Private Sector Participation in Infrastructure in Africa (1970 to 2007)

Abstract

This study appraises the record of private sector participation in infrastructure (PPI) in Africa using the updated PPIAF database for 1970 to 2007. The results of almost two decades of regulatory reforms, implementation of the privatization and liberalization agenda, combined with the influx of private investment in infrastructure have decidedly been mixed. There has been a “policy mistake” founded on the dogma that infrastructure would be financed by the private sector. For various reasons, mainly involving investment climates and rates of return, private investment has been limited in terms of volume, sectors and countries. The current global economic and financial crisis poses a new threat. Its effects are already being felt in greater delays in financial closures, more cancellations, and higher financing costs for PPI projects. The lessons of experience, however, show that most countries will be better off working out a partnership with the private sector. To begin to solve Africa’s infrastructure investment problems, broad institutional reform along with greater financial commitments by governments and the private sector will be required. Private participation in infrastructure requires fiscal reform and improvements in public sector management. It also requires careful attention to the basics of project design, including identifying and allocating risk and ensuring sound procurement practices.