Africa has some of the world’s most significant, yet, untapped resources such as solar, hydraulic and geothermal energy. While some of these resources are scattered across the continent, most are found in huge deposits around the Northern, Southern and Eastern regions. According to comments by Makhtar Diop, Managing Director, IFC, in the recently concluded Africa CEO Forum, conversations have started in the places like Morrocco, Egypt, Tanzania, Namibia, etc., about how to tap some of these energy deposits for the benefit of the continent and the global market. This highlights the critical role of Public-Private Partnerships (PPP) – between development institutions, the private sector and the African governments- in facilitating economic growth.
Global events in the past decade have revealed the criticality of the role of the private sector in many developed economies. But despite the vast potential embedded within the African continent, the number of PPPs in Africa is small compared to other continents. Thus, there is a need to strengthen and foster more of these collaborations for economic growth. According to Sergio Pimenta, Vice President for Africa, IFC, the private-public sector development Africa seeks will not happen in a vacuum but in the context of the kinds of public policies that are enabling the private sector to come in.
The multifacet aspect of the IFC-BUA $500 million cement deal
On Tuesday, June 6, on the sidelines of the Africa CEO Forum held in Abidjan, Cote D’Ivore, BUA Group, a leading Nigeria cement manufacturer received $500 million in financing from the International Finance Corporation (IFC) and other lenders to boost production in the West African country. Reuters reported that the funding would help the company part-finance and develop two new, energy-efficient cement production lines at its plant in Sokoto state, in northwest Nigeria.
Now BUA Group has its factory located in two states in Nigeria, Edo State (Southern) and Sokoto State (Northern). By geography, Sokoto shares a border with the Republic of Niger and has a very high temperature as it is in the dry Sahel. It has an annual average temperature of 28.3 °C (82.9 °F), making it an excellent hub for clean energy generation. Therefore, the latest partnership would explore multiple economic potentials such as clean energy generation and market expansion. “The plants will run partly on alternative fuels derived from waste and solar power. Each will produce about three million tons of cement annually when complete, serving markets in Nigeria, Niger, and Burkina Faso,” IFC and BUA said.
The latest funding includes $160.5 million from IFC, $245 million in syndicated loans from African Development Bank, Africa Finance Corporation and the German Investment Corporation, and $94.5 million from institutional investors.
Expert Opinion by Amajuoyi, Ikechukwu Kingsley, CEO Kernelinc Resources Ltd
Today’s investors are looking for the green component of a business model. The latest IFC- BUA deal will be powered by solar and upcycled waste from their operations, what I call a circular economic plan. This also speaks to a strategic ESG plan focused on sustainable and responsible production.
Locating the project in Sokoto could be for the reason above or a strategic positioning to capture other African markets like Niger and Burkina Faso, thus, promoting an AfCFTA appeal as a Pan-African brand. It could also be because of the abundance of sun to power the plants. Either way, it is a strategic decision.
I would recommend that PPP initiatives incorporate grassroots engagement in their policies. For instance, in the palm oil industry, a global market worth well over $90 billion, Nigeria is only a 5% contributor and a net importer of this commodity. While smallholder farmers account for over 80% of the local production of palm oil, interventions by the CBN only get to the big corporations that meet the criteria to access the funding. Enacting policies and guidelines that remove or reduce bureaucracy for this category of businesses will unlock diverse opportunities for job creation, poverty alleviation and hunger reduction amongst other SDGs.