Any assumptions that East Africa was short of money to finance a number of its key projects were put to rest during a dinner for three presidents attending the Northern Corridor infrastructure summit on Friday night, with private sector players saying the region needed to offer a conducive environment for more capital to roll in.

Making a strong case for the banking industry’s ability to fund investment projects, Patrick Mweheire, the chief executive at Stanbic bank Uganda, the largest in the country in terms of assets, said: “The irony is that capital is no longer a scarce resource anymore.”

He explained that some of the top private equity funds were “looking for yield in the region,” meaning that foreign players were willing to spend money on investments that could bring them higher interest earnings. Private equity funds usually channel money through financial institutions such as banks.

A report by Ernst and Young, released last year, notes that East Africa will continue to attract private equity funds for the years ahead.

“As growth rates declined across most of the developed world in the aftermath of the credit crunch, private equity (PE) firms turned to emerging markets as an engine of growth,” the report, titled Private Equity Roundup Africa, noted.

It further noted that “East Africa (consisting of Kenya, Tanzania, Uganda, Rwanda and Burundi) will be attractive partly because it is doing more than most other African regions to become integrated, thereby facilitating easier cross-border activity and attracting investors.”

The report pointed out that there are already private equity funds targeting the continent’s infrastructure projects. It listed Convergence Partners as one of those that recently announced a first close of $145m on an infrastructure fund for information and communications technology investments across the continent.

Harith General Partners is also said to be fundraising for an infrastructure fund targeting $1.2bn, which will be invested in projects across the continent. Sithe Global, a company majority-owned by a fund managed by Blackstone Group, helped partly develop Uganda’s Bujagali hydroelectric project to a tune of $116 million.

More of these funds are expected to target the projects under East Africa’s northern corridor programme. The Northern Corridor Infrastructure summit is an initiative that was launched in 2013 to implement a number of programmes, most of which are trade-related, to support economic growth around the region. This was the 10th meeting where the presidents discussed the progress of the different projects.

Some of the 14 projects that the summit is focusing on include: two petroleum pipelines, the oil refinery in western Uganda, the standard gauge railway between Uganda and Kenya, the one-stop border points, and ICT, among others.

Kenya’s President Uhuru Kenyatta said the governments had no business undertaking these projects on their own. He said that the private sector should take the lead in executing most of these projects, also reiterating that “we are not short of capital.”

Kenyatta, who is also a shareholder in Brookside Dairy Limited, the company that recently acquired Uganda’s Sameer Agriculture Livestock Limited, said governments needed to create an environment that supported private sector participation.

President Yoweri Museveni said government was already listening to the concerns of the private sector. He pointed to the recent abolition of Value Added Tax during the exploration of minerals, saying it was unfair that investors who were pumping money in a mining project, and not get any return, would be subjected to tax.

Museveni also thanked Kenyatta for creating a comfortable environment for Ugandan importers in Kenya.

“Before Kenyatta came, there used to be a mentality that they are doing us a favour by allowing our goods to go through Kenya. These were enemies… I am happy that Kenyatta has dealt with this mentality,” he said.

He was pointing to the numerous complaints from Ugandan traders who said they faced harsh conditions at Kenya’s busy port of Mombasa. Jeniffer Mwijukye, who is a part owner of Unifreight Cargo Handling Limited, which also manages an inland port facility on behalf of Uganda Property Holdings Limited at Mombasa, said Ugandan importers would appreciate it if Kenya implemented the electronic cargo system, which partly eases the clearance of goods.

She said TradeMark Africa has a fund that facilitates the implementation of this system, and that Uganda is already benefiting from it.

Elly Karuhanga, the chairman of the Uganda Chamber of Mines and Petroleum, the body that organised the dinner at Speke Resort Munyonyo, said throwing dinner alone did not offer the private sector and the presidents enough time to brainstorm all the issues holding back development in the region. He asked for a full day, a request that President Yoweri Museveni granted.

For example, Mweheire also said some of the investors’ main concerns also centred around credit risk and political risk. On credit risk, Mweheire said a lot of money was spent on the preparation stage. He estimated that about five to 10 per cent of the project cost was spent on such things like feasibility studies, among others, which, he said, was too much money.

It is the private sector’s concerns, such as those involved in the sensitive tourism industry, about the political risk that could pose a bigger headache for the presidents.

The absence of the presidents of Burundi and South Sudan from the dinner table – two nations that have a role to play in this summit – was not lost; both countries are trying to keep a fragile peace process in their countries in place, which, if they fail, has deep ramifications for the region.

President Paul Kagame of Rwanda said there was political will to address some of the concerns of the private sector and also push ahead with the infrastructure projects. But that, he added, was not sufficient.

“There is political will. But political will alone is not enough. There is need for urgency,” he advised.

Source: All Africa

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of TradeMark Africa.