Africa gateway


SA invests in African infrastructure

4 August 2005 South Africa's state-owned enterprises are investing heavily in building up rail, power and other infrastructure in Africa. Now a new body in the Department of Public Enterprises, the Africa Infrastructure Project, is to coordinate this investment. Bongi Gasa, head of the initiative, told Parliament's select committee on labour and public enterprises on Wednesday that the project is to maximise the developmental impact of Public Enterprises' investments, and minimise the risks of doing business in Africa. South African state-owned enterprises or parastatals include transport company Transnet, South African Airways, electricity utility Eskom, arms manufacturer Denel, telecoms utility Telkom, diamond mining company Alexkor, IT provider Arivia, Aventura holiday resorts, and forestry company Safcol. Gasa said South Africa's parastatals need to position themselves to "take advantage" of investment opportunities over the next 10 years that will flow from the recent Gleneagles G8 leaders' summit. A recent Commission for Africa report recommended that developed countries should invest an additional $20-billion (R128-billion) a year in African infrastructure, he said. For this reason, Public Enterprises Minister Alec Erwin and senior management of SA's parastatals meet regularly to coordinate the activities of the enterprises in Africa and ensure the maximum impact and reward for their investments. Previously, parastatals had approached African investment separately. Eskom already operates in over 20 African countries, is exploring opportunities in 10 others - and is to engage in a R24-billion cross-border infrastructure project with the power utilities of Botswana, Angola, Namibia and the Democratic Republic of Congo (DRC). The joint venture will build hydroelectric power stations in the DRC, Angola and Namibia, producing power for the region and possibly for export. It will also construct fibre-optic connections for broadband telecommunication links. South Africa's Spoornet, which owns and operates 80% percent of Africa's rail infrastructure, is upgrading rail lines between Ethiopia and Eritrea, as well as in parts of West Africa, along with projects in the southern region and locomotive leasing arrangements in Sudan, Tanzania, the DRC, Zimbabwe and Swaziland. Other parastatals with large exposures in African markets include South African Airways, Arivia and Denel. Balancing risk However, Gasa warned that South Africa's parastatals need to protect themselves from high-risk investments in Africa. The cost of loan capital in high-risk countries could jeopardise the enterprises' profitability, he said. High interest rates could affect the whole company, not just its operations in the risk area. The department needs "to make sure that the risk factors associated with investment in Africa do not have a negative bearing in South Africa," he said. The department has engaged international business consultancy McKinsey & Company to assess the financial and political risks of investing on the continent. Gasa added that parastatals must focus on their core business to maintain viability while maximising their impact on economic growth and poverty reduction. The state has to be realistic about the risks of investing in Africa, Gasa said, while at the same time helping African countries improve their policies and regulations. The government is currently renegotiating infrastructure investment projects in Zambia and Mozambique - particularly those involving Spoornet - because South Africa's shareholding in some projects is disproportional to the investments made, Gasa said. SouthAfrica.info reporter

MediaClubSouthAfrica

MediaClubSouthAfrica.com

Helping the media cover the South African story.