what results they contribute to. the results the government achieves. What are Armed with that data, citizens will be able to citizens getting for the money their government follow the money and hold governments to invests on their behalf? account for the results they see (or don’t see) in their communities. Which fiscal transparency reforms in Africa do you find the most What sort of business opportuni- promising in the short-term? ties may come to Africa if there Which longer-term reforms do you is an enhanced degree of budget hold out hope for? transparency? There is a very simple way to make African The availability of basic budget information budgets more transparent, quickly and cheaply. is important not only to citizens, but also to Many of the key budget documents that coun- companies that want to conduct business. IFC | 21 Opening up the budget process is an important Citizens are notified via SMS about upcoming part of improving governance and making coun- budget meetings, and the results of the meet- tries more attractive to business, and increasing ing afterward. In Ibanda, this increase in civic investor confidence. participation resulted in a 16-fold increase in tax compliance. South Kivu is also experiment- ing with voting via mobile, which is preferred What are citizens get- by 100 percent of citizens to in-person voting. ting for the money Mobile access is not a silver bullet. More broadly, while technology can boost transpar- their government ency, and transparency can empower people invests on their behalf? with information, political change is often slow and unpredictable. Businesses are more likely to invest in countries they know to be financially stable, and their How do the priorities outlined in a investment can provide countries with necessary tax revenue, increasing investment in key sec- government budget shape a coun- tors including health, agriculture, and poverty try’s social progress? Can you give alleviation. an example of this interplay? The budget is the document through which a government’s priorities are funded and imple- How will wider access to mobile mented, and should take into account the needs technology push budget transpar- of citizens. However, sometimes the priorities of ency forward in Africa in the com- citizens are ignored. In these cases, citizens need ing years? data to advocate for change and ensure that their government’s budget reflects their needs. We all know access to mobile technology is An example is South Africa’s HIV/AIDS budget. growing in Africa at an exponential rate. The When the South African government refused to resulting innovations are changing the way we increase funding for HIV/AIDS treatment, the think about participation. For example, in South Treatment Action Campaign took them to court Kivu, a province in the Democratic Republic of and proved that health departments had under- Congo, a pilot participatory budgeting program spent their budgets. Courts ruled that based is giving citizens a voice in government, result- on budget documents, resources were available ing in increased tax revenues and compliance. 22 | IFC.ORG/HANDSHAKE for the programs and changes were made to the budget. South Africa now has the world’s most comprehensive HIV/AIDS treatment and pre- vention program, providing free anti-retroviral drugs to over 2 million people. OPEN BUDGETS An informed citizenry is the most important tool TRANSFORM LIVES. for social progress. Opening budget processes gives citizens the information they need to hold their governments to account for the decisions that are made on their behalf. h Open budgets can expose $ corruption and lead to more efficient and effective government spending. Open budgets help match national resources with national priorities. Open budgets support government efforts to 5 QUESTIONS IN 5 MINUTES: manage debt. Open budgets help gov- ernments secure cheaper international credit. Open budgets can help governments build trust with their citizens and give citizens voice and dignity. Interview with Michael Elliot IFC | 23 GOVERNANCE gameCHANGER Mo Ibrahim’s Index redefines leadership in Africa Established in 2007, the Ibrahim Index of African Governance (IIAG) assesses governance performance in Africa. Consisting of 94 indicators calculated using data from 32 independent sources, the annual IIAG is the most comprehensive collection of data on African governance. The IIAG aims to provide: • A framework for stakeholders to assess the delivery of public goods and services, and policy outcomes, in every African country. • A tool with which to govern, highlighting continental, regional, national, and thematic Photo © Mo Ibrahim Foundation governance results. “ we are looking for people We are looking not just for a job done... changing the course of the country. ” —Mo Ibrahim, founder of the Ibrahim Index of African Governance 24 | IFC.ORG/HANDSHAKE IBRAHIM INDEX OF AFRICAN GOVERNANCE THE DATA ARE CLASSIFIED WITHIN FOUR CATEGORIES: (NUMBER OF COUNTRIES WITH IMPROVED SCORES 2006-2013) SAFETY & SUSTAINABLE RULE OF LAW Includes rule of law, 19 ECONOMIC OPPORTUNITY 38 accountability, personal countries Includes public man- countries safety, and national improved agement, business improved security. environment, infra- structure, and rural sector. HUMAN PARTICIPATION & DEVELOPMENT 47 HUMAN RIGHTS 28 Includes welfare, Includes participation, education, and countries rights, and gender countries health. improved equity. improved 2013 IIAG, COUNTRY & RANK | SCORES /100 MAURITIUS | 1ST/52 WATCH THE BBC HARDTALK 82.9 Safety & Rule of Law | 86.8 Participation & Human Rights | 76.7 Mo Ibrahim on the dearth Sustainable Economic Opportunity | 79.7 of African leadership, the Human Development | 88.5 prize for achievement, and how to attract political innovators. SWAZILAND | 26TH/52 Safety & Rule of Law | 59.5 50.8 Participation & Human Rights | 30.1 Sustainable Economic Opportunity | 49.3 Human Development | 64.3 Since its creation, the prize has been awarded three times: in 2007, 2008, and 2011. The SOMALIA | 52ND/52 2013 prize was not awarded. Safety & Rule of Law | 4.9 8 Participation & Human Rights | 11.5 Sustainable Economic Opportunity | 2.3 Human Development | 13.1 IFC | 25 SMART INVESTING in Africa By Andrew Alli, Africa Finance Corporation Photo © Cedric Favero Azito Power Plant, Côte d’Ivoire 26 | IFC.ORG/HANDSHAKE INVESTORS Investors worldwide recognize the potential for investments in Africa, especially through public-private partnership (PPP) structures. But taking advantage of these opportunities requires a proper understanding of the risks—and how they can be mitigated—to optimize the project’s invest- ment return and development impact. The Africa Finance Corporation (AFC), through its active involvement on the continent as a project investor, financier, and developer, has participated in a number of notable PPP projects and learned valuable lessons along the way. “TOO GOOD TO BE TRUE” contracts all across the continent have been rene- gotiated. These “creeping expropriations” often PROBABLY IS arise because governments are not as skilled or as For many investors, especially those new to the experienced in negotiating such agreements as dynamics of working in Africa, political risk their counterparts and cannot afford the advisors remains a big cause for concern. With many that will best assist them. Corruption is also the politically fragile states on the continent, the culprit in some cases. apprehension is often justified. But the reality is Investors can mitigate this risk by avoiding that the most worrisome political risks do not projects with concessions that are too good relate to political violence or forced expropria- to be true—especially those that have either tion, which concern many people, but rather emerged from less than transparent processes, to unfavorable renegotiation of contract terms or were awarded on a discretionary basis. The (“creeping expropriation”). downside to such one-sided concessions is that For example, during the decade of civil unrest they are often scrutinized after the fact, and in Côte d’Ivoire, well balanced and structured withdrawn or renegotiated by new governments projects such as the Azito power project contin- or administrations. ued to perform well. In contrast, many mining IFC | 27 IMMATURE MARKETS to be, while not properly accounting for real risks that could affect the project’s outcome. REQUIRE STRONG PARTNERS Pairing a young country with mature advisors RISK PROFILES ARE AS VARIED and experienced private sector partners makes all the difference to a successful project. Côte AS BORDERS d’Ivoire’s Henri Konan Bedie Bridge reached New investors and analysts outside the continent financial close in 2012 after 14 years under often see Africa as one country, making the mis- development, surviving two periods of civil take of thinking that the same risk profile applies unrest. In this case, the government partnered throughout the continent and across projects. with Bouygues S.A., funded by international This is not the case. financiers and partly arranged by AFC. Having Risks differ from one country to another and a strong sponsor to navigate the local environ- from one project to another, given the differ- ment was crucial to the project’s success. ences in policies, structure of government, level Strong partners and financiers can also withstand of reforms and development, and physical and the financial ups and downs that sometimes human capacity. It is important to develop occur in the African business environment, and different structures and solutions to mitigate the experience gives them a nuanced understanding specific risks identified in each market and for of real project risks. Lacking this understand- every project. ing, projects may be over-engineered to protect There is also often a temptation to adopt foreign against risks that are very unlikely to crystallize. templates and assumptions that are not realistic This makes them more expensive than they need in the local environment and to apply those templates across all African markets and proj- ects. For example, while it may be acceptable to apply higher leverage ratios (80:20/90:10) in Avoid projects with concessions more mature and advanced countries, this may that are too good to be true— not necessarily be sensible in the local environ- ment, where larger equity cushions may improve especially those that have either project outcomes. emerged from less than transpar- In evaluating project assumptions, it is impor- ent processes, or those awarded tant to ensure that project fundamentals are on a discretionary basis. clear to all. For example, in a power project, the off-taker and fuel supplier should be known in 28 | IFC.ORG/HANDSHAKE advance and their ability to meet their obliga- tions under the agreements be well established. Projects are often over-engi- Valuation and cost competitiveness is also critical, neered to protect against risks as overpaying for an asset is a painful and that are very unlikely to crystal- usually irreversible error. lize, making them more expen- sive than they need to be. KEEP INNOVATING The uniqueness of the challenges and risks on the continent requires innovation in approach- ing and evaluating PPP projects. This is particu- cost. In addressing this problem, AFC and the larly true with respect to financial products. For Dutch DFI, FMO, recently launched a $15 example, while AFC is focused on a few key sec- million project development facility aimed at tors (natural resources, transport infrastructure, providing early stage capital to projects in order telecoms, power, and heavy industries), it offers for them to become bankable. a broad range of financial products and services In addition, AFC provides tenor extension facili- that allows participation across the spectrum ties aimed at providing longer tenored financing of the capital structure. Other financiers with a for projects that most domestic banking institu- more limited set of offerings can find it difficult tions are unable to provide due to statutory and to meet the needs of these varied projects. regulatory requirements. These products—in addition to other key services like technical and STAY