A benchmarking survey has shown that developing infrastructure projects in Africa is more difficult and costly than in any other developing country region. 

The Benchmark for Investing in African Infrastructure Project Development, known as the I4PD Benchmark, said the risk premium attached to African projects was significantly higher than that of other developing country regions such as Latin America, Asia, emerging Europe and the Middle East.

Faced with a high perceived risk and cost of capital, Africa is the only region where the survey participants put the required internal rate of return at 16% to 20% for securing local partners, strategic investors and international finance partners. It is between 11% and 15% in other developing country regions.

The survey was pioneered by the advisory board of the African Investors African Project Developers Forum with technical support from Africa Investor Capital and the Global Clearinghouse of Development Finance (GlobalID). 

GlobalID executive director Barbara Samuels on Tuesday told the International Federation of Consulting Engineers (Fidic)-Group of African Member Associations (Gama) conference on African infrastructure, in Cape Town, that the benchmark was aimed at identifying the obstacles to scaling up infrastructure in Africa.

Project developers, financial advisers and investors were among those surveyed.

The survey showed that an immense amount of political support is needed for a project to go ahead.

“In Africa, it’s extremely important to have political support. It’s off the charts in Africa compared to other regions,” said Samuels.

Apart from political support, greater support is needed from development institutions, while investment incentives and funding for noneconomic infrastructure for a project, are each needed in abundance and are essential to reach full closure.

It is also much harder to secure qualified professionals in Africa, particularly qualified local project developers as there is a shortage of qualified professionals.

The reported success rate of African infrastructure projects, gauged by those reaching financial close and able to provide service, is on average only about 20%. This compares to 25% in Latin America, 27% in Asia and 40% in the Middle East. The project success rate for the advanced economies is reported at 46%.

Development costs for projects are also high on the continent, making up to 5% to 12% of total project costs.

“This is very expensive. Time frames are also too long. Projects can run from 2 to 15 years. This can make it to risky to invest. We need to reduce the time frames,” said Samuels.

High risks translate into fewer projects on the ground, and those that are being developed have to pay high premiums. But there are things that can be done to improve the situation.

These include loosening government red tape and being clear with government about what needs to be done for companies to secure offtake agreements and deliver the projects.

It is also vital to boost the number of adequately skilled professionals in Africa.

"We need armies of engineers in Africa,” said Samuels. She said it would also help to link brand-name, world-class, recognized engineering firms with smaller local engineering firms, which would have offtake agreements.

The Fidic-Gama conference is the largest annual networking event for consulting engineers in Africa.