Tackling Infrastructure Project Delays in Africa: The Hidden Costs of Inexperience and Poor Funding Strategies

Infrastructure development across Africa promises economic development, economic growth, job creation and sustainable progress, yet chronic delays plague many projects. From solar farms in Southern Africa to mixed-use developments in South Africa, timelines stretch from years to decades.

These setbacks often stem from inexperienced public officials putting together public projects without proper advice, without adhering to laws and regulations. The other factors causing such setbacks is due to civil servants compiling and wanting to undertake infrastructure development projects without proper budgeting, nor without ensuring that the projects that they need to undertake have been properly scoped, properly costed and they have a feasible funding model.

Infrastructure and real estate development delays are also caused by inexperienced professionals preparing or driving such projects without undertaking proper project scoping, without doing feasibility studies and without undertaking proper costing that is informed by the work of various professions such as architecture, civil engineering, electrical engineering, mechanical engineering, structural engineering, etc. As a result of this gap in the scoping and the preparation of infrastructure development projects, such projects end up being delayed, or the projects end up collapsing because they fail the funding test.

Another factor that causes delays to the implementation of projects related to infrastructure development and/or real estate development is that of promoters who are unskilled in structuring, arranging and capital raising, where they and the project owners come to the market with unrealistic expectations of cheap debt (where people have punted funding costs of 3% per annum), and in certain instances, they come to the market expecting to get grants for infrastructure development projects.

Such promoters provide incorrect or incomplete advice, where infrastructure development and real estate development projects are planned in a manner that results in such infrastructure development projects being non-compliant with sustainability regulations.

The cost of delays to infrastructure development projects is not just to the individual project owners, or to the government department or entity wanting to implement such projects, it is also a cost to the economy, as well as a cost to the sovereign integrity of a nation or country.

In this two-part article, we dissect the root causes and offer actionable solutions.

Part 1: How Project Owners’ Resistance to Structured Finance Fuels Delays and Raises the Cost of Infrastructure Delays

Firstly, Project owners frequently underestimate the complexity of planning large-scale infrastructure development projects.

Secondly, project owners underestimate the long-term costs of infrastructure project delays, where the real cost can even transcend generations, and start to erode the sovereignty of a nation.

Thirdly, project owners frequently underestimate the complexity of funding large-scale infrastructure, where if funding from the government budgets fails, such project owners end up opting to not hiring structured finance professionals or transaction advisors. Sometimes even if they do, they hire transactions advisors who have no clue how public infrastructure development can be funded outside of the normal government balance sheet avenues. This decision creates a cascade of delays. Without expert guidance, owners approach financiers from a position of ignorance, pitching projects with flawed financial models or unrealistic terms, such as expecting 100% debt funding for equity-heavy ventures.

Consider these common pitfalls:

• Inexperienced Preparation and Execution: Infrastructure development projects crafted by novices lack robust feasibility studies, risk assessments and bankable tests and/or structures, leading to repeated rejections by lenders and/or investors.
• Capital Raising Novices: Promoters without funding expertise chase “cheap money” illusions, such as government grants or concessional loans, ignoring market realities. In African PPPs (Public-Private Partnerships), this often results in aborted projects and at best, stalled negotiations.
• Overreliance on Debt: Demanding full debt financing overlooks the need for equity skin-in-the-game, deterring investors who spot the imbalance.
• Sustainability Blind Spots: Non-compliance with ESG (Environmental, Social, Governance) regulations, the need to consider and cater for, carbon tax or IFC standards, often triggers regulatory halts, redesigns, rejection by investors whose mandates revolve around such compliance factors, and at best, hefty fines for the projects (if they ever get funded).

These issues compound: a solar project might languish for years because promoters bypassed advisors, only to learn post-pitch to potential financiers that their project does not meet funding requirements, this on top of violating grid compliance rules. Something that could have easily been avoided, had the correct approach been employed from Day 1.

The delays related to infrastructure development projects prevent economies from diversifying, and they actually have the potential of delaying the adoption of 4IR (fourth industrial revolution) for many of the low-income and less developed countries.

Part 2: Ziyanda Capital’s Proven Solutions to Accelerate Your Projects and Avoid the Cost of Infrastructure Delays

Ziyanda Capital specialises in bridging the gaps highlighted herein.

Ziyanda Capital advises project owners on the correct approach for infrastructure development in Southern Africa. Our structured finance advisory turns delayed dreams into delivered assets. Here’s how we deliver:

• Expert Transaction Advisory: We conduct comprehensive due diligence, crafting bankable financial models tailored to debt, equity, or hybrid funding. This includes scenario analysis for solar IPPs (Independent Power Producers) and mixed-use real estate.
• Capital Raising Mastery: Leverage our network of DFIs (Development Finance Institutions), private equity firms, asset managers with the mandate to invest in infrastructure development projects and commercial banks. We’ve secured funding for projects where promoters previously failed, blending grants with commercial debt in a realistic manner, which leaves all parties relatively well-satisfied with our risk allocation, risk mitigation and ring-fencing work.
• Debt: Equity Optimisation: Educate owners on viable structures, where on Day 1 of our engagements, we tell project owners that they need to forget about the illusions of securing 100% Debt Funding, and if their project is in the SADC Region, they need to forget about obtaining funding at 3% per annum. Ziyanda Capital advises project owners to ready themselves for a typical funding structure representing a 70/30 Debt: Equity split. This quickly settles the direction of the trajectory that they the project will take, very quickly.
• Sustainability Compliance: Ensure projects meet local and international standards from day one, integrating ESG into the implementation plans, the funding models and the operating plans, this with the aim of easing the unlocking of green financing, when such is applicable and available.
• Additional Pain Points addressed by Ziyanda Capital: Overlooked procurement delays, where some project owners have not even thought of whom to appoint as an EPC partner, how such an EPC will be appointed, etc. Other factors that cause delays in procurement are evidenced by lack of of delayed appointment of built environment professionals, and at times, project owners completely ignore matters related to currency risk in cross-border projects, as well as matters related to stakeholder misalignment in PPPs.

Conclusion: Engage Structured Finance Consultants from Day One

Infrastructure project delays erode value, inflate costs (artificially or through normal inflation creep) and erode investor confidence. The resistance of professional structured finance advisors by project owners results in setbacks that would otherwise be avoidable. Setbacks in project implementation do not just cause delayed financial gains for project owners, they erode reputation. Investors do not want to work with, nor to back novices. Investors do not have time to hand-hold project owners, or project promoters. Investors want to invest.

Project owners who ignore engaging structured finance advisory firms risk rejection from investors and/or financiers, whilst they risk having to navigate the murky world of regulations, which often require the engagement of corporate lawyers who understand that specific sector of regulatory frameworks by which the project is affected.

Partnering with Ziyanda Capital at the outset ensures:

• de-risking your project,
• aligning funding strategies, and
• fast-tracking the execution of your project plans, and
• tackling infrastructure development delays from the onset.

Avoid the pitfalls related to delayed infrastructure projects. Contact Ziyanda Capital today, to transform your vision into reality.

Ziyanda Capital: For Structured Finance Solutions.

Your partner in African infrastructure development finance.

Specialising in project preparation advisory, project funding advisory and capital-raising.