FLEXIBLE financial advisory, mezzanine, and acquisition finance—have been central to AFC’s success on There are over 20 development finance institu- the continent. h tions (DFIs) operating in Africa, and the evolu- tion of the banking sector and financial markets has made debt financing relatively easily acces- sible. However, two things are lacking. There is a paucity of well-structured projects that are bankable, and too little access to long tenored financing. Sponsors very often underestimate the resources required to develop their projects, which can be as high as five to ten percent of the total project IFC | 29 matchmaker, matchmaker By Jeff Delmon, World Bank I still remember my first break-up. Flash back doing as much as possible in-house. Sub-Saharan to eighth grade, where Katie, a cute strawberry Africa suffers from a distinct lack of understand- blonde with dimples, utters the classic break- ing about what it takes to bring a good public- up line in the school hallway: “It’s not you, it’s private partnership (PPP) project to market. me”­ —followed by some explanation about how she is not ready for a relationship, blah, blah, blah. How is this supposed to help me? A-COURTING WE WILL GO To complicate matters, Sub-Saharan African Flash forward thirty years (give or take a decade) government officials receive a constant stream of as I attend meetings where lenders to infrastruc- visits from foreign governments and company ture in Sub-Saharan Africa insist that the money delegations promising fast, cheap results if they is there, the capital is available, but the projects could only have an exclusivity agreement for are not. The government is not doing its part. some large infrastructure project. These rarely They say, “It’s not me, it’s you!” Ouch, that is work out, but they seem to be far too tempting an even worse break-up line. for Sub-Saharan African governments short on But is it true? Is the capital really there? time and cash. To add to the misery, new recent First, to agree with the lenders, the projects are natural resource finds in various countries (in there, but they are not well prepared. There are particular Ghana, Mozambique, Tanzania, and a number of reasons for this, which are discussed Uganda) distract even further from the economy in more detail in the article “Africa demands and efficiency sought from PPP. transparency” on page 16. Basically, governments Now to the question of available capital. There around the world tend to look for the fast, cheap seem to be a number of challenges remaining, way to bring projects to market, which means and it may be a little early to declare a job well 30 | IFC.ORG/HANDSHAKE MONEY TALKS done. Local currency markets are anemic and export credit agencies (like US Exim and China distracted by property development at the riskier Exim). The need for heavy structuring is not end of the spectrum, and treasuries at the safe specific to Sub-Saharan Africa, nor is it a critical end. The interest rates on local debt tend to be problem. But it translates into greater time, cost, high, tenors short, grace periods elusive, and and complexity invested in mobilizing capital. It capacity limited. Except in a few key countries also imposes a major caveat on the claim that the (for example, Kenya and Nigeria), attracting “capital is available.” local finance for PPP can be an arduous affair. Foreign exchange risk. This is a problem in any But then when lenders claim that capital is avail- country where local financial markets or hedg- able, they are probably not talking about local ing markets cannot convert the local currency currency. Capital in the global currencies has revenues into foreign capital to repay debt. The many of the characteristics needed for financing debt exposure and extensive fiscal constraints in PPPs: long tenors (12 years plus), grace periods, much of Sub-Saharan Africa impedes the ability high liquidity, and bankers thoroughly experi- to manage foreign exchange risk exposure. (West enced in PPP and limited recourse financing. Africa, with its common currency pegged to the Euro, escapes much of this complexity.) TYING THE KNOT Global banks lack experience in infrastructure in Africa outside of commodities deals with There are also significant challenges to making higher profits, forex revenues, and lower risk. this match, such as: This is for the very good reason that few such Risk aversity. Like it or not, global capital deals have been done in Sub-Saharan Africa. But marches to a different tune. Compared with flying bankers in from Europe and the U.S.— local financial markets, it is generally more bankers with experience in developed countries, familiar with investment grade lending into rather than in Africa itself—creates its own countries with reliable legal systems and rela- challenges. tively robust secondary markets for those assets. My point is simple: the statement “the capital In Sub-Saharan Africa, government credit is available, but the projects are not,” while ratings are low (below investment grade), and displaying an impressive bravado, is not entirely subsovereign, public utilities that act as project accurate, and not at all helpful. We all have a lot counterparts are often insolvent. Credit concerns of work to do to get African PPPs moving, from can be addressed through financial engineering both public and private sides. There will be time (including escrow accounts, letters of credit, for pointing fingers later, once the job is done. stand-by capital, and natural resource rights), lending from development financiers (like IFC, And Katie, if you are out there, you were wrong. FMO, and DBSA), and credit enhancement It was me. h from IFIs (like the World Bank and MIGA) and IFC | 31 SOVEREIGN WEALTH FUNDS Infrastructure investment goes international Photo © Erwin, Abuja, Nigeria By Richard Eckrich, Russian Direct Investment Fund From an investor’s point of view, the big- areas such as transport, healthcare, and educa- gest risk in PPP bid participation is often not tion. This is part of a growing trend in emerging competing bidders, but rather the process markets to expand social benefits, as there is a failing to reach a conclusion. For this reason, recognition that these benefits are vital to sup- investment committees sometimes regard port economic growth. Some SWFs are taking PPP bid participation as a form of venture leadership roles in the development of these new capital investing. With sovereign wealth capital structures. funds now investing directly in infrastruc- In Russia, this trend is supported by the Russian ture as cornerstone investors, co-investors, Direct Investment Fund (RDIF), and is capital- and lenders, these funds play a key role in ized with $10 billion. RDIF was established in mitigating risk, and can provide a major June 2011 to make investments, primarily in boost to future PPP programs in Africa. the Russian Federation, and act as a catalyst for By nature, sovereign wealth funds (SWFs) are direct investment into the Russian economy. The trusted partners of sponsor governments and fund invests alongside qualified foreign investors. international investors, have top-level political support, and employ private equity and industry EXPERIENCE & EXPERTISE specialists. State agencies are increasingly look- In developing PPPs and private infrastructure, ing to new capital structures to meet needs best Russia has the advantage of being among the suited for long-term investors—especially in top emerging markets for private infrastructure 32 | IFC.ORG/HANDSHAKE INVESTORS ownership/investment. Russia has a successful • the PPP bid process, preferred bidder track record in privatizations and sector reform, selection, and project implementation along with several significant PPPs that reached all follow best practices. financial close. However, Russia’s PPP program has had growing pains, in part due to the 2008 In Africa, Nigeria is supporting infrastructure financial crisis. development through the newly established Nigeria Sovereign Investment Authority (NSIA). Having gained experience, the Russian govern- Nigeria’s GDP is growing at 8 percent, and is ment is now embarking on a new wave of PPPs successfully diversifying its economy through for major roadways, bridges, rail, ports, and industrialization, agriculture, and a rapidly other vital infrastructure. The need for such developing consumer sector. Having recently assets is acute. Russia’s per capita road density privatized its power industry, Nigeria attracted is one-fourth that of some developed markets, strong interest from regional and international and Russia’s rail sector carries over 80 percent infrastructure investors. of industrial production. And, while the recent focus by investors has been electricity, Nigeria is in urgent need of expanded APPLYING SOLUTIONS infrastructure for highways, rail, water, health- Unsuccessful PPP programs in emerging markets care, and agriculture supply chain infrastructure. often follow a similar pattern: an initial PPP NSIA will play a major role in supporting PPP program is attempted, the project does not reach development by providing investment platforms financial close for a variety of reasons, and the to promote investment, economic growth, PPP program needs to be restarted. The restarted and help the government fulfill its vital social program is then considered a risk among inves- responsibilities. tors. This uncertainty is priced into the revived The potential for African governments to utilize program or results in lack of bidder interest. State-sponsored investment funds to support In the upcoming Russia PPPs, RDIF will play a PPP programs is great, especially in markets in key role as an investor. RDIF’s participation in a which investors may attach a high risk premium. PPP bid is intended to signal to the market that: There is also the potential for SWFs in different regions to cooperate, co-invest, and help bring • the project is vital to the Russian global expertise. For the African infrastructure economy and has strong support; market, SWFs have the benefit of being able • uncertainty in the process is greatly to reduce project risk, lower financing cost, mitigated; and and enhance the overall project structure for investors and the public. h IFC | 33 the road AHEAD By Julius Ngonga, Ernst & Young Foreign aid has been a part of the African landscape for as long as most of us can remember. While these donor funds have saved lives during and after crises and funded critical infrastructure, many would argue that aid has also skewed incentives and created a crutch of dependence. But this seemingly entrenched paradigm has begun a slow shift. This change can in part be linked to the Paris Declaration on Aid Effec- tiveness (2005), which called for national ownership of policies and pro- grams supported through aid, and better coordination of the jumbled maze of external assistance. Supporting this, the United Nations Development Programme recommended aligning donor programs with national priorities and strengthening local implementation capacity. Better donor coordination seems to have followed, led by the creation of various multi-donor facilities. In addition to better coordination, new approaches in aid are emerging. Donors are increasingly responding to the growth of the private sector by offering programs to enhance the private sector business environ- ment, and also through more innovative funding mechanisms such as: • the provision of seed funding for early-stage private sector companies; • direct lending or equity investment to infrastructure projects; and • leveraging local financial institution participation by taking first loss positions in guarantee structures. Photo © Peeter Viisimaa/istock, North Togo 34 | IFC.ORG/HANDSHAKE DONORS CHINA’S EMERGENCE The change in the role of traditional donors is also a result of China’s emergence as a significant player in Africa. As a result of drastically increased bilateral funding, Chinese companies are now involved in infrastructure projects across the continent that until recently were the preserve of Western countries and companies. But Western countries, recognizing the need to stay agile to safeguard their long-term interests