Project Preparation Financing

Infrastructure is critically important in supporting economic growth and development in Africa. Yet, as the poorest region, the continent not only has one of the highest needs for infrastructure, it is also particularly deficient in infrastructure overall when compared to its peers, and is accumulating it more slowly.

Recognising that behind a completed project is a highly complicated process and one of the key parts in that process is project preparation, numerous project preparation facilities (PPFs) have been established to fund projects’ crucial preparation stages and increase the supply of viable projects. However, PPFs are not adequately funded, and with similar challenges faced by PPFs due to common design problems, PPFs do not act in the market for project preparation in a way best able to alleviate its failure. PPFs could be improved to increase the supply of infrastructure in Africa.

PPFs could be improved in the following ways: first, new types of facilities with a regional focus, and based in the relevant region, are recommended. Second, new facilities should have different institutional structures: they should be independent to provide institutional flexibility and local relevance, improve political buy-in by acting as a commitment device for political support, and focus on internal and external skills attainment and retention. Third, these facilities should channel their funds toward early stage activities where private sector involvement is least. Fourth, funding provided should be large enough to achieve scale economies. Fifth, financial viability should be improved by recycling funds. Finally, this paper recommends that facilities’ operations should also be altered in ways that will make them more effective.