currency and therefore our natural headquarters for
Francophone Africa.
With that said, our strategy isn’t to develop projects in every
single African country. We are currently looking at projects in,
amongst others, Gabon, Cameroon, Benin, Tanzania, Kenya,
Zambia, Mozambique, Namibia, Nigeria, Burkina Faso, Mali,
Senegal and Ivory Coast.
What are the key challenges in funding South African
infrastructure projects?
In South Africa, we believe we are now thankfully at the end
of a period of policy uncertainty, especially with regard to
the Renewable Energy programme and the Power sector
generally. Without exception, uncertainty is the biggest killer
of infrastructure projects because we need it for investors to
commit to these long-term projects.
What do you do to mitigate your risk in South Africa?
South African investors know what to expect. Foreign
investors, however, need reassurance about the levels of risk
and how to mitigate that risk. One issue that always arises is
the currency in which you contract. It’s an issue that needs to
be addressed for foreign investors, not just investing in South
Africa, but in the rest of Africa as well and we address the
currency risks in various ways. For example, hedging where
necessary, especially when much equipment needs to be
brought in at the start of a project; or contracting the off-take
price with a hard currency basis.
Jurie Swart, CEO of African Infrastructure Investment Managers (AIIM).
been involved in around at least a quarter of all the new
renewable energy schemes in South Africa.
Why were Nigeria and Nairobi the
chosen destinations for your
business outside of South
Africa?
The first destination
outside of South Africa
was Lagos. Nigeria
is Africa’s largest
economy and is by
far the dominant
force in West Africa.
Nairobi plays a
similar role with
Kenya acting as a
hub in East Africa. In
addition, we found
it easier to move into
the territories where
English was used as a
language of business.
Having preliminary project approvals in place is important
before we commit. We won’t work on anything that’s too
early-stage, but we will often start small and scale up later
on certain projects.
Equally, on the larger projects we’ll need to
ensure that our tariffs are signed and sealed
(to guarantee revenue) and that interest rate
hedges are also in place at the beginning.
"If a project seems too
good to be true it almost
always is, and it will unwind
at some point.
Our new presence in
Abidjan serves as a gateway
into Francophone Africa and, most
importantly, its economy has been growing
well above average for the last six or seven years with
inflation under control. It is the hub of the West African
50
A way of mitigating risk is only investing in projects where
we are certain of or a high level of confidence in revenue
security. We are willing to trade potential upside against
minimised downside. We don’t work on the basis of backing
the one big winner in the expectation of other projects falling
over. We expect all our projects to succeed if we back them.
African Mining October 2019
There are three other broad categories
of risk mitigants that are extremely
important to us. One is that we have
a large diversified portfolio in the
energy sector. We expect some
projects to have delays or other issues,
but we’d expect other projects to
progress more smoothly, and these
tend to even out. This is a clear benefit
of diversification.
The second broad risk mitigant is being
sure that our projects are based on long
term sustainability. If a project seems too good
to be true it almost always is, and it will unwind
at some point. By working with the South African
government’s IPP office we are able to take this risk out
of the equation because they are extremely thorough and
will only back solid projects.
A third means of controlling risk are public and proven
commitments by our partners in the Environment, Social and
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