An investigation into the qualitative characteristics of large infrastructure and project finance ventures in Southern Africa

Makovah, David Takaendisa
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Sub-Saharan Africa faces severe infrastructure deficits including in power generation, water facilities, transportation, and telecommunications. These deficits compound the socio-economic challenges of the most impoverished region in the world. It is estimated that funding of US$ 90 billion per annum is required to address infrastructure deficiencies. Other developing regions including Asia, the Middle East, and South America, have with varying degrees of success utilised the project finance framework to address similar infrastructure deficiencies, and also develop other commercial ventures. Africa has lagged behind in this respect, and still accounts for less than 3% of international project finance flows. The ability to attract and access international and domestic project finance capital, and execute the underlying ventures is an important opportunity to address the challenges noted above. The study contributes to knowledge by deepening our understanding of project finance in South Africa, Mozambique, and Zimbabwe in the following ways. Firstly, it offers a model through which to monitor key contextual factors that influence the success, failure, and shaping of project and infrastructure ventures. Secondly, it interrogates the main capital structure theories including the static trade off and pecking order theories, and their applicability and relevance for project and infrastructure finance in the selected jurisdictions. It then compares capital structure theory with actual practice of capital structure formulation in the 7 cases studies investigated. This yields important insights as to the most important factors influencing capital structure in project finance in the three selected countries. In particular the constrained supply of capital is observed as the top factor determining capital structure. It further enhances our understanding of why ventures using project finance in these countries may have significantly lower leverage than other similar ventures in developed regions of the world. Thirdly, the study extracts key insights into how stakeholder interactions evolve in the projects by applying stakeholder agency theory to project sponsors, managers, contractors, state institutions, and community organisations. Collectively these insights should contribute to attracting increased capital to project finance in Sub-Saharan Africa, and arranging projects with greater prospects of operational success.
A thesis submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand in fulfilment of the requirements for the degree of Doctor of Philosophy. Wits Business School 4 November 2016
Makovah, David Takaendisa (2016) An investigation into the qualitative characteristics of large infrastructure and project finance ventures in Southern Africa, University of the Witwatersrand, Johannesburg, <>