First PPP deal in East Africa

Mota-Engil Africa will finance $80m in the first infrastructure PPP in Malawi.

 

The project will build a modern highway between Njakwa, Livingstonia and Chitimba in the north of the country.

 

Richard Laudy, head of infrastructure at Pinsent Masons said “Africa has woken up a continent and has realised how much it has offer the world”

 

Francis Kasaila, the minister of transport and public works, said the firm would pay the entire cost of building the road, and would recoup it over an unstated period.  

 

“We have learned a lot of lessons from those [projects] we have executed previously and are determined to do things differently,” he said. “The good thing is that it will be funded by a contractor whose capacity to deliver a project of this magnitude is beyond a doubt.”

 

It has been estimated that the road will take three years to be accomplished. The main objective is to rouse tourism by making a number of attractions in and around the Nyika National Park and the Vwaza Wildlife Reserve accessible to visitors.

 

The main significance of this project is that it is one of the first PPP schemes in east Africa, and if it is efficacious it may be the first of many. 

 

In Malawi, which is the poorest country in east Africa, the government has indicated that a number of other projects may follow, such as links between the northern towns of Jenda and Edingeni, Rumphi and Nyika and Mzimba and Ezondweni.

 

Mota-Engil Africa, which is the listed subsidiary of Portugal’s Mota-Engil, has said it expects PPP to become a more important procurement route. 

 

In an interview with GCR in December, chief executive Gilberto Rodrigues said: “Governments in Africa are becoming more sophisticated about how they spend, with PPP models starting to be trialled.

 

I think the traditional model for doing business in Africa has been slightly but consistently shifting.

 

“One example is a concession to operate a road connecting Zimbabwe to Malawi through Mozambique: we built the bridge over the Zambezi river, we’re managing the concession.”

 

Richard Laudy, the head of infrastructure at law firm Pinsent Masons, told GCR that PPP schemes had a significant part to play in filling Africa’s infrastructure gap, “once governments decided that are politically willing to accept the private sector – which is easier for some than for others”. 

 

He said the second, and potentially more serious, problem was to set up the pipeline of future projects in order to persuade the private sector to become engaged in a country’s development.  

 

“Firms want to know that there is going to be a steady income stream, and if you don’t have that it can be very challenging to get the private sector interested. The third thing is political risk, and a problem that African regimes have is a perception, rightly or wrongly, that their stability is not there yet.”

 

In terms of government’s ability to apply PPP, Laudy said that this was not a problem owing to the number of global consultants who could assist governments to set them up – many of them freed by the demise in PPP work in the UK.

 

Laudy said: “Africa has woken up a continent and has realised how much it has offer the world. With the price of resources in places like Australia being so incredibly expensive because the cost of labour is so high, African governments have realised that they can offer the same thing at a much cheaper cost. So you’re seeing mining companies piling into Africa, and they have to build infrastructure to get from pit to port. You go to places like Mozambique the amount of infrastructure development is extraordinary.”