Co-investments and African infrastructure deficit: Understanding and mitigating political risks in Conflicts Affected and Fragile States

Nawo, Larissa and Njangang, Henri (2018): Co-investments and African infrastructure deficit: Understanding and mitigating political risks in Conflicts Affected and Fragile States.

Abstract

This article through a qualitative assessment identifies political risks confronted by FDI in infrastructures project in African Conflicts Affected and Fragile (CAF) States and studies the structure for infrastructures financing which allows lessening political risks. Outside hydrocarbon sector which remains attractive even in a worse political context, African CAF regions infrastructures sector as other sectors remain unattractive to foreign investors. By considering global investors’ weak preferences for CAF countries infrastructures assets, due to high levels of political risks, we argue that: to fill the CAF States’ infrastructure gap and addressing at the same time political risks concern, an optimal solution is located in a strategic tricky balance between African SWFs as kick-started, Multi-Development Banks (MDBs) (like MIGA agency under the World Bank Group) and long-term institutional investors like foreign SWFs. In the initial phase, MDBs with both their flexibility and experience ought to help finance the riskiest phases of infrastructure projects after African SWFs have to identified bankable projects. In the second period, MDBs ought to disengage and transfer their mature green infrastructure projects to secure the path for a workable involvement of long-term institutional investors such as sovereign wealth funds. With the aim to foster a vast African infrastructure bonds’ markets in which the African CAF States could play a pivotal role, strengthening rules of law (regulatory and legal frames) should begin straightaway

• Item Type: MPRA Paper
• Language: English
• Keywords: Sovereign wealth Funds, Africa, CAF States, Political risks, infrastructure financing, co-investments, Multi-Development Banks (MDBs)
• Subjects: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D74 - Conflict ; Conflict Resolution ; Alliances ; Revolutions; G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy ; Financial Risk and Risk Management ; Capital and Ownership Structure ; Value of Firms ; Goodwill; H - Public Economics > H1 - Structure and Scope of Government > H13 - Economics of Eminent Domain ; Expropriation ; Nationalization; H - Public Economics > H5 - National Government Expenditures and Related Policies > H54 - Infrastructures ; Other Public Investment and Capital Stock; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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