and share of trade in Africa, are now offering more tailored and innova- tive funding mechanisms and focusing on somewhat neglected areas such as climate change and gender reform. In 2010, China committed $9 billion to Africa’s infra- structure growth (up from $7 billion in 2006). This includes: • non-concessional development finance from China Development Bank; • equity finance to ventures launched or backed by Chinese enterprises from the China-Africa Development Fund; and • export credits, concessional loans, and guarantees from China Exim Bank. As the donor paradigm evolves to fit the times, foreign aid—and trade—will reshape itself accordingly. With the desire to affect change comes the certainty that approaches, too, will continue to change. IFC | 35 DONOR CASE STUDY: DFID By Radhika Dil, DFID Like the unique countries that make up Africa, ing at what its offering to developing countries views vary on where Africa is headed, what is should be, and how best it can reflect countries’ changing, and what is driving change. But we ability to self-finance out of poverty. It will also agree on one thing: Africa is changing, and look at instruments to unlock U.K. expertise and with it, what we do as development partners continue to invest in the multilateral system— needs to change too. The U.K.’s Department for with a strong link to performance. DFID will International Development, or DFID, is looking continue to strengthen its commercial exper- at a renewed focus on economic development, tise—and use innovative delivery mechanisms refocusing its development program to help such as results-based financing and public-pri- create more jobs and strengthen governance and vate partnerships. Working in new ways includes international institutions, while working with continued work to improve the transparency of new partners and in new ways. aid spending and a focus on impact. DFID is also rebalancing its investments toward inclusive economic development, strengthen- CHANGING DEMOGRAPHICS ing institutions and governance, unlocking the The emergence of the African middle class is potential of girls and women, and mainstream- becoming a force for positive social and eco- ing climate and conflict programming. It is look- nomic change. Many of the world’s poor no lon- 36 | IFC.ORG/HANDSHAKE Photo © Dan Kori, Nairobi, Kenya ger live in the poorest countries. China and India This is built around supporting labor-intensive have already shown us how difficult it can be to activities and sectors that will generate the most eradicate poverty despite economic growth— productive jobs, promoting diversification Ghana and Nigeria face the same challenge. of economies to create inclusive growth, and By 2030 more Africans will live in urban than in strengthening export sectors to create deep and rural areas, and in the next 30 years there will be durable long-term markets. an unprecedented level of working age people. DFID also supports the institutional and The spread of mobile phones has revolution- political arrangements that facilitate growth. A ized information access and is transforming continued focus on transparency, rule of law, and what people know, who they know, what they a political settlement that can deliver long-term do, and how they do it. Accompanying these growth will help ensure that African citizens ben- demographic changes, new stakeholders, such as efit from growth and the country’s wealth is not private investors, foundations, philanthropists, appropriated by a few. and most importantly emerging donors like Brazil, China, and India, have changed the map of Africa’s development relationships. PLUS ÇA CHANGE It is important to stress that a new role doesn’t There are also new threats. Climate change mean everything changes. Many donor inter- is perhaps the biggest one, and threatens to ventions have been fantastically successful at reverse the development gains in many countries reducing poverty and saving lives and much of by making infrastructure unusable, established this work will continue. This includes humani- agriculture unsuitable, and exposing populations tarian interventions in conflict and natural to increased threats of droughts and famines. disasters. But here too, we are stepping up our Traditional partners, such as DFID, must take game: new innovation and technology is helping account of the new demographics and new us target, manage, and deliver assistance better. threats. This will allow the development commu- There is an increased focus on building resilience nity to make a lasting difference in Africa. to shocks, consolidating peace, and supporting recovery to reduce the likelihood of slipping SCALING UP back into conflict. In response to the new landscape, DFID has Traditional development partners have many an increased focus on Africa’s “development decades of development efforts to learn from as frontier”—the less developed and fragile coun- we tailor our offerings in response to the chang- tries as well as the poorer populations in more ing needs of Africa. We will continue to learn developed countries. We are also scaling up work from the past, even as the new role for donors on economic development for poverty reduction. in Africa changes with the times. IFC | 37 DONOR CASE STUDY: KfW in UGANDA By Maximilian Heyde, KfW THE DONOR THE APPROACH KfW, a German government-owned develop- KfW is undertaking additional activities in the ment bank, is active throughout the power sector sector—some with the potential to change the in Uganda, focusing mostly on putting together paradigm for donor support throughout the a renewable energy fit in tariff program. As part region. In one case, KfW is providing assistance of this program, KfW has made funding avail- to one of the isolated power grids in the West able to potential private sector players to top up Nile Region and helping UEGCL, the national the tariff at which they sell power to UETCL, power generation company, launch several other Uganda’s national transmission company and the projects in remote areas. IFC and KfW are work- buyer of all power in the country. Depending ing together to meet this goal. Specifically, KfW on technology, this amounts to about $0.02 has provided funding to buy down the capital per kilowatt hour (KWh) in addition to what cost of a mini hydro scheme in the West Nile it receives from UETCL, which is supposed region; with KfW funds, UEGCL hired IFC to incentivize private sector power players to to advise on how to structure the mini hydro come and develop renewable energy projects transaction and attract private sector partners. in Uganda. Given that the hydro power scheme is located in an area that is not served by the national grid, 38 | IFC.ORG/HANDSHAKE THE DETAILS The GET FiT initiative combines: • access to World Bank partial risk guarantees to mitigate the payment risk of the off-taker; • a Deutsche Bank-led renew- able energy financing facility to offer private developers much-needed access to debt and equity instruments at Photo © linbeek/istock, Nalubaale Power Station, Uganda reasonable rates; and • the GET Fit Premium Payment Mechanism, used the commercial aspects of the project on its to top-up the traditionally own would not be likely to attract private sector low feed-in tariffs that have financing. However, the capital buy down makes undermined the financial the opportunity viable and serves as a way to sustainability of renewable incentivize the private sector to address the energy projects. The pay- critical power situation in an underserved ment mechanism allows area of the country. developers of small-scale renewable energy projects to THE RESULTS earn an adequate return on Ultimately, the Government of Uganda, the investment, rendering the Electricity Regulatory Agency, KfW, and projects financially viable. Deutsche Bank developed GET FiT to support 15 new generation projects with a total installed capacity of roughly 125 megawatts. The GET FiT initiative will increase generation capacity in Contact: secretariat@getfit-uganda.org Website: www.getfit-uganda.org Uganda by 20 percent, giving an additional 1.2 million people access to electric power. IFC | 39 DONOR CASE STUDY: Norad in LIBERIA By John Leber, IFC THE DONOR power to some parts of Monrovia. In 2007, with 2 MW of imported generators, LEC was revived The Liberian conflict, which lasted nearly 14 and started commercial operation with 450 years and ended in 2003, left the country in customers and a row of street lights for the first economic ruin and its infrastructure devas- time since the war. Since then, the generation tated. The country’s prior generation capacity capacity has been increased to 10 MW and the of approximately 180 megawatts (MW) and transmission and distribution network has been accompanying distribution network were totally expanded. But differing donor objectives and lost, and as a result commercial electricity ser- procurement procedures were hampering prog- vices in the country were non-existent. LEC, the ress. The government was becoming increasingly state power company, had no infrastructure, no eager to speed up the process by introducing fuel source, and no customers. private sector investment and expertise. THE APPROACH THE RESULTS In July 2006, an international donor group for- Led by the Government of Norway, donors used mulated an Emergency Power Program to restore a highly innovative approach to support this 40 | IFC.ORG/HANDSHAKE THE DETAILS The management contract acts as a framework agreement among the operator, the gov- ernment, LEC, and donors by: • referencing bilateral agree- ments between the donors and the government; • requiring donors to define the annual funding amounts; • defining procedures to Photo © Travis Lupick, Monrovia Power, Liberia manage the flow of donor funds to investments by the operator; and project. By pooling funds, and tying their use to performance parameters already established • requiring the operator to in the management contract, donors gave the prepare a master plan and flexibility to the management contract opera- an annual investment plan tor to use the funds when and how it felt most that describes how they effective. intend to use the donor funding. This contrasts with a typical bilateral approach, whereby donors engage in discrete investments (usually purchasing equipment or construction), without coordination or integration with other donors. This approach often leads to suboptimal investments, since decisions are taken absent of considerations related to performance outcomes. h IFC | 41 Africa’s needs transform donors’ role By Donald Kaberuka, African Development Bank Photo ©Andy Kristian Agabs/Gates Foundation, Uganda rice farm Donald Kaberuka, President of the African Development Bank, was recently in the U.S. for an award ceremony at the U.S. Treasury. In this article for Handshake, he touches on the irony of winning for a project on traditional aid in an environment that celebrates innova- tive approaches, and expands on the ways aid to Africa has been transformed in an era of private investment. 