Private sector financing

Private sector financing of roads

Toll roads have traditionally proven difficult to implement in Africa. This is in part because the continent is so large and the population density along regional connecting roads is relatively low. It is also true that paying tolls for road use has not been accepted by road users in many African countries. The Nigeria Lekki-Epe concession toll road, which was taken over by the Lagos State government in 2013, is often cited as a prominent example. South Africa has the leading toll road system in sub-Saharan Africa, covering 16% of the national network, with government agency tolling covering 1,832 km and three PPP toll roads covering 1,288 km. Even here, the national cabinet has recently decided to scrap a controversial e-tolls scheme on the Gauteng Freeway.

However, there is a feeling among many transport specialists that the recent debt sustainability issues facing many African countries will necessarily lead to a reconsideration. Kenya, Tanzania, and Uganda have all announced plans to begin charging on certain expressways built with Chinese financing. Even in Nigeria, the Federal Executive Council (FEC) has approved a new Federal Tolling Policy aimed at reintroducing tollgates on Nigerian 

roads. For toll roads and PPPs to play a larger role in transport will require political willingness to ask road users to pay cost-relevant user fees.

For toll roads on national trunk roads, it is likely that viability gap funding to improve bankability would be necessary to attract private sector investment. High quality feasibility studies and experienced financial advisors will be essential for the success of future toll roads. It may also be necessary in some countries to start in ways that reduce project risks. Perhaps initially starting with shadow tolls (where the government pays the tolls) on an improved existing road and converting to user paid tolls later when project risks are better understood.

PPPs in roads, ports, railways, airports

In 2019 there were five transport PPPs, with a combined capital value of $2.468bn, all in the ports sub-sector. In 2020, the total value of all transport PPPs was $5.871bn, with PPPs in all transport subsectors: $5.24bn in railways (of which $5.02bn for the Cairo Metro); $575.9m in the roads sub-sector for the Nairobi Expressway, $133m for an airport in Guinea; and $80m in the ports sub-sector. It is notable that in 2019 and 2020 there was only one toll road PPP, one rail PPP and one airport PPP.

The $2.468bn of PPPs for transport in 2019 was only 7.8% of the total of 33.8bn of commitments for all of transport in 2019. For 2020, the $5.871 PPPs in transport rose to 17% of the $34.4bn committed for all of transport in 2020. This further illustrates the dominance of public sector projects in the transport sector in Africa and suggests the need for more innovative approaches to private finance of infrastructure, as discussed earlier in this report.

The ICT sector is a major success story in Africa and its financing gap has been bridged, mostly by funding by the private sector.

ICT continues to be a notable success story on the African continent, in at least three distinct areas: first, the amount of money invested in ICT infrastructure every year to connect the continent’s citizens and the resulting rate of growth of connectivity are very significant; second, unlike other infrastructure sectors, a substantial share of this financing is from the private sector, lessening the pressure on scarce public money; and third, the African continent is a forerunner in utilizing ICT to provide services beyond voice, notably in extending financial inclusion to low income groups.