In July 2024 a
In July 2024 a significant milestone in the development of the rail infrastructure project to support the Simandou iron-ore mine in the Republic of Guinea was achieved. one of the secrets to success in creating a prosperous African continent: regional integration, where we see the countries agreeing to cooperate and work closely together to achieve economic and political stability; wealth and peace are core drivers to development and sustainability for the continent. This in turn will create an appetite for intra-African trade and shines a light on the need for regulation of standards, maintenance of high-quality products and facilitates the need for local and international trade.” “Prioritising structural transformation that is green, inclusive and resilient will lay a foundation for resilience ahead of the next crisis” Corridor development is thus an integral part of boosting intra-African trade and an essential element of regional integration. Beyond physically connecting geographies, corridors will enable vital socio-economic transformation. Rail development is the long-term solution for regional integration and presents great advantages in terms of sustainability and safety. Nevertheless, it is the infrastructure that requires the largest capex investment and therefore needs strong planning, and critically, weighty financing. The recent International Forum: Financing Rail Projects in Africa organised by the International Union of Railways (UIC) held in October 2023 in Dakar has opened the debate around key issues relating to rail corridors. The structuring of project financing and the emergence of a new legal framework to mitigate risk for investors are certainly valid approaches to explore. For example, the Luxembourg Protocol to the Cape Town Convention on International Interests in Mobile Equipment is currently under discussion. When enforced, it will set up a new global legal regime that will make it easier and cheaper for the private sector to finance railway rolling stock. The Protocol aims to increase certainty and reduce risks in asset-based financing for the acquisition and use of railway rolling stock through a global legal framework providing international recognition and enforcement of creditors’ rights. In addition, there is a real opportunity to use mega-mining investments where rail is crucial for operations to develop new corridors. For example, the Simandou iron-ore project that involves the construction of a 650km railway in Guinea will be a strong driver for socio-economic growth and a great chance to foster sustainable development, job creation, new local expertise development, social integration and gender diversity. It is now imperative that local governments and all stakeholders obtain maximum benefit from the opportunity. Finally, public and private authorities need to urgently address standardisation across technology, operations and safety measures to reduce lead times at borders and fully exploit the infrastructure in the medium term. Regulatory compliance and consistency are crucial across economic corridors and need to align with global compliance. Green finance as an opportunity In response to the global climate crisis, green finance is the strategic approach to incorporate the financial sector in the transformation process towards low-carbon and resource-efficient economies. Various types of infrastructure from housing to transport, energy, telecoms or water must all carry green, smart and climate resilience as core requirements. Infrastructure development should be environmentally sustainable and meet the needs of future generations. Policies and practices to promote sustainable development and climate change mitigation need to be implemented. This will require governments and private developers to build resilience into infrastructure projects in regions vulnerable to climate change or other environmental hazards such as flooding or drought. Long-term sustainability versus “quick wins” can prove a dilemma on the African continent. The immediate need for results can be a strong motivating force at the expense of long-term sustainable infrastructure rollouts that will provide health and safety benefits for all, and in accordance with global standards and certifications. The global green agenda is a unique opportunity to leverage funding for critical assets needed to be developed such as affordable housing. Affordable housing is one segment of the much-needed gap in infrastructure and is an area of huge foreseeable growth. Today, 54-million people live in impoverished areas and this number is due to double by 2030. More than 74% of the population lives on less than per day, according to International Finance Corporation (World Bank Group). New development schemes and the need for financial institutions and investors to greenify their portfolio can be used to leverage funding. Green-building certification schemes have showed recently that they can be a useful tool for affordable housing development. For example, the government of 30 PHOTO: Rio Tinto
INFRASTRUCTURE FUNDING Kenya has issued a decree that all affordable housing projects under the nation’s “Big 4” Agenda must meet the EDGE green buildings standard (Excellence in Design for Greater Efficiencies). The government will provide developers with free land to build affordable housing projects that meet the government’s commitment to resource-efficient structures. The decree was enacted by Kenya’s State Department of Housing and Urban Development in the Ministry of Transport. The government aims to build at least 250 000 houses every year for the next five years, a project that could see over six-million Kenyans get proper affordable houses. Another noteworthy example of green building standards for affordable housing development is Acorn Holding Limited, which, in 2019 issued the first Green Bond in Kenya. The projects were benchmarked against International Finance Corporation EDGE green building standard. By 2050, Africa’s cities will be home to an additional 950-million people and places like Addis Ababa will benefit from detailed infrastructure planning. Private investment will make the difference It is essential that governments and institutions create an enabling environment for investment: a clear and transparent regulatory framework sets the foundation for a conducive business environment. Governments need to create the right legislative, regulatory and institutional environment to attract private investors to come on board. For instance, African Special Economic Zones (SEZs) are considered one of the main instruments that stimulate economic reforms, promote quality foreign direct investments (FDIs) and accelerate industrialisation across the continent. The main objective is to increase a country’s trade balance, employment, investment, job creation and effective administration. According to the African Economic Zones Outlook (Edition 2021), more than 200 SEZs are operational in Africa with 73 projects intended for completion in 47 countries. The land dedicated to SEZs is nearly 150 000ha while over .6-billion has been mobilised in investments dedicated to agro-processing, manufacturing and services. The number of SEZs on the continent is steadily rising but there are still challenges to meeting industrialisation, foreign direct investment and job creation targets. SEZs are geographical areas that are mostly located at borders and offer investors attractive tax incentives (reduced or zeroed), infrastructure (developed land, factory buildings and public services), a special customs regime (exemption of inputs from customs duties and taxes) and simplified administrative procedures. They owe their fame mainly to being instrumental in the economic take-off of Asian giants such as China, South Korea, Hong Kong and Singapore. Investment returns A key issue to be noted is that financing is available, but lenders (private or otherwise) want to see a return on their investment. However, a lack of understanding of the African context makes it difficult for new investors. Each country needs to be treated uniquely according to its strengths and needs. It is vital that the diverse economic needs of different regions and countries are embraced. Monitoring and protection of their assets’ full life-cycle, from design to construction, operation and completion to de-risking of the investment is sought, with a knowledge that guaranteed funding is being appropriately managed to ensure healthy financial returns. It is imperative that quality, health and safety, sustainability, corporate social responsibility are monitored according to global standards to ensure outstanding infrastructure is developed for the long term. Massive opportunities are anticipated and through effective facilitation of projects based on partnerships of trust and harmonisation of regulatory compliance standards, it is predicated that investment appetites will mature. It promises to be a win-win all around. Distributed by APO Group on behalf of Bureau Veritas. About Julien Fouilliart Julien Fouilliart is a business development professional with some 15 years’ experience in international, multicultural and cross-sector environments. He is currently leading Bureau Veritas’s development strategy in Africa in the Building & Infrastructures market. A mechanical engineer by occupation, he is based in Kenya and is passionate about the African continent. Julien has been actively contributing to the emergence of large and iconic infrastructure projects in the region. He has previously worked in France, China, Spain, Belgium and the United Kingdom, collaborating with global companies and public institutions to generate new business opportunities in the aerospace, IT, rail, building and transport infrastructure sectors. Julien Fouilliart of Bureau Veritas PHOTO: Abdullah Aljaberti on Pexels 31