42 | IFC.ORG/HANDSHAKE DONORS There is a massive change in outlook across the that men and women receive equal opportuni- African continent. The emphasis is on what we ties so that each can play their part in building can do with Africa, not what we can do for it. the prosperity of their nations. We know that in Given all the talk about new approaches to aid places where there is conflict, women and girls which mobilize private investment, was it not suffer disproportionately, so the issue of gender ironic that the reason for my visit to D.C. was is central to inclusive development. to celebrate traditional aid, as administered by the Multilateral Development Banks through their concessional windows, such as the African The emphasis is on what Development Fund (ADF) and the International Development Association (IDA)? Indeed, the we can do with Africa, African Development Bank came to the podium twice at the U.S. Treasury ceremony to receive not what we can do for it. awards for what the ADF does in fragile states, and for what it does to increase farmers’ produc- tivity and incomes. We are impacting people’s The second project, in Uganda, represented lives in meaningful and lasting ways, and the two our commitment to empower rural farmers by winning projects were perfect examples of what enabling them to increase their incomes. We do was being achieved. this by providing public goods and opportunities to help them move up the value chains, however modestly, and to lessen the dependence on aid EQUAL OPPORTUNITIES and handouts. The first project, in Côte d’Ivoire, represented The results were plain for all to see. Across 26 our commitment to gender equality, to inclu- districts of eastern and central Uganda, thou- sion, and to fragile states. The transformation of sands of kilometers of roads were built, rural Africa requires that no one is left behind, and IFC | 43 markets were established, and units of agro- mobilize additional resources for it, while saying processing production were built, from coffee that we should be focusing on trade and invest- and rice hullers, to maize mills and milk coolers. ments? My answer is simple. We are proud of The rise in farm-gate prices was as astounding as what we are achieving. The two projects show it was quantifiable: the price for cassava went up that aid money can be very effective, especially two-and-a-half times, maize 20 times, milk four (as in the Uganda project) when it frees the times, bananas two times. Travel costs and times recipient from aid dependence. It enables people involved in taking produce to market were cut in to step up and step out, or to “graduate.” half, and post-harvest losses were cut by a fifth. This ties in with my fundamental belief that the time is ripe for what we should call “smart aid,” which leverages further resources from the private sector, remedying social ills but also The time is ripe for “smart paving the way for graduation. The concept of aid.” The concept of aid aid as a closed envelope has come to a close. We need to be less doctrinaire, and to rise above the as a closed envelope has tendency to answer modern problems by asking come to a close. old questions and using old tools. If we can do that, Africa will continue to “graduate” from being part of the global challenge to being part of the global solution. h This project strengthened my belief in several things. First, in how relatively small investments can generate very large returns. Second, in how international institutions working together (in this case we worked with the International Fund for Agricultural Development), each in their field of comparative strength, yields a superior result. Third, in how infrastructure is critically important for agricultural development. AID AND TRADE Was it ironic that we were celebrating the work Photo © Benedikt von Loebell of the ADF (an aid instrument) and seeking to Donald Kaberuka, President, African Development Bank 44 | IFC.ORG/HANDSHAKE SMART AID: THE SPECIFICS We know the financing gap for African infrastruc- ture, put at about $50 billion a year, cannot be funded purely through public resources. The first task is to take advantage of the strong cycle of commodity prices, and to manage natural resources wisely to fund infrastructure. That is why the G8’s trade, tax, and transparency agenda is so important. Second, we must bring in the private sector. The African telecommunications revolution of the 1990s was largely driven by private funding, after sector deregulation showed what was possible. In the energy sector, the reforms are in place, and it awaits private capital. Our challenge is to make that possible. For each dollar we loan, we are able to leverage up to six more. I was in Dakar recently to see a cluster —a toll road, an airport, a of infrastructure projects­ power plant, and the expansion of the port—which, with $245 million of African Development Bank funding and $132 million from the Senegalese government, drew a further $1.3 billion from com- mercial banks and international private investors. This is smart aid in action—leveraging private capi- tal, crowding in investment, and fighting poverty through trade, investment, and the private sector. Adapted from “We need to rethink how we provide aid to Africa,” Donald Kaberuka, The Guardian, September 25, 2013. Photo ©Andy Kristian Agabs/Gates Foundation, Uganda rice grain IFC | 45 Photo © Peeter Viisimaa/istock, Banjul, Gambia The need for investment in Sub- Saharan Africa electric power is urgent. To meet suppressed demand and provide additional capacity for electrification expan- sion in the region, approximately 7,000 megawatts (MW) was required to be added each year between 2005-2015. This expan- sion would have required upwards of $27 billion per year. However, actual funding to the electricity sector (for capital expenditure) does not exceed $4.6 billion a year­ — leaving an annual funding gap of more than $20 billion. Since public sources (utility income and fiscal transfers) contribute only about one-half of current capital invest- ment requirements, there is a clear imperative for increased private investment, including through public-private partnerships (PPPs). The outlook is ELECTR C By Anton Eberhard, University of Cape Town & Katharine Gratwick, Independent Energy Consultant 46 | IFC.ORG/HANDSHAKE POWER Between 1990 and 2011, approximately $9 free government balance sheets from contingent billion of Sub-Saharan Africa’s private invest- liabilities. However, approximately 15 years later, ment was made through management and lease as governments recognized that the value of the contracts, concessions, divestitures, and green- guarantee outweighs the balance sheet concerns, field investments, or independent power projects PRGs are finally part of the deal for most new (IPPs). Seventy percent of the investments were power plants. in IPPs with a capacity of over 40 MW and As a result, four new plants in Kenya will benefit long-term power purchase agreements with the from a PRG. The government is required to primarily state-run utilities. There are approxi- counter guarantee less because the liability mately 25 such projects across a dozen African is small—less than five percent of the total countries, and several more in the pipeline. project cost. Other projects benefitting from Originally, the expectation was that IPPs—with PRGs include Cameroon’s Kribi (216 MW), their risk-limiting project finance structures— Côte d’Ivoire’s Azito (288 MW), and Uganda’s would attract private investment into otherwise Bujagali (250 MW). under-funded state-run electricity sectors. While There’s a good reason for the success of PRGs: private investment has increased, the public sec- they insure against the risk of government (or tor has also continued to invest. a government-owned entity) failing to perform Over 30 percent of projects during the last two against its contractual obligations. PRGs are decades have received equity investments from typically used where the project is large (or in the state agencies. And nearly every project over the case of Kenya, when projects have been grouped same period has required foreign public debt, generally through multilateral or bilateral con- cessionary loans. Are we looking at the future, The push toward private investment in electri- or just a blip on the screen? cal generation in Sub-Saharan Africa dates to the early 1990s. The experience shows: THE ROLE OF GUARANTEE • seventy percent (about $6 billion) of pri- vate investment was by independent power PRODUCTS producers (IPPs); Many projects trace elements of success to the • limited private investment necessitates availability of partial risk guarantees (PRGs) and public equity and debt financing; various levels of political risk insurance. These products have evolved considerably since the • partial risk guarantees (PRGs) play an first IPPs took root. Kenya—one of the most important role in mobilizing finance; and popular IPP spots in the region—is an interest- • non-traditional investors are playing an ing case. In 1996, at the dawn of its first private increasingly greater role. power investment, sovereign guarantees were not extended because IPPs were supposed to IFC | 47 together), the country is in an early stage of with shares in projects in Côte d’Ivoire, Kenya, reform and/or has made clear reform intentions, Tanzania, and Uganda, and Aldwych Interna- and where there are commercial lenders. tional (U.K.), involved in Kenya, are driven by commercial interests. However, their work emerged from agencies with strong commit- ments to social and economic development. While private investment has South-South investors. Indian and Chinese increased, the public sector firms have also become increasingly involved in has also continued to invest. the power sector in Sub-Saharan Africa. Tata, India’s largest private integrated electricity firm, holds a 50 percent equity stake in Zambia’s Furthermore, the government of the country Itezhi. Tata has been selected as the preferred must request the PRG; thus, the project must bidder for two South African wind farms, and be a priority both for the government and the will also be the technical service provider for the institution (the World Bank or African Develop- recently privatized Benin Distribution Company ment Bank) providing the PRG. In some cases, of Nigeria. Chinese firm Shenzhen is involved in the PRG can be further enhanced or replaced Sunon Asogli (Ghana) and Sinohydro in Kafue by political risk insurance from the Multilateral Gorge Lower Hydro Project (Zambia) and in Investment Guarantee Agency. Karuma Hydro in Uganda. China-Africa Sun- light Energy has been licensed by the Zimbabwe Energy Regulatory Authority to develop a plant A NEW TYPE OF SPONSOR for harnessing coal bed methane. The more traditional investors in African These are enthusiastic partners laying the electricity are literally all over the map. Major groundwork for the future in projects where players, including American firms such as AES the traditional players have shown little interest. and French giant Electricité de France, have And with Sub-Saharan Africa’s investment gap made important investments in Cameroon, Côte at $20 billion annually, there is no shortage of d’Ivoire, Kenya, and Nigeria. Smaller Malaysian opportunities for all. h firms like Westmont and Mechmar were among the first in Kenya and Tanzania. This article is based on a larger review of independent power However, the universe of players is expanding. projects across Sub-Saharan Africa, undertaken by Eberhard To fulfill future needs, two non-traditional spon- and Gratwick, part of which was recently featured in “Invest- sors have already begun making inroads. These ment Power in Africa: where from and where to?” published in The Georgetown Journal of International Affairs, “The include: Future of Energy,” Winter/Spring 2013. Triple bottom-line companies. Globeleq (U.K.) and Industrial Promotion Services (IPS-Kenya), 48 | IFC.ORG/HANDSHAKE SOUTH AFRICA At long last, IPPs are emerging in South Africa ultimately accepted, totalling 1044 MW. Prices as an alternative to the state-owned generator, for wind fell by 20 percent and for solar PV, 40 Eskom, and as part of an 18,800 megawatt percent. Credit for this success may be linked to (MW) renewable energy program. This could a number of factors, including a well-designed radically change the electricity landscape. It rep- procurement process that engaged 75 local and resents Africa’s largest renewable energy program, international transaction advisors to help plug largest IPP development, and potentially, most a knowledge and experience gap. The flexibility complex public-private procurement. in the design of subsequent bid rounds has also The South African IPP program is further dis- been cited as a major boon. Specifically, capacity tinguished by the fact that it advanced competi- in the first round exceeded the market’s capacity; tive bids for renewable energy (REBIDs) rather it was reduced in round two to improve compe- than the more commonly adopted feed in tariffs tition, resulting in large bid-price decreases. Not (REFITs), demonstrating that the former could only is there potential for these lessons to apply attract investors and bring real competition to to neighboring African countries, but investors a small renewable market. REBID attracted 58 who