What’s more, six of the world’s top 15 megaprojects – those priced at more than $10bn – last year were in Africa, with hydrogen a particular focus. Despite an apparent fall (-43.5% to $44.9bn), FDI in Africa is set to grow by 7% in 2022, according to the same report.

Financing difficulties

“The continent is full of private sector-led projects. Our good performances in 2022 and the first half of this year show that there is no shortage of profitable investments,” says Sameh Shenouda, executive director and chief investment officer of Africa Finance Corporation (AFC), the pan-African development finance institution focused on the private sector.

Like many others, however, Shenouda says operators are facing new constraints.

In the infrastructure and energy sectors, the most striking development has been the surge in prices for construction, materials and logistics, thanks to the pandemic. This has disrupted and even jeopardised several projects.

At the beginning of the year, on one of Chad’s largest solar projects, the Djermaya park, “an Indian group, chosen to carry out the work, preferred to throw in the towel because of cost inflation”, says a partner in the project, which brings together various investors, including the African Development Bank (AfDB), Proparco, the Emerging Africa Infrastructure Fund (EAIF), InfraCo and Neo Themis.

A new call for tenders had to be issued, which was ultimately awarded to the Egyptian group Elsewedy, albeit at a higher price.

Political risk

The other topical challenge is political risk, which has leapt to the fore with the recent coup d’état in Niger and its aftermath.

“For a country, this type of event means an immediate freeze on most project funding. This is what we are already seeing in Niger with the Scaling Solar projects, even though they are in the middle of a development phase,” said one corporate lawyer familiar with the region.

In these circumstances, at best donors put their projects on hold, pending a timetable for institutional transition, as in Guinea. In the worst-scenario, investors would look elsewhere.

The latter risk is compounded by the financing difficulties that have accelerated with the rise in key interest rates, which started in the US at the beginning of 2022, spread to Europe a few weeks later and then crept further afield.

The International Monetary Fund’s latest report on Sub-Saharan Africa, published in April, was entitled The Great Financing Shortage. Lawyer Marianna Sédéfian, a partner at Trinity International LLP and a specialist in project structuring, particularly in the renewables sector, is cautious.

“The phase of rising EPC [engineering, procurement and construction] costs and rising credit costs has reached a plateau in recent months,” she said.

“What’s more, good medium-sized projects in stable countries such as Senegal and Côte d’Ivoire are relatively easy to put together. Especially as development finance institutions – and this is the current paradox – have a lot of capital available, but are rather short of bankable projects.”

From this complex environment, The Africa Report draws up a non-exhaustive panorama of the sectors currently attracting investors.

Mining companies digging deeper

While the situation in South Africa, traditionally the sector’s champion, is looking grim, other countries are making their mark in the mining sector.

“After the gold fever of recent years, a new generation of projects is entering the active phase, in a wide variety of minerals, led by major operators or juniors stimulated by demand and world prices,” says a specialist consultant.

A case in point is Gabon, where Fortescue, a 10% partner in the Africa Transformation and Industrialisation fund led by Gagan Gupta (Arise), is promising the first tonnes of iron ore from the Belinga deposits by the end of the year. This will come at a cost of $200m.

Capital Ltd, a Mauritius-based mining services company, has just signed a five-year, $150m operating contract with the Australian mining giant.

In the same country, Genmin, another Australian iron ore operator, signed an offtake agreement with China’s Hunan Valin Steel in mid-August, which will enable it to make further progress on the future Baniaka project, valued at $200m.

A geological nugget, the Democratic Republic of Congo (DRC) is also at the cutting edge, with success stories such as the Kamoa-Kakula copper mine, which opened in 2021. Canada’s Ivanhoe Mines Ltd and its Chinese partner Zijin recently confirmed that they would be reinvesting $2.8bn in the project in 2023 and 2024.

