and how they can be mitigated. Compiled by a PPP transactions advisor to Rwanda (me). Barriers to private investment in African infrastructure: Country political risk – Eg. medium or high likelihood of terrorist attacks, war, corruption, riots, strikes Risk of expropriation Payment risk Insolvency for state off-takers such as state utilities Inflation/currency depreciation Currency convertibility Risk mitigants and Rwanda’s experience: Country political risk – Solution: State to improve security internally by having a strong law enforcement agency and also by pursuing sustainable and fair domestic and foreign policy – Rwanda surveyed as the African country where citizens feel most safe according … Continue reading African (frontier market) risks associated with PPP infrastructure
By Imaduddin Ahmed and Shilesh Muralidhara The East African | January 11, 2014 Partnerships can be wonderful. They can also be disastrous. So, too, is this the case with partnerships entered into by governments and businesses for the delivery of public goods, which can either lose countries millions of dollars per project or initiate virtuous economic growth cycles. Public-private partnerships (PPPs) are mechanisms in which governments transfer upfront costs and risks for infrastructure projects meeting public needs to private sector developers. Power plants, water treatment facilities, roads, stadia, airports, hospitals — all of these can be given birth under PPPs, … Continue reading Is your local public-private partnership going to be a happy one?
Businesses: – The business model is scalable – There is a compelling case that there is large latent/unmet demand for the product/service – Competition is underperforming/non-existing and barriers to entry are high – Competition for financing a given firm is low (don’t want to enter a bidding war) – Strong personal relationships with management – Strong balance sheets for financial institutions (diligence their Accounts Receivable and recovery rates) – Strong Debt Service Coverage Ratios for mature businesses Economies: – Rapid growth in the urban middle class – rapid demand growth from the latent baseline – Large domestic market – Rule … Continue reading Stories private equity is looking for in Africa
Notes from Timothy Irwin’s Government Guarantees – Allocating and Valuing Risk in Privately Financed Infrastructure Projects Bordeaux Bridge – early template of public-private partnership – Govt built bridge – Firm maintained and operated it and contributed capital for construction – Firm would get the toll for 99 years. If annual revenue < min., govt would pay the min. If >an amount, govt share half surplus On guaranteeing returns If firms aren’t convinced by the commercial viability of a project and require guaranteed returns, it’s probably not worth doing! On exchange rate risk For free floating currencies – If a govt … Continue reading Allocating & valuing risk in public-private infrastructure projects
A non-exhaustive (will be periodically updated) list of emerging and frontier market financiers: Government/multilateral development finance institutions and banks – International Finance Corporation (IFC), the for-profit arm of the World Bank – Overseas Private Investment Corporation (OPIC), US DFI – CDC Group (formerly Commonwealth Development Corporation), UK DFI – DEG, German DFI – L’Agence Française de Développement (AFD), French DFI for govt projects – Proparco, French DFI for majority-owned private sector projects – FMO, Dutch DFI – SwedFund, Swedish DFI – NorFund, Norwegian DFI – Africa Development Bank (AfDB) – Asia Development Bank (ADB) – European Investment Bank (EIB) – … Continue reading Frontier market funds
A couple of resources for entrepreneurs, on how to pitch to venture capital funds. The first is how HEC Paris lecturer Serge Desvignes of Iris Capital recommends entrepreneurs format their presentations. In 10 slides: 1 – Offer your solution to solve problems (needs met, value proposition) 2 – Description of products/services: succinct not over-technical (picture, video, demo) 3 – Competition: how the market is divided, strengths of the competitors, why you will be able to compete successfully 4 – Your team: past successes and experience, why they are qualified for the job (core capabilities needed) 5 – Target customers (first validation … Continue reading Tips for entrepreneurs / business managers seeking equity investments: Part 2
Think of the value you create for customers vis-a-vis the competition Working in venture capital / private equity, I come across a number of poorly presented business proposals. The first thing I want to know about a business is whether it will be able to sustain growth and profitability by offering customers something of value that no-one else does – whether it be a product or service that noone else currently offers, a product or service of a higher quality or at a lower price than any competition is able to offer, or whether it maintains a monopoly/competitive edge thanks to the nature of … Continue reading Tips for entrepreneurs / business managers seeking equity investments: Part 1
Imaduddin Ahmed Executive Summary In 2009, the government of Madagascar was overthrown for negotiating a seemingly unfavourable deal with Korean conglomerate Daewoo. Of concern to the nation with malnutrition rates as high as 50% were land grabs and food security. The subsequent Malagasy president revoked the deal. Yet despite the bitter experience, Daewoo and the government of Madagascar may still want to consider negotiating for a deal that can better ensure the food security of both nations through Daewoo’s superior farming technologies. A prerequisite to a deal, however, is a legal framework that protects from the Madagascan government the interests … Continue reading Korean corporate land acquisition in Madagascar: how the law governs it, and how it ought to
Imaduddin Ahmed I. Introduction Do the current U.S. laws regulating the fund-raising activities of private equity funds raising capital for portfolio companies adequately balance the interests of sophisticated investors seeking higher returns, foreign private equity funds and firms in least developing countries requiring growth capital with the interests of lay investors? This is the question that I will attempt to answer in the forthcoming paper. It is a question that came to the fore when sent a response by a colleague on a networkers’ email listserv. I, a graduate student, had invited colleagues via email to attend a speaker event … Continue reading Regulating Frontier Market Funds as Value Creating Enterprises
The Guardian Also linked to by the Wall Street Journal Our system of sovereign sukuk ratings could benefit the global economy and promote better cross-cultural relations Imaduddin Ahmed Wednesday 2 February 2011 Think of two of the most common problems highlighted in today’s news: the state of the global economy and violence at the hands of Islamists. Here’s a possible remedy to both: a sovereign sukuk rating system. Such a rating would show which economies are sharia-compliant and hence suitable candidates for asset-backed Islamic bonds in the form of sovereign sukuks. The metrics used in such a rating would mean … Continue reading Is your economy sharia compliant?