The Civil Engineering Contractor August 2018 | Page 10

INFRASTRUCTURE AFRICA

EAST AFRICA

KENYA

Infrastructure projects on pension funds’ radar

The World Bank has encouraged Kenya’ s growing body of pension schemes to invest their capital in public-private partnership( PPP) projects. This is in line with the government’ s efforts to open up infrastructure as a new asset class for institutional investment. World Bank senior financial sector specialist, Caroline Cerruti, describes Kenya’ s infrastructure needs as‘ vast’ with about USD4-billion a year, creating an opportunity for longterm institutional investors such as pension funds. According to Kenya’ s Retirement Benefits Authority, the pensions sector had assets under management of over KS1-trillion as at end- 2017 and schemes are under pressure to generate returns for members by diversifying their investment. Cerruti addressed trustees of several pension schemes across the country during the annual Trustees Forum. She describes bank lending as a diminishing source of long-term financing given the growing constraints of commercial banks( through international Basel regulations) to make long-term loans for PPP projects. She explains that it therefore makes better sense for the government to search for long-term financing for various infrastructure projects from pension schemes. She labelled this‘ an opportunity’. In the upcoming budget, the Kenyan treasury is expected to table a proposal to revise the asset classes in which pension schemes are permitted to invest. In Kenya, the regulator has been supportive of opening more investment channels. This will be presented in the upcoming budget proposal to open infrastructure investment as a new asset class for pension schemes. She says there are about 67 local projects in the pipeline that pension schemes could take part in, with the first five PPP road projects coming to market in need of about USD3- billion to USD4-billion. Among them being the 175km Nairobi – Nakuru toll road project, final bids for which were submitted in March; and the second Nyali Bridge construction in Mombasa, which is in the pre-qualification stage. The Bank urged local pension funds to invest in PPP projects through the Infrastructure Debt Fund as senior debt providers— not equity partners— to ensure they have the highest priority in terms of repayment. The case for infrastructure was a combination of the diversification benefits for alternative investment, as well as good returns from infrastructure assets. It was noted that international pension schemes are also looking at infrastructure investments in Kenya to maximise benefits to their members, so Kenyan pension schemes should follow suit.

SOUTHERN AFRICA

ZAMBIA / ZIMBABWE

Joint bid for USD3-billion Zambian – Zimbabwe project

Global electrical engineering giants, China Power and US firm General Electric( GE), have made a joint bid for a contract to construct the 2 400MW Batoka Gorge Hydropower Project being co-developed by Zambia and Zimbabwe. Zimbabwe’ s Energy and Power Development Minister Simon Moyo was reported in the Lusaka Times as saying the two electrical engineering giants had jointly expressed strong interest in the project. The energy minister said that while Zimbabwe had successfully commissioned the Kariba South Extension Project in March this year, which added 300MW to the national electricity grid, the country remained short of power capacity, whereas the country’ s goal was to be energy self-sufficient as well as be a net exporter of power. Moyo told the Lusaka Times he would engage his Zambian counterpart to discuss ways in which the implementation of the Batoka power project, which the two countries need urgently to resolve power deficits in their countries, could be expedited. The Batoka Gorge sits on the Zambezi River bordering Zimbabwe and Zambia, and whose administration is shared by both countries. It supplies water to the jointly owned Kariba Dam, which the two countries use for power generation: 1 050MW for Zimbabwe and 1 080MW for Zambia.“ I do know my colleagues would want to accept this development. I will consult and we will meet as members of the Zambezi River Authority to discuss how we can speed up the programme,” said Moyo. The USD3-billion Batoka power station will be situated 60km downstream of the Victoria Falls on the Zambezi River and is expected to improve the two countries’ power supply, currently in deficit, and also to feed into the Southern African Power Pool. Zimbabwe’ s and Zambia’ s demand for energy are forecast to more than double by 2035.

The Zambezi River is the site of another power generating plant for Zimbabwe and Zambia.

Alan Rambling

8- CEC August 2018