Investors’ appetite for infrastructure projects seen soaring

Ghana in SSA top-three for private infrastructure investment selected markets-private investment in infrastructure since 2000. Source: World Bank, Fitch Solutions

The economy will experience positive private sector participation in public infrastructure programmes, with projects in the energy and transport sectors being key areas for investors, a Fitch Solutions report has said.

The positive outlook for private investment opportunities for this year, Fitch explained, is underpinned by the country’s considerable public private partnership (PPP) track record and project pipeline, as well as decreased legal and policy risks.

As one of the continent’s preferred destinations for private investments over the last decade, it said a total US$7.9billion of investment involving private participation in infrastructure since 2000 puts Ghana among the top-three sub-Saharan African markets after South Africa and Nigeria, two significantly larger economies.

The power sector has attracted the largest part of this private investment, US$4.3billion, spread across 11 individual projects. Port projects, which attracted US$2.1billion, are dominated by the US$1.5billion investment in the expansion of Tema Port.

“According to our proprietary Fitch Solutions Infrastructure Key Projects Database, public-private partnerships account for almost 20 percent of planned infrastructure projects in Ghana, highlighting that PPPs will continue to play a significant role in Ghana’s infrastructure sector,” it noted, adding that the adoption of a PPP law – approved by Parliament in December last year, will also decrease legal and policy risks for private investors in Ghana’s infrastructure sector.

The law, Fitch added, will further improve Ghana’s risk profile when implemented.

Meanwhile, in the transport sector, it noted that the prevalence of debilitated colonial railways will continue to provide ample opportunities for high-value brownfield concessions, following the completion of capital intensive port projects.

Currently, two rail projects worth a total US$2.8billion are being constructed as public private partnerships respectively, involving German and Indian companies and financiers. This, Fitch said, is indicative of foreign investors’ confidence in Ghana’s potential as a gateway to West Africa and its hinterland.

According to our proprietary Infrastructure Risk/Reward Index, Ghana’s risk profile already outperforms the sub-Saharan African average. Furthermore, our risk outlook for infrastructure investments is tipped to the upside, as the country’s long-term economic risk score exceeds its short-term economic risk score – an agreeable outlook for PPPs’ long-term attractiveness,” the rating agency added.

The latest projection will be welcomed as positive news by government, given that the pandemic shock has limited its ability to carry out most of it planned infrastructure projects.

Although Fitch Solutions is predicting a positive outlook for investment in infrastructure, it warned that perceived revenue risks for international investors in Ghana’s infrastructure sector are expected to persist as the cedi’s depreciation is forecast to continue. 

“Depreciatory pressure on the cedi will remain in 2021, although the pace of depreciation will slow as the economy recovers from the COVID-19 outbreak. We expect the cedi to lose just 3.1 percent of its value against the dollar over the year on average, compared to 12.2 percent in 2020,” it stated.

Pace of cedi depreciation to moderate, Ghana – exchange rate, GHS/USD
Source: IMF, Fitch Solutions
f = Fitch Solutions forecast.


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