Infrastructure Brief

News and opinion on public works procurement

Latin America’s Emerging Infrastructure Crisis

By Kenneth Mwangi

Assessing political risk in infrastructure projects tends to mean parsing the small print of regulatory changes, or shifts in party manifestos in the run-up to elections.

But the fire that engulfed the Chilean headquarters of ENEL, the Italian energy company, during civilian riots in 2019 was a vivid reminder of other, less predictable risks faced by investors in Latin American infrastructure.

The Santiago protests were triggered by a three-cent rise in metro ticket prices and resulted in dozens of stations in the capital being burnt and vandalised. It turned out to be a catalyst for a wave of pent-up anger against what many Chileans saw as high-priced and poor-quality public services.

The events shocked investors because they happened in a country associated with stability and steady, long-term growth.

But emergency government spending and the promise of a new constitution have since taken the heat out of the Chilean protests and infrastructure investors have once again been drawn to the South American country — attracted by projects including green hydrogen and road building.

Henrique Martins, Brazil chief executive at Brookfield, the Canadian asset manager, insists Latin America remains “one of the best opportunities in the world” because of its enormous need for infrastructure and the limited ability of governments to finance it.

Brookfield has $30bn invested in South America, mostly in Brazil, where the company runs toll roads, ports, railways, water, and gas distribution.

However, investors in the region still have to contend with risks as well as opportunities. Latin America ranks second-worst in the world for political risk after sub-Saharan Africa, according to Fitch Ratings, but does not necessarily compensate investors with higher profits because of the small size of many markets and limited growth prospects.

“Latin America’s infrastructure markets are generally characterised by elevated risk and limited rewards, undermining the region’s overall attractiveness,” Fitch concluded in its report this year, though it noted that risk levels vary widely between countries.

The sun will power large parts of Africa’s Covid-19 vaccination program

By Kenneth Mwangi

There’s hope that some industrialized countries will achieve near-universal vaccination against Covid-19 in the coming months. Yet the effort to vaccinate even the most essential workers in developing countries has only just begun.

By current estimates, achieving herd immunity (to current strains) will require at least 75% of the world’s population to be vaccinated. Some developing countries haven’t reached that level of coverage even for common vaccine-preventable diseases like measles and polio.

Many low-income countries will soon get vaccine access through the COVAX initiative. The first doses distributed in sub-Saharan Africa under COVAX were injected at the end of February. Around 30 million more doses are expected to arrive in March 2021.

But the success of national distribution efforts depends on a functional cold chain. This is an uninterrupted system of storage, transport, and delivery of vaccines at low temperatures all the way from national warehouses to local clinics and into the arms of people.

Most vaccines must be stored between 2°C and 8°C. This is the case for polio and measles vaccines, as well as the Covid-19 vaccines from Johnson & Johnson and AstraZeneca-Oxford. Others have temperature requirements that are notoriously more difficult to maintain. The Covid-19 vaccines from Moderna must be stored at between -25°C (-13°F) and -15°C (5°F). The Pfizer-BioNTech requires -70°C (-94°F), but can be kept between -25°C and -15°C for up to two weeks.

Peru planning 5G spectrum tender for 1H21

By Kenneth Mwangi

Peru plans to launch a tender for spectrum frequencies for 5G technology during the first half of next year, according to deputy communications minister Virginia Nakagawa (pictured).

Speaking at a virtual event on Peru’s agenda for the development of 5G technologies promoted by the Pontificia Universidad Católica del Perú (PUCP), Nakagawa said that before the end of 2020 the government should launch a public consultation on the channeling and use of the bands identified to implement the technology.

After that, in the first half of next year Peru’s investment promotion agency ProInversión is expected to release the final tender terms and carry out the tender itself.

This is the first time that Peru has committed to a roadmap for its 5G tender.

The country is considering awarding 5G frequencies in the 3.3Ghz-3.8Ghz range (3.5Ghz band) and the 24.2GHZ-25.5GHZ range (26GHz band).

The 3.5GHz band has been standardized by telecom bodies such as 3GPP and ITU for mobile broadband and is considered the prime spectrum for 5G deployments.

