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Investing in State-Owned Enterprises is critical for infrastructure development in Africa

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  • Kim Chan Wan Fong

    (British International Investment)

Abstract

After banking and financial services, the power and energy sectors are the largest funded industries by development finance institutions (DFIs) worldwide1. The developer of a typical power generating asset is awarded a long-term, concession from a government-owned off-taker. The Concession Agreement (CA) will normally stipulate that if the off-taker doesn’t pay, then the government will step in to make service payments. While the credit ratings of most African nations are below investment grade (if at all rated), having the backing of the government is often sufficient comfort for equity and debt investors to - literally and figuratively - break ground. Given the government involvement in these types of investments, it would seem natural to extend DFI money to State Owned Enterprises (SOEs). Yet, investment in African SOEs is a whole lot less popular amongst the DFI community.

Suggested Citation

  • Kim Chan Wan Fong, 2022. "Investing in State-Owned Enterprises is critical for infrastructure development in Africa," Development Finance Agenda, Chartered Institute of Development Finance, vol. 7(3), pages 1-16.
    • Handle: RePEc:afj:journ4:v:7:y:2022:i:3:p:16
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    File URL: https://journals.co.za/doi/abs/10.10520/ejc-defa_v7_n3_a6
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