have met with success in South Africa could bids in round one, of which 28 qualified, incor- make inroads into other African nations, similar porating a total of 1,416 MW; 79 bids were sub- to the Nigerian experience. mitted in round two, with 51 qualifying and 19 Photo © epicurean/istock IFC | 49 Photo © Nico Saporoti/IFC hydro By Ryan T. Ketchum, Hunton & Williams LLP with contributions from Marie Marconnet & Ananda Covindassamy 50 | IFC.ORG/HANDSHAKE POWER In late December of 2012, the General Assembly of the United Nations declared 2014-2024 the In Africa, one of the continents decade of sustainable energy for all and launched the Sustainable Energy for All Initiative jointly with the greatest need for addi- with the African Development Bank. In passing tional generation capacity, only 5 the resolution, the General Assembly noted that percent of potential hydropower 1.3 billion people live without access to electric- is in use today. ity and that 2.6 billion people in developing countries rely on traditional biomass sources for cooking and heating needs. Half a billion of those living without access to electricity live in RUZIZI I & II Africa. The Ruzizi River forms the border between DRC Hydropower is undoubtedly the most common and Rwanda. The south-flowing river connects form of sustainable and renewable energy. In Lake Kivu with Lake Tanganyika. Two projects 2008, hydropower accounted for 16.3 percent located on the river are currently in operation. of global electricity production. In Europe and The 29.8 megawatt (MW) Ruzizi I, which is North America, 25 percent and 29 percent, owned and operated by SNEL, the parastatal respectively, of the potential hydropower has electricity utility of the DRC, is located 3 kilo- been developed. In Africa, one of the continents meters downstream of the outlet from Lake Kivu with the greatest need for additional generation and was commissioned in 1959. The 43.8 MW capacity, only 5 percent of potential hydropower Ruzizi II is owned and operated by SINELAC, is in use today. Hydropower has the potential a multi-national organization established by a to provide a significant percentage of the energy treaty among Burundi, the DRC, and Rwanda that is necessary to realize the objectives of the and was commissioned in 1989. General Assembly’s resolution. It’s not impossible for nations in conflict to PRECEDENTS PAVE THE WAY put aside their differences to coordinate the The Ruzizi III dam will be the third in a series delivery of natural resources, but it’s unusual. of four projects on the Ruzizi River. The experi- For Burundi, Democratic Republic of Congo ences of the first two initiatives provide the (DRC), and Rwanda, cooperation is transform- clues to the success of Ruzizi III. The Ruzizi ing the shared Ruzizi River into a valuable source River forms the border between the DRC and of hydropower for three peoples. IFC | 51 Rwanda. The south-flowing river connects Lake the consortium of Sithe Global and Industrial Kivu with Lake Tanganyika. The 29.8 MW Promotion Services (Kenya) as the preferred Ruzizi I plant, owned and operated by SNEL, bidder for the project. (This is the same consor- the parastatal electricity utility of the DRC, is tium that developed the 250 MW, $900 million located 3 kilometers downstream of the outlet Bujagali Hydroelectric Dam on the River Nile in from Lake Kivu and was commissioned in 1959. Uganda.) The 43.8 MW Ruzizi II plant is owned and The proposed technical solution for Ruzizi III operated by SINELAC, a multi-national orga- envisions a run-of-river project comprising: nization established by a treaty among Burundi, the DRC, and Rwanda, and was commissioned • a diversion dam; in 1989. • a 7 kilometer headrace tunnel; SINELAC has been besieged by management • penstock and surge chamber; and financial challenges since its commission- • surface powerhouse; ing—a repeat of that structure for Ruzizi III was not an option. Donors and governments wanted • three Francis type turbine-generator units; a fully commercial and independent structure • a 220 kilovolts switchyard; and protected from interference by any of the three • a 10 kilometer transmission line to a substa- governments, assuring that they are all equal. tion located at Kamanyola in the DRC. The design also includes a small generating unit A THIRD WAY at the dam site to produce energy from the eco- EGL has been working steadily to promote the logical flow that will be released to the bypassed third project. In June 2012, EGL launched a reach of the river between the dam and power request for proposals for the selection of a private station. The proposed technical solution has a investor to develop Ruzizi III on a Build-Oper- total installed capacity of 147 MW. h ate-Transfer basis. In September, EGL declared “ It simply is not possible for [Africa] to achieve its development targets with the current state of infrastructure. Energy in particular is a game changer. Access to energy literally changes people’s lives. ” —Makhtar Diop, World Bank Vice President for Africa 52 | IFC.ORG/HANDSHAKE AFRICAN DEVELOPMENT BANK BACKS HYDROPOWER At the 2012 Summit of the African Union, African heads of state endorsed a set of priority energy projects to be implemented by 2020 as part of the Programme for Infrastructure Development for Africa (PIDA). The energy infrastructure program focuses on major hydroelectric projects and interconnects the power pools among countries to meet the anticipated increase in demand. Nine hydropower projects were identified for this phase, amount- ing to more than 50 gigawatt potential capacity—representing 40 percent of the actual installed capacity of the continent. To date, the African Development Bank has been involved in five of them: • The Mphanda-Nkuwa project in Mozambique, which will contribute to supplying energy to Mozambique and South Africa. • The Inga hydropower projects in the Democratic Republic of Congo (DRC), which will transform Africa by providing electricity to a large part of the continent with transmission lines interconnecting several countries. • Hydropower components of the Lesotho Highlands water project Phase II, which will supply power to Lesotho and South Africa. • The Ruzizi III project in Rwanda, which will provide additional electricity capacity in Burundi, DRC, and Rwanda, and is the first regional public-private partnership power project in Africa. • The Rusumo Falls development, which will supply electricity to Burundi, Rwanda, and Tanzania. Those multinational large-scale renewable projects will ease regional cooperation in Africa and facilitate universal access to modern, reliable, and affordable energy services on the continent. Photo © Rich Beilfuss/International Rivers, Cahora Bassa hydro, Mozambique IFC | 53 risk REWARD & With donor funding constrained and domestic capital markets not fully developed, the world is looking toward private sector investment to remedy Africa’s huge infrastructure deficit. The role of multilaterals and development finance institutions is transitioning from financiers to mobilizers and risk “mitigators”—leveraging their involvement by allowing countries to unlock access to private finance. As a risk mitigator, the Multilateral Investment Guarantee Agency (MIGA) plays a significant and increasingly critical role. MIGA’s exposure in Sub-Saharan Africa more than doubled in the last four years. For the fiscal year ending June 30, 2013, MIGA issued $1.5 billion in coverage for investments throughout Sub-Saharan Africa, and $1.3 billion of this coverage was for projects in the energy sector. Countries such as Côte d’Ivoire, Kenya, and Uganda have experienced significant progress in this sector due in part to MIGA guarantees. By Jason Zhengrong Lu, MIGA 54 | IFC.ORG/HANDSHAKE POWER CÔTE D’IVOIRE KENYA In Côte d’Ivoire, a MIGA guarantee In Kenya, the government is imple- of $116 million is providing breach menting its ambitious “least-cost power of contract cover for the conversion development plan,” which calls for an of the Azito thermal power plant increase in the number of independent from simple-cycle to combined-cycle, power producers and a more diversified increasing total capacity from 290 to and reliable energy mix. approximately 430 megawatts. This year, MIGA provided $102.5 MIGA is also supporting Foxtrot million in breach of contract cover to International’s oil and gas production the Industrial and Commercial Bank platform, which supplies Azito and of China and Standard Bank of South other plants in the country, by cover- Africa for their long-term commercial ing the equity investment by SCDM financing to Triumph Power Generating Energie and debt from HSBC. The Company Limited. MIGA’s support for World Bank’s International Develop- Triumph is complemented by an IDA ment Association (IDA) is also provid- partial risk guarantee. ing a partial risk guarantee to back the MIGA is also providing coverage for government’s payment obligations to Thika Power Limited and Olkaria III, the company under a gas supply and Kenya’s first geothermal independent purchase agreement. power producer. UGANDA In Uganda, the Bujagali hydropower project is key to the country’s plan to increase access to electricity. The dam, commissioned in 2012, is already meeting almost 50 percent of the country’s electricity needs. The project is sponsored by a consortium of Sithe Global Power of the United States and the Aga Khan Development Network. A partial risk guarantee from IDA is covering commercial lending of $115 million from Standard Chartered and Absa banks, while MIGA is providing 20-year breach of contract cover of $120 million to Sithe subsidiary World Power Holdings. Photo © MIGA, Bujagali hydro, Uganda IFC | 55 powering AFRICA More than two-thirds of the population of Sub- According to the International Energy Agency, Saharan Africa is without electricity, and more Sub-Saharan Africa will require more than $300 than 85 percent of those living in rural areas lack billion in investment to achieve universal electricity access. To help solve this inequity, U.S. President access by 2030. Only with greater private sector Barack Obama has announced Power Africa, a investment can the promise of Power Africa be new initiative to double access to power in Sub- realized. With an initial set of six partner countries Saharan Africa. Power Africa will build on Africa’s in its first phase, Power Africa will add more than enormous power potential, including new discover- 10,000 megawatts of cleaner, more efficient electric- ies of vast reserves of oil and gas, and the potential ity generation capacity. It will increase electricity to develop clean geothermal, hydro, wind, and access by at least 20 million new households and solar energy. It will help countries develop newly- commercial entities with on-grid, mini-grid, and discovered resources responsibly, build out power off-grid solutions. generation and transmission, and expand the reach of mini-grid and off-grid solutions. Photo © PRIs the World, Tanzania 56 | IFC.ORG/HANDSHAKE POWER The United States will commit more than $7 billion in financial support over the next five years to this effort. The U.S. Agency for International Development (USAID) will provide $285 million to advance private sector energy transactions. The Overseas Private Investment Corporation (OPIC) will commit up to $1.5 billion in financing and insurance to energy projects. The U.S. Export-Import Bank (Ex-Im) will commit up to $5 billion in support of U.S. exports for the development of power projects. The Millennium Challenge Corporation (MCC) will invest up to $1 billion in power systems to increase access and the reliability and sustainability of electricity supply. OPIC and the U.S. Trade and Development Agency (USTDA) will provide up to $20 million in project preparation, feasibility, and grants to develop renewable energy projects. The U.S. African Development Foundation (USADF) will launch a $2 million Off-Grid Energy Challenge to provide grants of up to $100,000 to African-owned and operated enterprises to develop or expand the use of proven technologies for off-grid electricity. Power Africa will also leverage private sector investments, beginning with more than $9 billion in initial