Private equity investment in the renewable energy independent power projects in Africa.

Abstract

This research paper unbundles seven factors that were considered integral to the success of the South African Renewable Energy Independent Power Producers (REIPPP) program and investigates the factors’ potentiality when implemented to attract private capital to invest or finance infrastructure development in Sub Saharan Africa. The initial seven factors were identified by previous research papers. The paper explores the world of private equity as a proxy for private capital, independent power producers as a proxy for infrastructure projects, and project finance as well as Public Private Partnerships (PPP) as the main methods of financing infrastructure projects. The paper also proposes the most active providers of debt and or equity in the next 12 to 36 months, measured by the player’s US Dollar commitments. The research expanded the initial seven factors by identifying three variables per factor that best describe that factor. The researcher then utilised the Exploratory Factor Analysis (“EFA”) quantitative methodology to analyse the underlying structure, complexity and multidimensionality of each of the three variables as well as the correlations between the 21 variables and each of the seven factors. EFA explores each variable’s interrelationships and comes up with factor loadings which are then used to construct new factors. In this particular research, EFA was used to summarise or reduce the factors. This would ascertain if indeed only seven factors existed or if there were more than seven or less than seven.