Study to assess the potential for enhanced private participation in the maritime and air transport sectors in Africa Monday 11 June 2012 Steer Davies Gleave 28-32 Upper Ground London, SE1 9PD +44 (0)20 7910 5000 www.steerdaviesgleave.com 1
The EIB and consultant team Alistair Wray Sheila Farrell Peter Wiener Senior Infrastructure Ports specialist Project Manager & Air Specialist transport infrastructure European Investment Bank specialist 40 years experience of 40+ years experience of port 25+ years experience in the development covering all and shipping consultancy aviation industry, specialising aspects of infrastructure and work, specialising in port in the economics, finance most regions, including Sub- economics and finance, port and regulation of aviation Saharan Africa. He has privatisation and markets, and in traffic and worked for DFID since 1991, institutional reform revenue forecasting with past 4 years under assignment to EIB. 2
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Study to assess the potential for enhanced private participation in the maritime and air transport sectors in Africa Ι Objective: identify targeted interventions to facilitate private participation in key ports and airports across the African continent The study forms part of the activities foreseen under the ICA Transport ■ Sector Platform Ι Deliverable: report including short lists of 5-10 port or airport-related developments and other details including next steps towards advancing these to maturity Ι Measure of success: a small number of projects are identified for further support and in the longer term perhaps two projects may benefit from new private sector participation Ι Methodology: Six month desk-based study – with dissemination workshops in Brussels and Tunis Extensive literature review ■ Stakeholder engagement ■ Development of criteria for assessing suitable projects for investment ■ Assessment of investment climate in different countries ■ Selection of long and short-list of projects ■ 3
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Assistance options available to ICA Members Ι Range of instruments available to ICA Members to assist projects throughout life cycle Ι Technical support : institutional reform, safety and security support, and advice to facilitate private sector participation. May extend throughout the project as transaction support Ι Financial support: grants, debt, equity, interest rate subsidies, and insurance guarantees. Provided to either private or public sector entities, or both Project life cycle STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6 STEP 7 ENABLING PROJECT PROJECT PROJECT TRANSACTION LEGAL AND PROJECT ENVIRONMENT DEFINITION FEASIBLITY STRUCTURING SUPPORT FINANCIAL CLOSE IMPLEMENTATION Technical assistance / Capacity Building Financial assistance 4
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Ports: Market Background Ι Existing ports Small ■ Shallow ■ Low levels of mechanisation ■ Congested city centre locations ■ Ι Greenfield sites Dar es Salaam Larger ships ■ Efficient layouts ■ Easier access ■ New working practices ■ Ι Other investment drivers GDP & trade growth ■ Mining projects ■ Suez Canal Container Terminal 5
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Ports: Past PPP Projects Ι Most PPP projects have been container terminals high financial returns ■ strong market growth ■ Dakar standardised contracts ■ ease of implementation ■ Ι Dry bulks will be more important in future, due to mining activity Ι Richards Bay Port modernisation programmes & multi purpose berths are less attractive small scale ■ low profitability ■ technical complexity ■ overmanning issues ■ Mombasa Ι New ports at greenfield sites are attracting private interest however: They are extremely expensive, especially when breakwaters & ■ dredging area required They carry high commercial risks ■ Port Said 6
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Ports: Lessons Learned from past PPP projects Ι Public sector specification & procurement by competitive tendering are desirable but not always possible Ι “Big bang” development is only feasible at the right location, with high quality team and strong political commitment Ι Choice of investors should reflect size and complexity of project Ι Partnerships with local firms have resulted in limited technology transfer Ι Many of the problems with PPPs occur after contract signature non compliance ■ weak regulatory bodies ■ inflexibility in restructuring ■ failure to resolve Customs problems ■ 7
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Ports: Success Factors / Obstacles to future investment Ι Success factors strong traffic growth ■ immediate benefits to port users ■ sensitive handling of labour issues ■ lack of political interference ■ Ι Obstacles to future investment political opposition to the concept of private ■ investment inability to reach financial closure within a ■ reasonable time period unclear policy framework ■ barriers to market entry ■ inability of the public sector to finance its share of ■ PPP costs 8
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Air transport: Market Background Ι African aviation growing at 7% p.a. Ι Propensity to fly generally low Ι Key markets RSA, Egypt, Morocco, Nigeria, Kenya, Ethiopia Ι Runway capacity generally sufficient Ι Terminal capacity and quality often inadequate Source: Official Airline Guide, IMF 9
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Air transport: Legal Framework Market Access Aviation Safety Ι Ι The Yamoussoukro Decision of 1999 has Africa has a weak aviation safety record, legal force in 44 of 54 African countries with a higher accident rate than other (not South Africa or Morocco) world regions and a rate of hull loss over 10 times higher than in Europe Ι It allows market access for carriers from Ι participating countries following a simple Primary causes relate to low levels of notification procedure by the staff training and incomplete oversight government by the relevant authorities in each country (poor quality equipment is also Ι Although applied within some regions of relevant but not a primary cause) Africa, full implementation across the Ι continent has not been achieved Both ICAO and EASA are involved in projects to enhance the regulatory Ι This reflects some governments’ framework and improve the technical unwillingness to relinquish control and capability of safety agencies in a number continuing support for weak national of African countries airlines 10
2. Overview and 4. Air trans infra – 8. Air transport 3. Ports – key 5. Investment 6. Evaluation 7. Ports project 9. Conclusions stakeholder key learning project learning points climate in Africa framework evaluation and next steps consultation points evaluation Air transport: Past PPP Projects Ι Airports Greenfield airport development ■ Existing airport airfield enhancements or ■ refurbishments Enfidha Airport Existing airport terminal expansion or ■ refurbishment Cargo facilities ■ Management contract for operation of an ■ existing facility Lagos MMA2 Domestic Terminal Ι Airlines Involvement of a foreign airline as shareholder ■ and operational partner; and Support for aircraft funding ■ Ι Air Navigation Services None historically, although several examples of Cairo Airport ■ IFI and other agency support (e.g. EIB support for ASECNA) Kenya Airways 11
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