Big Ticket Practicalities in the Gulf of Guinea
Prior to the pandemic, the phrase “there is no shortage of capital” was commonly repeated in the investment community. And that it is rather, the identification of large-scale bankable projects that is the ‘pain point’ for asset managers committed to financing major infrastructure in the region. Today, COVID-19 has put pressure on African supply chains, livelihoods and consumer demand[1]. It has simultaneously intensified our countries’ need for new productivity enhancing physical infrastructure and strained governments’ ability to act as a partner on the same.
Take the Gambia and Ghana, for instance. In the former, total revenue and grants fell from 29% to 25% of GDP between 2019 and 2020[2]. This year, the government expects its overall deficit to tick upwards from 3.9% to 5.6% of GDP. Meanwhile, general elections are scheduled for December and campaigning will begin in the coming months. Ghana’s economy is much larger; so too are its imbalances. From 2019 to 2020, the fiscal deficit is estimated to have increased from 5% to 11% of GDP and public debt from 63% to 77% of GDP. Ghana had its general elections in December 2020 but the results have produced an historic hung parliament or close to the same. Please see here.
These data points only add to the complexity of qualifying opportunities to engage in the sort of infrastructure that could power recovery and long-term growth. For example, authorities in Ghana and the Gambia have expressed varying levels of interest/commitment to projects such as:
The Gambia: Banjul-Barra Bridge, which would link the capital Banjul, on the southern side of the Gambia River to the northern bank (the same side as the Senegalese capital, Dakar).
The Gambia: Development of a National Data Centre serving the data infrastructure needs of central government agencies initially and then education and healthcare sectors, payment platforms, immigration services, and then private sector more broadly.
Ghana: Accra-Takoradi motorway project. This would broaden the road connecting the administrative and commercial capital Accra to the oil industry hub Sekondi-Takoradi from a single/double lane to a four-lane road.
Ghana: Rehabilitation of the Eastern railway line connecting Accra and neighbouring Tema with the second city, Kumasi.
To qualify them, investors will have to make use of the following diagnostic questions:
Where does the office of the presidency, the finance ministry, and the specific relevant portfolio ministry currently sit with regard to this project?
Who are the primary decision-makers within the legislature and how are they predisposed toward it? From the speaker through committee level and the relevant constituency.
Where does principal opposition stand with respect to the project? This refers to official party organs but also those individuals with the heaviest interest and influence.
Where are we in the political cycle?
Outside government, who are the primary local decision makers, what is their level of engagement and their position on the project in question? Include donors in this arithmetic.
What are the de jure and de facto processes for the proposed investment, including the roles of the identified counterparties, and are they fully cognisant of them?
How strong is the underlying project need? i.e., a nice to have is not strong enough
Relevant qualified and experienced legal expertise that can ensure contracts are robust.
There is no guarantee that the key local parties are (a) cognisant of the project’s current status, (b) aligned on its merits, and/or (c) willing and able to go through the legally required steps to see the project completed, even where they support it.
In fact, investors should view their own willingness and ability to investigate the above as both risk management and a potential source of comparative advantage.
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[1] Estimates of COVID-19 morbidity and strain on healthcare systems are also rising.
[2] In large part due to reduced grants
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