commitments from private sector partners to support the development of more than 8,000 megawatts of new electricity generation. These commitments include investments from: IFC | 57 POWER Photo © warrenski, Darling Wind Farm, South Africa a “greener grid” GOOGLE GREEN Africa is already benefitting from Google Green’s policies for renewable energy make it an attractive massive investment in solar power. The company place to invest—which is why it had the highest has closed its first investment on the continent, growth in clean energy investment in the world a $12 million investment in the Jasper Power last year. Second, we look for projects that have Project, a 96 megawatt solar photovoltaic plant transformative potential—that is, projects that will in the Northern Cape province of South Africa. bolster the growth of the renewable energy industry Upon completion, Jasper will be one of the larg- and move the world closer to a clean energy future. est solar installations on the continent, capable The Jasper Power Project is one of those transforma- of generating enough electricity to power 30,000 tive opportunities. To explain why, perhaps some South African homes. background would be helpful. As Rick Needham, Google’s Director, Energy & Back in 2008, South Africa experienced a severe Sustainability, explained on the Google Green energy shortage, which resulted in blackouts blog: throughout the country and slowed down economic growth. Since then the South African government When we consider investing in a renewable energy has been actively supporting the growth of new project, we focus on two key factors. First, we only sources of electricity to power the nation. While pursue investments that we believe make financial today South Africa is primarily dependent on sense. South Africa’s strong resources and supportive 58 | IFC.ORG/HANDSHAKE fossil fuels, there’s lots of potential for renewable through the REIPPPP have the potential to energy—it’s a country blessed with abundant wind transform the South African energy grid. And given and solar resources—and the government has set an South Africa’s position as an economic powerhouse ambitious goal of generating 18 gigawatts (GW) in Africa, a greener grid in South Africa can set an of renewable energy by 2030 (as a comparison, the example for the whole continent. entire South African grid is currently 44 GW). Jasper will create approximately 300 construc- To meet this goal, the South African government tion and 50 permanent jobs in a region expe- has established the Renewable Energy Independent riencing high rates of unemployment, as well Power Producer Procurement Program (REIPPPP). as providing rural development and education Through the program, renewable energy projects programs. It will set aside a portion of total proj- compete on the basis of cost and contribution to ect revenues—amounting to approximately $26 the local economy to be awarded a contract with million over the life of the project—for enter- Eskom, South Africa’s state-owned energy util- prise and socioeconomic development, spreading ity. Jasper and the other projects being developed the green further than it’s ever gone before. LINKING NATIONAL TREASURIES TO POWER PPPs In this 15-minute interview hosted by the Africa Energy Forum, Karen Breytenbach, Senior Project Advisor to the National Treasury of the Republic of South Africa, shares her advice on how to jump-start energy PPPs. IFC | 59 OUARZAZATE The scene: a rocky plateau above the southern city of Ouarzazate, on the edge of the Sahara and often called “the door of the desert.” It’s a Hollywood favorite: Star Wars, Lawrence of Arabia, and Gladiator were all filmed there. A scorching sun hangs overhead, boosting summer temperatures to 40° C (104° F) or more. IFC and its partners are now tasked with harnessing that heat by making it the basis of a feasible power project, advising the Moroccan government on the initial phase of an ambitious 2,000 megawatt plan for solar energy. National solar agency MASEN named IFC its financial adviser in developing the first power plant to be built in Ouarzazate. The goal is to have 500 megawatts installed by 2015 at a cost of approximately $3.5 billion. Private investors were asked to submit proposals for the initial phase of at least 150 megawatts by early 2011, with a public bid award expected in the second half of that year. However defined, it will be one of the largest solar plants ever built, selling power in the domestic market first, and later perhaps to Europe as well. Such projects are now growing in number: in June 2010, Abu Dhabi authorities named Spain’s Abengoa Solar and French oil company Total their partners in a new, approximately $700 million, 100 megawatt solar plant called Shams-1, in 2012. The consortium will build, own, and operate the power plant using concentrated solar power (CSP) technology, col- lecting sunlight in 768 parabolic troughs. The Morocco project will also use CSP systems. But large- scale commercial financing is far less available in emerging Photo © Dana Smilie/World Bank economies than in oil-rich Gulf locales. So IFC and the World Bank will help mobilize concessional financing Photo © Arne Hoel/World Bank, Ouarzazate from development institutions so the Ouarzazate project can sell affordable power to its final consumers without major government subsidies, while also providing private developers a viable business proposition. Source: Telling Our Story: Renewable Energy, IFC, 2010. 60 | IFC.ORG/HANDSHAKE Photo © rbbaird, Senegal SENEGAL Morocco’s national utility, the Office National de l’Electricité (ONE), has raised the rural electrification rate from 18 percent to 95 percent since 1995. Small-scale solar kits were an important part of its approach to bring power to more than 3,600 villages. This led to a partnership between ONE and IFC in Senegal, whose government is working with the World Bank Group on new public-private partnerships to achieve 50 percent rural electrification. In one rugged northern area near the Mauritanian border, IFC and ONE are co-investors in a new private utility called Comasel St. Louis, which has a long-term concession from the government. Among its goals: using solar technology to bring more than 5,000 local villagers their first electrical power over the next two years. The area is poor and dry, using unpaved roads for transport and simple wells for water. But its residents want a reliable source of power and lighting, and are willing to pay for it. Comasel St. Louis’ solar systems will meet those needs for as little as $8.39 a month, costs that are far below those of the kerosene lamps and dry cell batteries currently being used. They will also serve 213 schools and 118 health centers. Initial subsidies from the International Development Association and the Global Environment Facility, provided under an innovative Output-Based Aid approach where funding is released only as targets are met, and Islamic Development Bank loans will help defray installation costs in the early phases. Villagers will then begin to pay, ramping up commercial viability via a four-tier pricing structure based on consumer demand. The three lowest- level users will pay flat monthly rates, while small businesses and other large users will pay on a variable basis. Demand for a low-cost, “base of the pyramid” solution to Africa’s rural electri- fication needs is high. But given the expectations of modest returns, private risk capital is in short supply, and this project sets a “powerful” example for others to follow. h IFC | 61 SANITATION SOLUTIONS By Jane Jamieson, IFC & Jemima Sy, Water and Sanitation Program, World Bank Why are there more people in Africa who own a Poor sanitation and limited access to water mobile phone than a toilet when the economic generate massive healthcare costs for develop- and social value of improved sanitation is so clear? ing countries. In Tanzania, the total economic Improved sanitation (in contrast to basic sanita- losses due to lack of on-site sanitation have been tion) provides access to a facility that hygienically estimated to be over $200 million a year—an separates human excreta from human contact. Six astonishing 1 percent of the country’s gross hundred and ten million Africans do not have this domestic product. access. Just as critically, over 40 percent of Africans As country governments and the international also lack access to safe water. This isn’t just about development community strive to tackle these restoring dignity to those who go without: it’s an issues, there has been a shift in the way govern- economic imperative. ments perceive the delivery of basic services. This is largely because governments in developing 62 | IFC.ORG/HANDSHAKE WATER countries with large numbers of people living because money is tight and incomes seasonal, in poverty do not have the capacity to meet the they engage in price-value tradeoffs in water need for improved water supplies and sanitation and sanitation. Meeting a standard level of services from public resources alone; they recog- water consumption from networks involves cash nize an opportunity for domestic enterprises in outlays that are a significant percentage of poor these growing markets. households’ income. In Benin, for example, the Once viewed as “opportunists” and “gap fillers,” cost of a household water connection comprises the domestic private sector is now seen as a cen- more than 100 percent of the household’s tral part of the solution as millions of poor (and monthly income. Most households have access non-poor) households already rely on it to meet to inexpensive alternative sources of water (if their needs. In water, private sector enterprises only for parts of the year), including wells, provide water through independent systems or springs, and boreholes. Poor people’s purchases the resale of water. In sanitation, businesses are are thus limited by cost and by their assessment involved in the installation of latrines and toilets, of the value of network water with respect to the manufacture of components, the importation alternatives. and sale of materials, the provision of empty- Although poor households seem to prefer ing services, and the growing business of waste cheaper water to good-quality water, they also re-use. value convenience. If operators can ensure good- quality service, the availability and opportunity cost of alternatives will likely shift incentives in MARKET POTENTIAL favor of networks. The scale of the market for piped water supply and on-site sanitation services is large and the nascent demand is far greater than originally In Benin, the cost of a house- thought. In Benin, annual sales of water from hold water connection com- privately or community-managed networks in small settlements could reach $22 million prises more than 100 percent by 2025. In sanitation, the current market for of the household’s monthly improved on-site sanitation services is vast, and untapped households in Tanzania alone represent income. a huge market of about $240 million. But this demand belies the fact that poor However, sanitation is a relatively low-priority households are highly discriminating clients: expenditure for poor households, and cost is an IFC | 63 important factor in their decision making. But entrepreneurs, expanding is an issue because cost is not necessarily an insurmountable bar- they are dependent on public funding for capital rier—as the widespread use of other consumer development. In sanitation, the risk of unsteady products, such as cellphones, suggests. Poor demand and the inability of small enterprises to households are willing to bear a cost to attain invest in research and development and market- improved sanitation that they find attractive ing limit their ability to realize the sizable market and providing value. potential. Supply is not matching demand. The other barrier to safer sanitation practices In addition to market-related risks, water is that products are literally out of reach. More firms face a variety of policy and institutional than three-quarters of sanitation businesses in obstacles, including the bureaucratic hassle of Tanzania indicate that the poor live in areas that applying for permits and