This will enable them to expand the mine, which in just two years has become one of the largest and most profitable in the world, with planned production of at least 390,000 tonnes of the red metal this year. This programme is financed by cash flow already generated by the mine and by senior debt raised on the markets.

Considerable potential

Not content with having spearheaded the development of Kamoa-Kakula, Robert Friedland, the boss of Ivanhoe Mines, is preparing to achieve another feat in the DRC: the relaunch, in Lubumbashi, of the Kipushi zinc and copper mine, which has been dormant for 20 years.

In partnership with the state-owned company Gécamines (32%), Ivanhoe succeeded last April in securing a three-year, $250m credit facility and an offtake contract from the Swiss trader Glencore.

This should enable the mine to be restarted by the end of 2024. In June, the Kino-Congolese bank Rawbank, whose loans to the mining sector will soon total $1bn, granted an unsecured loan of $80m to co-finance the relaunch of the site, estimated at a total of $380m over 2023-2024.

“The potential of the mining sector in Africa remains considerable,” says Shenouda, as the continent holds “40% of the world’s reserves of materials critical to the energy transition”.

Alongside copper, cobalt and aluminium, natural graphite, which is used in particular for the anodes of lithium-ion batteries, is also on a roll. According to Benchmark Mineral Intelligence, the continent is set to become the world’s leading source by 2026, with 40% of the market, overtaking China.

Energy companies boosted by natural gas

Like mining, energy continues to captivate investors. When it comes to hydrocarbons, natural gas is the star attraction. In Africa, most of the majors are reducing their oil holdings in favour of medium-sized players such as Perenco, Tullow and Tony Elumelu’s Heirs Holding.

“At the same time, international companies are reinvesting massively in natural gas, given the high global demand as a result of the conflict in Ukraine,” noted one oil expert.

Eni, already a methane champion in Egypt (Zohr), is working on a vast offshore development plan in the Congo. Launched at the end of April in Pointe Noire, this programme – estimated at $5bn, and in which SNPC has a 10% stake – will include two floating liquefaction units. The Italian group has also reinvested in Algeria with Sonatrach.

In Mozambique, Eni is the operator of the Coral Sul offshore project, which will come on-stream in October 2022. Eni is also a partner, alongside ExxonMobil, in Rovuma (not yet launched), one of the country’s two mega-projects, along with the Mozambique LNG project led by TotalEnergies, on which work is still pending.

The Grand Tortue Ahmeyim (GTA) offshore gas project – shared by Mauritania and Senegal and led by BP with Kosmos and the national companies SMHPM and Petrosen – is approaching the production phase, scheduled (after delays) for the first quarter of 2024.

But the industry is already preparing for phase two, which President Macky Sall says he expects to cost around $5bn. In addition to export revenues, GTA, along with the Sangomar (Woodside) oil and gas field due to come on-stream in mid-2024, will enable the country of Teranga to enter a gas-to-power logic.

Renewable energies

“Even if the international natural gas market is by far the main destination for these projects in Senegal, Côte d’Ivoire, Congo and Angola, local conversion into electricity is becoming widespread in Africa,” says our oil expert.

In Senegal, by the end of 2022, businessman Samuel Sarr, in association with a consortium of Senegalese entrepreneurs, had arranged most of the financing for the Cap des Biches power station, a $350m project, with AFC and other lenders.

In Gabon, the Franco-British oil company Perenco, which has embarked on a $1bn gas development plan, signed a preliminary agreement with Gabon Power in May to supply a future 21MW gas-fired power station in Mayumba. It had previously been done for the Owendo plant in Libreville, a 120MW asset developed by Gabon Power (40%) and Wartsila (60%).

Alongside traditional energies, the boom in renewable energies, led by solar power, continues unabated.

“Throughout West Africa in particular, we are seeing a proliferation of medium-sized photovoltaic projects, a few dozen MWp or more, for which international financing or ‘climate’ funds are widely available,” says Marianna Sédéfian, who advises funds and developers such as Africa REN, EAIF, Qair and Scatec Solar.

