ISAAC KWAKU FOKUO, Jr.
1. THE PANDEMIC HAS HAD AN IMPACT ON CURRENT INFRASTRUCTURE PROJECTS IN AFRICA – HOW CAN COUNTRIES AND DEVELOPERS WORK TOGETHER TO RECUPERATE LOST TIME AND INVESTMENT?
Governments and developers should speed up decision making, renegotiation, and refinancing processes to quicken the re opening of infrastructure projects. Additionally, these stakeholders need to rethink their supply chains and reduce dependence on one supplier to provide for alternative sources of manufacturing and construction components that go into these projects. Moving forward, such factors are expected to factor in the risk assessment of investment decisions, and it is best if countries and developers implement them early.
Increased collaboration and consultation across countries and sectors. Discussions on re-opening the economy should not be siloed - meaning governments should not only be discussing what happens next with each other but also with key representatives from different sectors, specifically the private sector. Now more than ever, governments need to leverage the skills and problem-solving mechanisms of the private sector and use these in decision making and planning for the future.
2. WHAT DO YOU FEEL WILL BE THE NEW PRIORITY AREAS WITH
REGARDS TO INFRASTRUCTURE DEVELOPMENT THAT GOVERNMENTS SHOULD FOCUS ON AND THAT WILL ATTRACT INVESTMENT?
- Building digital infrastructure to support the now fast-growing technology backed sectors.
- Boosting healthcare infrastructure - the pandemic has revealed the weaknesses of the continent’s healthcare systems and governments will be directing more funds towards building hospitals and other healthcare facilities.
3. HOW SHOULD INFRASTRUCTURE DEVELOPMENT POLICIES AND LEGAL FRAMEWORKS BE AMENDED MOVING FORWARD TO ACCOMMODATE FOR FUTURE POTENTIAL CRISES?
Local content laws aimed at enhancing the development of local expertise and facilitating the involvement of local companies in massive infrastructure projects should be bolstered to accommodate for future potential crises.
Currently, a number of projects, especially in the infrastructure sector, have stalled due to travel bans and flight cancellations preventing skilled personnel who had been tasked with managing these projects from traveling to the sites. Such issues should not be happening, governments need to pay more attention to building local expertise and reducing the reliance on foreign talent. The challenge has been implementing these laws to ensure that they are enforced in a way that actually ensures skills and knowledge transfer between foreign and local companies and those local companies are rightly integrated into these projects at top levels.
4. DO YOU SEE PUBLIC-PRIVATE PARTNERSHIPS PLAYING A ROLE IN ISAAC KWAKU FOKUO, Jr. Founder and CEO, Botho Emerging Markets Group, Kenya ACCELERATING SOCIAL AND ECONOMIC INFRASTRUCTURE PROJECTS IN AFRICA?
Yes. Government funds are currently strained due to the impact of the pandemic and some of the needs that have arisen out of the pandemic. Additionally, many governments have provided for tax cuts which have reduced the revenues they will make from their businesses.
Public-Private Partnerships with the private sector participating through debt and equity in project finance will bridge the finance deficits that many governments are facing. Project finance bases the viability of a project on its future cash flows and that’s an effective tool in providing immediate funds and accelerating infrastructure projects.
5. ARE THERE NEW INVESTMENTS MODELS THAT SHOULD BE CONSIDERED FOR THE FUNDING OF PROJECTS?
Distressed assets investment combined with earn-outs. While distressed assets investing is not a new concept - it is still very nascent on the continent with many countries recently reforming their laws to provide for alternative pathways to business recovery leaving liquidation as a last resort. The problem, however, is that valuation is expected to be a major point of contention because of the uncertainty around COVID and how quickly or slowly markets will recover. Sellers are expected to rely heavily on pre-COVID valuations while investors, considering the impact of COVID, will definitely propose significantly lower values. By using earn-outs, both the investors and sellers will be able to get to a middle point where though the seller may agree to sell at a lower valuation, they can still make money should the project hit certain targets in the future.
6. ARE THERE ANY ADDITIONAL POINTS THAT WE SHOULD CONSIDER WITH REGARDS TO INFRASTRUCTURE DEVELOPMENT IN THE “NEW NORMAL”?
Not just for infrastructure but organizations should be considering a crisis playbook.
After the 2008 financial crisis - one major practice that came out of it was the creation of living wills for big financial institutions that were considered too big to fail.
In a post-COVID “new normal” infrastructure development companies and other firms should create a crisis playbook that they can rely on whenever disaster strikes. A crisis playbook will enable companies to better respond to disasters and quickly pivot to minimize the impact on their operations.