participating in public are expensive to service because of transport and tenders, the insecurity of licenses, and the lack infrastructure problems. This increases the cost of effective dispute-resolution mechanisms. In of products due to transport, and also frustrates contrast, the impact of policies in the sanitation the ability of households to build facilities— sector is limited. Enterprises working in the because too many inputs need to be coordinated. sector would like governments to concentrate on removing risks to entry by providing market intelligence and promoting the entry of enter- prises that are able to undertake transformative Poor households are highly research and development on new technologies discriminating clients: because and materials. money is tight and incomes Transforming the water and sanitation markets will not happen overnight. Systematic change seasonal, they engage in is required if the potential of this market is to price-value tradeoffs in be unlocked. Policy makers have a key role to water and sanitation. play to improve affordability and sustain water services by creating a conducive investment climate, right sizing public investment, targeting subsidies, and being more flexible in pricing to SCALABILITY IS KEY the poor and wealthy alike. h The base of the pyramid in the water and Statistics from: “Tapping the Markets: Opportunities for sanitation sectors is dominated by micro- and Domestic Investments in Water and Sanitation for the Poor.” small enterprises (72 percent for water and from the World Bank Direction in Development series due 80 percent for sanitation). An overwhelming for publication January 2014. number of these enterprises are profit-making, Photo credits for page 62, from left to right, top to bottom: but they face many constraints. For water supply Gates Foundation, Heather Arney, Arne Hoel/World Bank, World Bank, Gates Foundation 64 | IFC.ORG/HANDSHAKE SOAP SAVES LIVES In Africa and elsewhere, access to safe water, sanitation, and the tools of basic hygiene can mean the difference between life and death, education and illiteracy, decent wages and poverty. Here’s a look at hand washing practices throughout the world. The very simple act of washing hands with soap and water is one of the most effective methods of preventing disease. In 2012, child mortality figures released by UNICEF showed that almost 2,000 children die each day from diarrheal diseases, 90 percent of which is due to a lack of safe water, sanitation, and basic hygiene. As diarrheal diseases are primarily fecal-oral, one of the simplest and most inexpensive barriers to infection is hand washing with soap at critical times, such as after using the bathroom and before eating. 0%-34% of people worldwide Laundry, bathing, and wash their hands with soap washing dishes are seen at critical moments—before as the priorities for soap handling food and after using use, not hand washing. the toilet. WITH THE PROMOTION OF HAND WASHING 44% increase in newborn survival rates when birth attendants and mothers washed with soap. 40% reduction in 23% reduction of acute diarrhea episodes. respiratory infections. 50% lower incidence of 54% fewer days of pneumonia in children absence among primary under five years old. school students. Source: UNICEF IFC | 65 Photo © Curt Carnemark/World Bank, Mali legal lessons from Burkina Faso By John Crothers, Frederic Pia, & Thomas Clement Gide Loyrette Nouel & Alard Guiramand Allemand Moussy In Burkina Faso, as in much of Africa, access operators. This success is even more pronounced to safe drinking water and sanitation remains when compared to PPPs in other sectors in the scarce. This is especially true in rural and country. semi-rural areas where villages are dispersed, the Typically in rural water PPPs, the challenge is population is small, and access to energy is rare. to increase coverage and expand the role of the To remedy this, the Burkina Faso government private sector while keeping the price of water has involved the private sector in rural water low. Lessons from Burkina Faso that have con- through public-private partnerships (PPPs) in tributed to meeting this challenge—including an effort to increase access to water as well as to institutional set up, contractual provisions, and improve the level of service. The PPP model has price-setting mechanisms—are instructive for been relatively successful, with approximately other governments considering the PPP model 20 percent of all villages now covered by private for rural water delivery. 66 | IFC.ORG/HANDSHAKE LEGALEASE DECENTRALIZING & delegating water supply activities: management contract, operation and maintenance contract, DELEGATING affermage (or lease) or concession. The Min- istry of Agriculture, Hydraulics, and Fishery In Burkina Faso, management of water supply Resources has published two model contracts to differs between urban and rural areas. In the minimize time and cost in contracting: an opera- large cities, water is supplied by the state utility, tion and maintenance contract and an affermage or Office National de l’Eau et de l’Assainissement contract. The use of these model contracts has (ONEA). become the norm in most rural municipalities. Following decentralization, responsibility to supply piped water to rural areas has been trans- ferred to local municipalities. These municipali- ties may then either delegate the operation (and, as the case may be, the construction, mainte- The challenge is to increase nance, and renewal) of their piped water systems coverage and expand the role of to private operators or operate the systems the private sector while keeping themselves. In any event, delegation to private the price of water low. operators must be preceded by a public call for tenders held by the municipality. The central government remains responsible for capital expenditures in water infrastructure Under the model operation and maintenance and setting out national water management contract, the operator is responsible for operat- policies—and supervising their implementa- ing and maintaining the piped water system tion—but has otherwise removed itself from the while the municipality is responsible for renew- delivery of water in rural areas. This decentral- ing the assets of the system (the renewal of the ized approach has given substantial responsibili- long-term assets being subsidized by the State). ties to the rural municipalities. The risk remains The initial investment related to the construc- that they are not always adequately resourced tion of the water piped system infrastructure to negotiate or follow up on the PPP contracts (well, pump, water tower, pipes, and distribution awarded for their water supply networks. points) is realized by the State. The remuneration of the operator is derived from the tariffs paid by the consumers. The operation and maintenance CONTRACTS & CONTEXT contract is usually entered into for a term of In principle, a rural municipality may look three years and is tacitly renewable. to various forms of partnership contracts for IFC | 67 Under the affermage contract, the operator is limited access to capital markets and the fact that responsible for operating and maintaining the if the private sector is responsible for financing network and renewing the “short term” assets capital expenditures, this will automatically raise of the networks (those whose lifetime does not tariffs. exceed 15 years) and the State is responsible for the renewal of long-term assets. The private operator is not liable for any “renewal fees.” As EQUITABLE PRICE SETTING with the operation and maintenance contract, In urban areas covered by ONEA, the price its remuneration is derived from the tariffs levied of the water is directly set by ONEA based on on the end users. The affermage contract is in maximum tariffs capped by decree. ONEA is principle entered into for a term of five years also able to offer a “social” tariff for its poorest and is tacitly renewable. customers, using economies of scale and cross- subsidies from larger volume users. In rural areas, cross-subsidization is more dif- Where the PPP for a particular ficult given relatively uniform low income levels. The price of water is not regulated by decree as water system is not attracting in urban areas, but is determined contractually many bidders, the price of water by the municipality and the operator at the stage tends to remain high—to the of the bid process. In other words, the price of the water will depend on the prices proposed by detriment of the local population. the bidders during the call for tenders. This system aims at encouraging competition and should put downward pressure on the price The operation and maintenance contract seems of supplied water. The drawback is that the price to be the prevailing arrangement. The affermage very much depends on the effectiveness of the contract should probably be the preferred choice competition existing during the call for tenders. of the rural municipalities, however, as it shifts to Consequently, where the PPP for a particular the operator the responsibility for renewal of the water system is not attracting many bidders, assets and consequently relieves the public sector the price of water tends to remain high—to the of this obligation. Ideally, a government should detriment of the local population. In order to try to move towards the concession contract, implement a national equitable price for rural since the private sector takes maximum risk for water, the government of Burkina Faso is now construction, financing, operation, maintenance, considering how to regulate the price of water in and tariff collection. This approach is unlikely rural areas in a manner similar to that in urban to succeed in the medium term, however, given areas (a maximum tariff set by decree). 68 | IFC.ORG/HANDSHAKE CONSIDERING CAPEX To attract private investors while preserving a price for water that is affordable for the rural poor, Burkina Faso has opted for a significant financial contribution from the state that impacts the price of water. Under the current PPP arrangement (whether operation and main- tenance contract or affermage), the construction, financing, and to some extent the renewal of the core infrastructure are realized by the state. The related costs are borne by the neither the private sector nor the end users. Consequently, the construction and to some extent renewal costs are not taken into account by the operator when determining the price of the water. Such a mechanism, which may be regarded as form of capex subsidy, appears to be one of the few ways to preserve an equitable price for rural water. Another possible solution may be to combine projects over a group of municipalities to try to achieve economies of scale and even cross-subsidization among users in the various municipalities. Since Burkina Faso aims to significantly increase access to piped water in rural areas as part of the millennium goals, it is clear that PPPs form a crucial part of the current rural water delivery system in a country where such partnerships are otherwise rare. The institutional, contractual, and price-setting mechanisms currently in place form a solid legal basis for success, and Burkina Faso’s government continues to look for ways to improve the system and reach more users at an equitable price. h Photo © Cristian Carrara, Mozambique IFC | 69 RESULTS BUILD RELATIONSHIPS By Catherine O’Farrell, IFC Public-private partnerships take root in Lesotho Photo © IFC Lesotho, a mountain kingdom in southern in the first year of operations. In 2011, the state- Africa, is known for its hard-working population of-the-art Queen Mamohato Memorial Hospital and challenging geography. Although it is not opened and the full health network became a wealthy country, the government has worked operational. steadily to develop its own solutions to resource But this was just the beginning of Lesotho’s constraints and the increased demand by its successful experience with PPPs, as the hospital citizens for infrastructure and services. One of partnership evolved to serve as a model for the government’s guiding principles is to harness others. Lesotho’s officials have continued to private sector capital and expertise to meet its design health PPPs, completing a second PPP national strategic goals. for healthcare waste management. PPP projects Because Lesotho’s people had especially press- are also underway in facilities management and ing needs in the health sector, the government information technology for clinics, as well as a and IFC’s Advisory Services in Public-Private variant, results-based financing, for primary care Partnerships started working together in 2006. in rural areas. The government was committed to providing Significantly, PPP principles are being applied to virtually universal health coverage to all citizens. many sectors, with additional projects in prepa- Together, government officials and IFC worked ration for wind energy and tourism. Lesotho’s together to design a public-private partnership government has continued its work with the (PPP) that would replace the aging national World Bank Group to expand capac­ ity building hospital and feeder clinics with a new health for contract management and to complete the network in the capital city, Maseru. National PPP Framework, with plans underway In 2010, a network of three refurbished and for the full legal and regulatory framework for expanded clinics opened and provided hundreds PPPs in 2014. h of thousands of patients with advanced services 70 | IFC.ORG/HANDSHAKE HEALTH Lesotho’s government and the World Bank KEY HOSPITAL STATISTICS Group are working together in a variety of sectors, such as: 51% increase in inpatient admissions health power 126% increase in outpatient visits tourism legislative/ (including clinics) regulatory 41% decline in overall mortality A PPP HEALTH NETWORK 45% increase Learn more about the results in deliveries from Lesotho’s health sector PPP experience in this video. 