According to Nakagawa, with 300Mhz for use, Peru is the country that has the most spectrum available in this band, in addition to another 200Mhz that has already been made available to telecom operators in small blocks of 3.5Ghz spectrum.

One challenge is that this spectrum is fragmented, meaning that the available blocks of spectrum to be awarded in 3.5GHz are not contiguous, said Nakagawa. The international mobile standardization bodies recommend a minimum 100MHz of spectrum for adequate 5G operation.

“Therefore, the tender must also come up with a system for reorganizing channels. With that, if a carrier who already has, say 50Mhz in a given 3.5GHz channel and wins another 50Mhz in another part of the spectrum, the contest would have to unite 100Mhz of contiguous spectrum,” Nakagawa said.

Taking into consideration this complex channelling process and the time provided for effective use of the spectrum assigned, the minister estimates that 5G will only become a reality for users in Peru “in 2022 or 2023.”

DRC Blocks Katanga Gecamines Land Deal

By Kevin Davids

Katanga Mining has been ordered to withhold about $250 million earmarked as payment for a land deal with the Democratic Republic of Congo’s Gécamines as an investigation into the state miner’s executives continue.

Katanga’s subsidiary Kamoto Copper Company (KCC) agreed in December to buy land next to its mine from Gécamines and said it would pay an initial $150 million.

However, Congolese prosecutors have issued an injunction preventing the company from consummating the deal until the investigation, announced in December, has concluded.

“KCC has provided notice to Gécamines that the order constitutes a force majeure under the agreement and that its obligations under the agreement are suspended,” Katanga said Tuesday.

Prosecutors in the DRC are investigating a €200 million (US$219 million) line of credit issued to Gécamines by a company owned by Israeli billionaire Dan Gertler, who is subject to US sanctions.

The land in question includes multiple blocks for construction of a new long-term tailings facility and the possible exploitation of additional resources that would enhance KCC’s ability to more efficiently operate its mines and facilities and fulfil other key infrastructure requirements.

Katanga also said it would delay the commissioning of its acid plant to the second half of the year due to delays caused by the coronavirus outbreak. The previous target had been by end June.

KCC is 75%-owned by Katanga and produced 234,500 tonnes copper and 17,100t cobalt last year. It is an important growth project for Swiss-based Glencore, and the construction of a new acid plant would help cut costs at the operation. The Katanga mine complex has the potential to become the world’s largest producer of copper and cobalt.

AfDB Approves $2M For WHO Fight Against COVID-19 In Africa

By Kevin Davids

The Board of Directors of the African Development Bank on Tuesday approved  $2 million in emergency assistance for the World Health Organization (WHO) to reinforce its capacity to help African countries contain the COVID-19 pandemic and mitigate its impacts.

The grant, which is in response to an international appeal by the WHO, will be used by the world body to equip Regional Member Countries to prevent, rapidly detect, investigate, contain and manage detected cases of COVID-19.

It is one part of several Bank interventions  to help member countries address the pandemic which, while slow to arrive in Africa, is spreading quickly and is  straining already fragile health systems.

Specifically, the WHO Africa region will use the funds to bolster the capacity of 41 African countries on infection prevention, testing and case management. WHO Africa will also boost surveillance systems, procure and distribute laboratory test kits and reagents, and support coordination mechanisms at national and regional levels.

This grant “ will enable Regional Member Countries to put in place robust containment measures within 48 hours of COVID-19 case confirmation and also support the WHO Africa Region to disseminate information and increase public awareness in communities,” said the Bank’s Human Capital Youth and Skills Development Department.

The grant will contribute toward a $50 million WHO Preparedness and Response Plan,  which other partners including the United Nations system, are also supporting.

It is estimated that Africa will require billions of dollars to cushion the impact of the disease as many countries scramble together contingency measures, including commercial lockdowns, in desperate efforts to contain it. Globally, factories have been closed and workers sent home, disrupting supply chains, trade, travel, and driving many economies toward recession.

The Bank Group is expected to unveil a financial assistance package that will enable governments and businesses to undertake flexible responses to lessen the economic and social impact of this pandemic.

