Key partnerships critical for infrastructure funding and development

Africa possesses abundant natural resources, including natural gas and oil reserves. It is a major producer of gold, chromium, platinum, copper, lithium, nickel, manganese, cobalt, graphite, chromium, molybdenum, zinc, silicon and rare earth minerals – all crucial for the global transition to renewable energy sources.

Given this wealth of minerals, Africa plays a vital role in the global economy. By harnessing these resources, the continent can create employment opportunities and develop secondary and tertiary industries, ultimately lifting communities out of poverty.

Many of the valuable mineral deposits are deep inland, particularly in Zambia and the Democratic Republic of Congo, far from major ports.

These corridors encompass roads, rail networks, ports, storage facilities and border posts connecting the mineral-rich areas with the ports. The corridors facilitate the transportation of minerals and stimulate economic and social development in the surrounding regions. By improving infrastructure and connectivity, Africa can benefit beyond the exploitation of its mineral wealth.

In the Southern African Development Community (SADC) region, four primary trade corridors facilitate freight transportation within the subregion and to international markets. These corridors are the North-South Corridor (from Durban, South Africa), the Maputo Corridor (through South Africa and Mozambique), the Walvis Bay Corridor (from Zambia to Namibia) and the Dar-es-Salaam Corridor (in Tanzania).

Funding and regulation needed

Currently, infrastructure along these corridors is insufficient to handle the required freight volumes for various markets. Africa has missed economic opportunities during previous booms and trade prospects due to its inability to export sufficient volumes of key minerals.

Efforts have been made in recent years to address this issue. One successful initiative is the concept of One-Stop-Border-Posts (OSBP), introduced a decade ago to streamline cross-border trade and enhance freight transportation. OSBP combines processing the exit and entry formalities of the adjoining states at one location, which reduces waiting and processing time for freight at the borders. 

Over the past five years, SADC countries have launched numerous infrastructure projects, although many remain in the pre-financing stage due to regulatory and implementation challenges within government structures. Due to the limited financial capacity of governments to independently fund these developments, there is a need for blended funding structures that attract private funding for rail and port expansion projects along the corridors. 

Various sources of funding are available, including local and international development banks, commercial banks, institutional investors and infrastructure debt and equity funds.

Development banks are expected to continue providing significant funding to government institutions, while commercial banks are likely to participate in Public Private Partnerships (PPPs).

PPPs promote appropriate risk allocation and implementation of risk controls that protect all parties involved, making them an effective mechanism for attracting private investment to the public sector.

Early involvement of development banks in the form of project preparation funding helps de-risk projects and ensures optimal financial engineering for securing senior debt funding. Commercial banks, particularly South-African-based ones such as Investec, play a crucial role in funding infrastructure projects within the SADC region due to their understanding of the associated risks and ability to provide funding in local currency.

Institutional investors are also increasingly recognising the potential of infrastructure projects and are upskilling to participate in funding solutions.

Attracting private investment and developing and implementing blended funding structures requires strong capabilities, expertise and an understanding of the broader landscape. Partnering with a specialist infrastructure team can assist in navigating the regulatory and implementation challenges within government structures. Extensive experience in this space ensures that projects can make substantial progress towards implementation.

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