10% decline in maternal death rate “ 70% survival for very low To better provide more birth weight infants (<1,500 effective public services... grams), virtually all of whom would have died before governments every- where are increas- 65% decline in pediatric pneumonia death rate ingly turning to some form of public- 22% increase in patient ” satisfaction rate (including private partnership. clinics) IFC | 71 HEALTH prescription: Illustration © Cuningham Group of Architects Nigeria’s first health partnership delivers new hospital Nigeria’s Cross River State, with just over 0.5 hospital beds per thousand people, has the lowest density of hospital infrastructure in the South-South region of the country. While there is nascent private sector involvement in the health sector, most healthcare delivery is provided by the state; however, the network of public sector hospitals and healthcare centers does not meet the region’s needs. With IFC as transaction advisor, the government of Cross River State is structuring and implementing the first health public-private partner- ship (PPP) in Nigeria: a new referral hospital in the capital city of Calabar that will deliver an affordable international standard of healthcare for the state. The hospital facilities in Cross River State are rate of medical evacuations to other countries. inadequate: in addition to deteriorating infra- The lack of advanced diagnostics is a serious structure and a lack of skilled staff, the facilities problem and patients are often forced to travel to lack advanced medical equipment. As a result, neighboring states for imaging services; there is the quality of public healthcare services is sub- also limited access to quality high-risk obstetric optimal. Moreover, the population perceives the care, intensive care units, and to emergency/ quality of healthcare as poor, resulting in a loss trauma care. of confidence in the facilities, a greater reliance With a population of approximately 3.4 million on self-medication, and an exceptionally high people, a shortage of doctors exacerbates the 72 | IFC.ORG/HANDSHAKE state’s healthcare problem. Apart from the fed- the proposed hospital through a transparent erally-funded teaching hospital, only 36 doctors tender process. and 938 nurses employed by the state cover the The hospital is anticipated to be operational in state’s secondary health facilities. This number 2015. The 10-year project term will include up translates into an alarming doctor-population to two years for construction and eight years for ratio of 0.21 doctors per 10,000 patients— operation. The construction and equipping of one-fifth of the Sub-Saharan African average. the hospital, totaling approximately $37 million, will be financed by the state government. The TAKE ONE PPP AND CALL ME consortium will bear some project development costs, deliver a turnkey hospital, and will then be IN 10 YEARS responsible for running the hospital operations To confront these challenges, the Cross River under terms defined in the PPP agreement. At State government proposed the establishment the end of the concession period, the facility will of a 105-bed referral hospital to serve the needs be transferred to the government. of the capital city, Calabar, and its environs. A The hospital will be managed as a state referral new gateway clinic to be attached to the hospital hospital, providing quality and affordable access will offer primary healthcare services and a solid to regional level clinical services. The consortium referral mechanism for the PPP hospital, ensur- led by UCL Healthcare Services includes Cure ing that only patients requiring secondary care Hospital Management Services, a U.S.-based are admitted to the hospital. Starting in Sep- firm which will provide clinical services, and tember 2011, IFC facilitated the participation Simed International, a Dutch firm which will of qualified private sector firms in the design, deliver the medical equipment. h construction, equipping, and management of RESULTS • The hospital is expected to provide high • Health professionals in the state will build quality advanced secondary clinical and expertise through exposure to international diagnostic services to the citizens of Cross best practice. River State, particularly to the 500,000 • Nigeria and surrounding countries will citizens of the greater Calabar area. refer to this model for good practice in • The hospital will play a role in the state concession contracting under international government’s overall growth strategy by PPP standards. creating jobs. IFC | 73 INTERVIEW Senator Liyel Imoke, Governor of Nigeria’s Cross River State, speaks to Handshake crossing off healthcare needs in about why his CROSS RIVER administration pursued the new hospital, and the state’s openness to increased private sector participation. Why is the hospital specifically, us was to investigate the feasibility of a special- ist healthcare facility. This hospital will serve as and the healthcare sector gen- a center of excellence that will drive delivery of erally, a priority for the current first-class, top quality healthcare across the state. administration? As part of our socioeconomic development How do you expect the new hos- agenda, Cross River State has extended its public pital to improve healthcare delivery sector investment beyond infrastructure. We have embarked on a concerted effort to increase in the state? our investment in our people. Improvements For a developing economy such as ours, our in education, social welfare, and healthcare are people are our greatest asset. It is therefore of top priorities for this administration. Over the paramount importance that we invest in our years, we have created an extensive network of people. The hospital is expected to be the top primary healthcare facilities, particularly in rural referral facility in the state, delivering interna- areas across the state. We have also established tional standard specialist healthcare to our citi- programs to improve access to these facilities and zens. It will be staffed by medical personnel with have recorded significant success. Currently, we extensive international experience in healthcare are engaged in a program of substantial upgrades delivery. We have just recently completed the for our secondary healthcare facilities, so they bidding process working with IFC as advisors for will meet the demands of our population. The a private-sector concessionaire to ensure efficient natural progression in the healthcare sector for operation and management of the hospital. 74 | IFC.ORG/HANDSHAKE The new hospital will translate world-class best recently, General Electric commissioned a $1 practices which can be easily adopted by other billion investment in a manufacturing plant facilities. As the only specialist tertiary healthcare here in Cross River. This entry shows the huge facility of its kind in the region, the new hospital potential there is for investment in industry and will attract cases from all over Nigeria. It will manufacturing. help divert the immense annual importation of healthcare from countries in Europe as well as India, South Africa, and the U.S. For a developing economy What role do you see for the pri- such as ours, our people vate sector in the development are our greatest asset. of Cross River State—not just in healthcare, but in other sectors as well? What has the government done As the premier destination for business and to encourage private sector leisure tourism in Nigeria, Cross River has consolidated its position as the hub of the participation? country’s tourism industry. Nevertheless, we Private sector participation will improve stan- have sought to further establish Cross River as a dards and increase quality to the benefit of all credible tourist offering on the subcontinent. In the people. This government has made assiduous this regard, there are substantial opportunities efforts to institute the processes and mecha- for private sector participation to facilitate the nisms for the smooth entry of private sector development of various tour sites and attractions participation in operation and management of that already exist, bringing them up to interna- public sector assets. We have created an Invest- tional standards. ment Promotion Bureau as well as a Bureau for Agriculture is just one example of the viable Public-Private Partnership in an effort to ease the opportunities here for private sector participa- entry of private sector commercial interests, thus tion. Wilmar International, the world’s largest freeing up government resources which can be oil palm producer and distributor, has invested employed in investments in infrastructure and in developing a 50,000 hectare plantation other social amenities. h with a refinery. Other domestic agricultural investors have found Cross River to be a con- ducive environment for their investments. Just Photo courtesy of Cross River State government. IFC | 75 FAST FACTS LIGHTING AFRICA Catalyzing markets for modern off-grid lighting 589,000,000 $4,400,000,000 people in Africa live without is spent per year on kerosene by access to a public electricity facility. off-grid African households. 1/3 49% of Africa’s on-grid popula- of off-grid households in Africa tion experiences frequent (54 million households) could blackouts and is consid- have their lighting needs met ered under-electrified. by solar portable lanterns. OVERALL IMPACT: 1,386,000 120% LIGHTING AFRICA off-grid lighting products growth in sales of good that passed Lighting Global quality lighting products quality standards sold in in 2012 (over 2011). Africa. 20 6,900,0001 138,600 countries now selling people in Africa with tons of GHG emission products that have clean lighting and better avoided; CO2–equivalent passed Lighting access to energy due to of taking 26,000 cars off Global quality tests. solar lanterns. the road. Lighting Africa is a joint IFC and World Bank program that works toward improving access to better lighting in areas not yet connected to the electricity grid. 76 | IFC.ORG/HANDSHAKE “ When we reject a single story, we regain a kind of paradise. —Chimamanda Ngozi Adichie ” author, Half of a Yellow Sun WATCH THE TED TALK Chimamanda Ngozi Adichi: “The danger of a single story.” Photo © Chris Boland IFC | 77 Subscribe: ifc.org/handshake Connect with us: facebook.com/ifcinfrastructure twitter.com/ifc_advisory scribd.com/ifcppp handshake@ifc.org October 2013