Last Thursday, the Bank raised an exceptional $3 billion in a three-year social bond, the proceeds from which will go to help alleviate the economic and social effects of the pandemic. It is the largest dollar-denominated social bond launched in international capital markets to date.

Construction Of Tanzania’s Mbulu District Hospital On Track

By Kevin Davids

Construction works on Mbulu District Hospital is on track. Deputy Minister of State in the President’s Office (Regional Administration and Local Government) Mwita Waitara confirmed the report and said the project is making great progress.

The project is expected to help Mbulu residents who have been traveling long distances to get medical services. When completed, the services offered will include vaccinations, child clinics, and other outpatient services.

“The government is closely monitoring the hospital construction as well as the construction of other 67 hospitals nationwide so that they start offering services,” said Mwita Waitara.

He however explained that Tanzania has currently over 16000 villages across the country and while the government may not be able to build dispensaries in all areas immediately, local authorities have been instructed and encouraged to erect the required structures for at least providing basic and minor treatments.

“We cannot cover all the villages countrywide with dispensaries but the local authorities should ensure they erect the required structures which as a matter of fact require just a small area for minor treatments,” said Majaliwa.

The government has sought to strengthen health care services by raising the medical supplies budget to enable payment for essential medicines, immunization, medical equipment and reagents to over US $130m in the 2018/19 financial year, compared with just over US $15m in FY-2015/16.

Mwita Waitara also urged local authorities to start mobilizing funds for the construction of dispensaries through which the government will be able to provide medical supplies and health care staff.

Kenya Gets $50M World Bank Credit For Coronavirus Fight

By Kevin Davids

Kenya is set for an additional Sh5.2 billion ($50 million) credit from the World Bank Thursday to support the fight against Covid-19 as confirmed cases rose to hit 81.

Health Secretary Mutahi Kagwe said that the credit facility will increase the government’s pool of funds to finance production of sanitisers, protective gear for medical personnel and scaling up bed capacity for Covid-19 patients.

The funding comes just as Kenya recorded the highest jump in infections on Wednesday when it confirmed 22 new cases even as fears mount of dire days ahead.

The patients are 18 Kenyans and two nationals each from Pakistan and Cameroon, who tested positive from among 300 persons with Mr Kagwe saying that they are all in quarantine.

The CS, however, warned that the transmissions will likely rise in coming days unless Kenyans adhere to the government directives on social distancing and basic hygiene measures that include use of sanitisers and cleaning hands using soap and water.

“We cannot emphasise enough what is likely to be ahead of us unless we adhere to the rules we have established that include washing hands, social distancing,” Mr Kagwe warned.

The number of infections in the country is likely to remain on the rise in coming days on increased mass testing of all people who jetted into the country from last week and close to 1, 000 contacts.

The country, however, recorded its first recoveries from the fast-spreading virus – that of the first declared patient Brenda Cherotich and Brian Orinda, who were in isolation at the Mbagathi Hospital.

Mr Kagwe said that the country will scale up production of face masks in addition to the free distribution of sanitisers that began last week to beef up support from development partners and curb spread of the virus.

The World Bank that had last week donated 250 ventilators is expected to approve Sh5 billion facility on Thursday that will further increase the pool of funding available to the country in fighting spread of Covid-19.

Chinese billionaire and co-founder of e-commerce multinational Alibaba Jack Ma last month donated 25, 000 testing kits that will help the government scale up testing for coronavirus.

With the rise in coronavirus infections, Kenya says the  dusk-to-dawn curfew, from 7pm to 5am,  will remain in force besides social distancing rules, as well as the requirement for all matatus to carry less than half of their capacity in efforts to curb the spread.

World Bank Approves Delayed $500M Education Loan To Tanzania

By Kevin Davids

The World Bank has approved a $500 million education loan to Tanzania after years of delays because of concerns about the country’s policy of banning pregnant students from public schools.

The World Bank froze $1.7 billion in loans to Tanzania in 2018 following both the pregnant student ban and a law making it illegal to question official statistics. It started releasing funds again to the East African country last September.

The terms of the loan, which is designed to improve secondary school access, give pregnant students – who were forced to drop out – a chance to complete their schooling through alternative public education programs, the World Bank said late on Tuesday.

