I recently downloaded a paper by Dr. Anton Eberhard and Dr. Katharine Nawal Gratwik at the University of Cape Town called “IPPs in Sub-Saharan Africa: Determinants of Success”. Very interesting read with a lot of good info compilation. I’ll quote the main conclusion from the end of the paper:
The role of firms with development origins such as Aldwych, Globeleq and IPS, and DFIs, such as IFC, Proparco, FMO and DEG, is increasingly important in the development and bringing to financial closure of new IPPs in Sub-Saharan Africa. Furthermore, the fact that projects with participation of these firms and DFIs were less likely to unravel signals two points: such projects may have been more balanced from the outset, and when an exogenous stress struck, they may also have been better equipped to resist any form of host-country government pressure.
I’ve described my own increasing awareness of the development impact of Provinceroot’s work in some of my recent posts, and to that extent I largely agree with the paper’s thesis.
The paper also perhaps explains some of the hesitation that international capital feels about investing large amounts in Africa – there still has to be an overriding sense of development purpose to manage and finance the long and risky process of implementing any kind of infrastructure project in Africa right now, and that’s simply not consistent with the more streamlined goals of many private equity funds. At the end of the day, the IRRs of many projects are consistent with PE fund targets, but amongst all the opportunities in the world it would be easy to pass on a power plant if Africa if the sole motivation is chasing IRR. One often hears that Africa needs “patient capital.”
Even if a developer (or investor) is resolutely “private sector” or does not identify as an “impact” business as such, the reality is that the actual endeavor ofputting an infrastructure project together is consistent with the “triple bottom line” framework; the difference, in my opinion is self-identification and marketing.
