Investors struggle to navigate African power market

BASEL, Switzerland – Africa will need to assuage investors to secure the estimated US$350 billion in funding required for energy projects over the next two decades, bankers and finance experts have said.

Jean David Bile, chairman of AES Apco, a subsidiary of the US power company AES Corp, said the African energy market remains hard to navigate, with different regulatory and legal regimes confusing and frustrating many outsiders.’We are dealing with an emerging market that is highly fragmented,’ he told an energy conference in Basel, Switzerland. ‘It is not an insurmountable issue … (but) investing in Africa is going to require a very different mindset.’Bile, whose company is based in Cameroon, said political instability was far less of a concern today than several decades ago, and presents little risk to investors and private sector actors interested in engaging in Africa.But he said governments needed to intervene more to confront corruption and to discuss with investors any changes to laws that could impact their business, especially tariff levels.Governments need to show they are willing to share ownership of key assets or skittish investors will stay away, he said.Leslie Maasdorp, vice chairman of Absa Capital, one of the largest investment banks in South Africa, said the cost of power outages can amount to four per cent of gross domestic product (GDP) in Africa, and should be addressed with a matter of urgency.’We still have some outdated industrial policies which are working against the objective of generating new power,’ said Maasdorp, whose bank is a unit of Barclays Capital.He told the Basel meeting that commercial banks like his are increasingly giving investors and funds guidance on how to navigate the African market as part of their offerings.’Risk management is increasingly a very, very important component,’ he said.Bile of AES Apco said the returns from investing in Africa’s power and energy infrastructure stood to be highly attractive for those who manage to hold on.’Emerging market situations evolve. For investors, it’s those who are flexible who are going to survive in this environment,’ he said.- Nampa-Reuters