President John Magufuli announced the pregnant student ban in 2017, drawing harsh criticism from activists and donors.

The World Bank, Tanzania’s biggest external lender, says about 5,500 pregnant girls drop out of school every year.

Foreign loans and grants are a key source of foreign exchange for East Africa’s third-largest economy.

Opposition leader Zitto Kabwe, who had previously asked the World Bank to withhold the loan until it was more inclusive, lauded campaigners and the terms of the loan on Twitter.

Still, some activists emphasized there was a lot more work to be done.

“I was expecting the World Bank to push for re-entry of banned teenage mothers in public schools, period,” said Carol Ndosi, a womens’ advocate. But, until then, this was a step in the right direction, Ndosi said.

Uganda Orders Two Week National Lockdown

By Kevin Davids

Uganda’s President Yoweri Kaguta Museveni in his address to the nation last night announced a nationwide lockdown for the next two weeks as the country battles the covid19 pandemic.

Uganda last week banned public transport and sealed its borders and urged the population to stay home, but stopped short of a full shutdown.

Museveni said that from 10:00pm Monday private vehicles would also be banned, seeking to avoid give a more advanced warning that would see people flee the city, as has happened across the continent where many poor residents see better chances of survival in the countryside.

“I would have given the public time to adjust but… a longer time would give people time to go to the villages and in so doing they would transfer the very sickness we’re trying to prevent. This freezing of movement will last for 14 days,” he said in a televised address.

Museveni also ordered a 14-day nationwide curfew from 7:00pm.

Shopping malls and businesses selling non-food items were ordered to close.

Food market vendors who continue to trade are forbidden to return to their homes for the duration of the 14-day lockdown, while factories could stay open if remain on the premises for the duration of the shutdown.

People are still allowed to move around on foot but not gather in groups of more than five at a time.

Metier Partners With Tembo Power On Kaptis Hydroelectric Project

By Kevin Davids

An agreement has recently been signed between Metier and Tembo Power, the company developing the Kaptis hydroelectric project in western Kenya. Metier will participate in the financial closing of this project, which will produce 14.7 MW, by taking a 40% stake in it.

The financial completion of the Kaptis hydroelectric project in Kenya will take place by the end of the year. It is one of the points of the agreement recently concluded between the project developer Tembo Power, a company based in Ebene, Mauritius, and Metier Private Equity International, a company based in South Africa specialising in the financing of renewable energy and energy efficiency in Africa.

According to Tembo Power, the agreement with Metier will enable it to select the financial partners and complete the financing of the hydropower project which will result in the production of 14.7 MW from a run-of-river hydropower plant. It is a hydroelectric facility that operates independently of a water reservoir. Such a facility has less impact on the river and its biodiversity.

40% stake for Metier

Tembo Power began development of the Kaptis hydroelectric project in 2013, following preliminary studies conducted by its partner Humphrey Mulindi. The purpose of the study was to determine the real potential of the site selected for the future hydroelectric power plant.

The engineering, procurement and construction (EPC) contract for the future hydroelectric power plant will be executed by WK Construction, a company specialised in hydraulics. This company, based in South Africa, is one of the financial partners of the project, in which it holds a 20% stake.

The new investor, Metier, now holds a 40% stake. The South African-based financial company has decided to place this investment within the framework of its Metier Sustainable Capital International Fund II. It is a fund that targets investments offering social and environmental benefits as well as financial returns. Its investments are balanced between renewable energy projects (encompassing both grid-connected and distributed generation) as well as growth capital investments in other sectors, such as energy efficiency and the exploitation of resources such as water or waste management.

The remaining 40% of the Kaptis hydroelectric project is owned by Tembo Power. “We look forward to the prospects of the Kaptis project and, more broadly, the prospects of Tembo Power’s portfolio, which fits well with the fund’s strategic direction. The fund is focused on small and medium scale renewable energy projects. We want to invest in Kenya’s energy sector and provide clean energy to support the Kenya Power and Lighting Company’s (KPLC) electricity supply,” says Michael Goldblatt, Director of the Sustainable Capital International Fund II.