She added: “Increasingly, these solar farms are being accompanied by a storage component, providing a real service in terms of grid stability.” With this in mind, Axian of Madagascar, via its subsidiary NEA, is currently negotiating its second solar project in Senegal, a 30MWp farm with storage, connected to the Senelec grid.

Alongside these connected parks, developers are increasingly focusing on the Commercial & Industrial (C&I) segment. “Contracts with national electricity companies take a long time to negotiate. Deals between developers and private companies that want to secure a low-carbon source of electricity, on the other hand, can be put together quickly,” explains one investor.

For example, just after NextSource opened its graphite mine in Madagascar, a hybrid power plant was installed in July, comprising 2.6MWp of solar power and 3.1MW of thermal power, owned and operated by CrossBoundary Energy, a Kenyan developer, for a period of 20 years.

Builders navigate pitfalls

Ports, airports, roads, urban and rail transport, dams… Despite the often severe constraints, bold investors remain on the lookout for these projects, where the need and the impact are immense.

Examples include the Dakar-Saint-Louis motorway currently under construction in Senegal, involving a number of donors; the future Abidjan metro financed by France, and the deepwater port of Lekki in Nigeria, led by the Chinese company China Harbour Engineering Company (CHEC) and inaugurated in January.

In Madagascar, the Egyptian group Samcrete has been building the island’s first motorway, between Antananarivo and Toamasina, since the end of 2022. The project, worth $250m for the first 80km, was won following a call for tenders.

What makes Samcrete special is that it is a member of Egaad, a consortium of Egyptian construction and public works majors involved in export, which provided an EPC package and financing, notably from Afreximbank. “This integrated approach speeds up project implementation,” says Reda Boulos, one of Egaad’s managers.

“It has enabled us to sign a number of contracts in the DRC in 2021 for major road projects in remote areas, as well as several thousand kilometres of fibre optic cable.”

In the port sector, alongside publicly funded projects such as the future port of Dakhla in southern Morocco, some international investors are still whetting their appetites. Such is the case with DP World.

Despite its setbacks in Djibouti and Tanzania, the Dubai-based giant is continuing to build its network across the continent. Following its investments in Berbera, Somaliland, it has just launched construction of the deepwater port of Ndayane-Dakar, a $1.1bn project in two phases.

Expansion

Much further south, on the DRC’s narrow coastline, DP World is about to begin work at Banana on the country’s first deepwater port, with phase one costing $350m.

Signed in 2017 under Joseph Kabila, this 30-year public-private partnership (PPP) was renegotiated under President Felix Tshisekedi at the end of 2021, with the government taking a final 48% stake.

To further accelerate its expansion in Africa, DP World joined forces in 2021 with the financial institution British International Investment to create a joint investment structure dedicated to the port sector, with a target investment of $1.7bn.

But when it comes to major infrastructure, “it has to be said that, despite the countless financing structures, the determination shown by governments and the resolute action of the AfDB, the sector is still suffering from a lack of implementation on a continental scale,” one financier told The Africa Report.

“At the moment, we’re seeing a drop in commitments from China and severe pressure on the public accounts of African countries.”

Added to these considerations is the increasingly frequent appearance of reciprocal exclusion clauses between rival nations – the US, China, India, and Russia – in financial packages. The Burkinabe junta’s denunciation in early August of the Ouagadougou-Donsin airport PPP, a project led by Thierry Déau’s Meridiam fund, is another reminder of the fragility of long-term plans.

For Marc Mandaba, investment director of the Moroccan energy fund Neo Themis, the time has come for a paradigm shift. “As was the case 20 years ago, it’s becoming difficult once again to run structuring projects based mainly on private capital,” he said.

“We may once again be moving towards an approach that favours government-to-government contracts financed by the public purse, with multilateral donors and guarantee agencies as a backup.”