Post-Brexit, the UK is doubling down on African infrastructure investment

A Zambian surveyor sees an open-pit copper mine, and a world of possibility. Ah yes, possibility.
A Zambian surveyor sees an open-pit copper mine, and a world of possibility. Ah yes, possibility.
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Against a backdrop of 2018’s Investing in African Mining Indaba in Cape Town, a roundtable of UK experts proposed holistic solutions around Sub-Saharan infrastructure projects that can provide wide-reaching, long-term economic opportunities for African communities.

Their idea is impactful: Say you’re interested in building railways to transport minerals from mines to ports. In a standard arrangement, you’d contract a company to build railways, move your minerals cheaply, and enjoy revenue on your exports. Done. Easy.

But what happens, after 10 to 30 years of operation, when your mines finish their production cycles and close? And how do you ensure your efforts will drive local economies and provide ongoing venture?

As Nigel Casey, UK High Commissioner to South Africa, explained in his roundtable remarks: “A mining project is much more than just mining.” The way forward, the roundtable seemed to agree, is a partnership model driven by UK infrastructure expertise, African community collaboration, and multi-sector financing.

Mastering The Master Plan

In Ghana, for example, UK companies were recently enlisted to develop such a railway. But what began as a railway has become a far-reaching economic opportunity for the country. The railway will require installation of telecom and power transmission. The addition of telecom gives locals greater connectivity and draws in small businesses. The addition of power allows for refrigeration—so you can build agricultural facilities for livestock and produce—and in-country beneficiation (in Ghana’s case: an aluminum refinery). That refinery will require supplemental power, driving demand for a clean coal power plant. And each emerging business will require skilled labor, driving demand for a local college.

Suddenly, this expression of interest for a railway has engendered an entire economic corridor that will long outlast any single mining project. In Ghana, the UK Department for International Trade (DIT) is acting as a facilitator—convening UK financiers, professional services, and construction companies as partners for every component where beneficial.

“A mine itself is a critical enabler of infrastructure, but if you just think about building a railway, you’re missing quite an opportunity to develop other pieces of the economy,” said Craig Sillars, DIT’s featured panelist and an African infrastructure specialist.

Sillars spoke further about Angola, where a British company is planning to invest up to £800 million to resurrect an iron ore mine and develop a smelter. The project requires extending existing railways, expanding a port, and about 600 megawatts of power, which will come in part from reconstituting about 25,000 hectares of agricultural land to create biomass.

These peripheral ventures can and often do emerge organically, but planning them beforehand allows for smart allocation of resources and collaborative investment opportunities.

“A country I work with has been very successful at exporting a particular commodity,” Sillars continued. “However, with no resource and infrastructure master plan, each mine has raised their own capital, built their own railway, built their own port. The government has to wait for the capital payback of all of that infrastructure, and they’ve probably lost one, two, three billion dollars’ worth of financing and an opportunity to enable really vibrant regional development.”

In contrast, a UK company has just finished a 30-year plan for Rwanda’s ongoing expansion. The plan, in consideration of Rwanda’s projected population boom, comprehensively identifies opportunities for economic hubs, infrastructure, and housing, among other things, according to Sillars.

Financing Partnerships, Not Just Projects

The crux of any such large-scale infrastructure plan is competitive financing, and this is where London is particularly inviting. Though over half of UK investment in Africa is held in mining and quarrying, financial services generate the largest amount of earnings (£1.7 billion). UK FDI in Africa grew from £19.2 billion to £39.5 billion between 2005 and 2014, representing significant opportunities for African countries and companies looking to do business.

The roundtable presented DIT’s Africa Infrastructure Board (AIB), which will drive partnership financing by working with UK companies, African project developers, UK Export Finance (the UK’s export credit agency), and UK financial institutions to present funding models for consideration for key projects. The idea of the AIB is, in part, that for something like Ghana’s railway, investors can also identify and fund related opportunities that the railway enables (e.g., agriculture, education).

“Why build a railway and not benefit off the back of that?” Sillars said.

Educating African Leaders At Home And In The UK

The UK is bolstering their African collaborators as well. The Extractives Hub, for example, is a UK-sponsored digital resource center whose website freely provides extractive data and information along with tailored technical consulting to governments in Africa.

“There’s a sea of information on extractives, and it’s very difficult to steer through… The Hub provides digestible sector research. It’s a place for industry, civil society, policy makers, and businesses to find information on things like beneficiation, regulation, existing contracts, revenues, commodity prices, and engineering standards. The Hub is a one stop shop,” explained Gokce Mete, a Research Fellow for the Hub in attendance at Mining Indaba.

The Hub was established by a consortia of UK institutions, including the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee, which has long been a premier institution for educating extractive sector lawyers and leaders from Africa.

Looking Beyond London

Finally, Maurice Kenton, a partner with UK firm Clyde & Co. in attendance at Mining Indaba, reaffirmed English law’s role as a backbone for African infrastructure projects, especially as most contracts are generally governed by London, regardless of whether UK companies are involved elsewhere.

Clyde and Co. has secondary offices across Africa, a shift reflective of their dedication to the region and Britain’s general desire to establish expansive, lasting partnerships in Africa. The UK’s impending departure from EU exchange agreements will streamline Britain’s relationship-building processes in Africa, making these efforts easier and more meaningful.

Learn more from DIT about building infrastructure partnerships with the UK.

This article was produced on behalf of the UK’s Department for International Trade by Quartz Creative and not by the Quartz editorial staff.