Africa Investment Forum 2012 Transportation

1. Africa Investment Forum 2012 Transportation Prepared By: ADVISORY AND CAPITAL MARKETS Accra, Ghana 3rd -4th April 2012

2. Introduction Africa’s Infrastructure Deficit The state of Transportation Infrastructure in Africa Roads Rail Ports Report Outline

3. Africa’s Infrastructure Deficit: Summary Investment Opportunity • Africa’s lack of infrastructure provides a significant investment opportunity in the region. • China, India, and a few Middle Eastern Gulf nations are already financing a record number of infrastructure projects across Sub-Saharan Africa. • The estimated financing requirement to close Africa’s infrastructure deficit amounts to USD$93 billion1 annually until 2020. • Although Africa’s finance deficit creates a hurdle, African governments have a wide range of policy options which present new sources of finance. • In some African Countries, domestic Capital markets are looking wide and deep enough to provide significant volumes of infrastructure finance. Financing Requirement Economic Development • Physical infrastructure remains Africa’s biggest constraint as far as economic development goes. • With the region expected to show economic growth of 5.5% a year over the next five years, the development of infrastructure creates a wealth of opportunity. 1 Source: Infrastructure Investor Africa (February 2011)

4. Overview of Road Transport Sector - Africa • Road transport is the most dominant mode of motorized transport in Africa, accounting for 80 per cent of the goods traffic and 90 per cent of the passenger traffic on the continent2 • Transport costs remain very high throughout Africa, averaging 14% of the value of exports compared to 8.6% for all developing countries3 • As currently only 27.6% of Africa’s 2 million Km of roads are paved (19% in sub-Saharan Africa, versus 27% in Latin America and 43% in South Asia), the need for increased investment in this domain is urgent 4 • Without effective road infrastructure and coherent coordination of transport infrastructure policies across African borders, Africa’s share of world trade may well stagnate at its current 2% 5 African Goods Traffic African Passenger Traffic 2Source: United Nations Economic & Social Council: Africa Review Report on Transport 2009 3,4,5 Source: NEPAD-OECD Expert Roundtable Investment in Transport Infrastructure in Africa – December 2008

5. Trends in Financing Road Infrastructure - Africa Sources of Funding Government Budgetary Resources • Private sector participation is essential if investment in road infrastructure is to truly experience an upturn . • 90% of investment in Africa’s transport infrastructure currently rests on public investment • African countries still lack the budgetary resources and organizational capacity to adequately maintain more than half of the national road network. Private Sector Investment Alternative Government Funding Options Road Tax Fuel Tax Types of Private Sector Intervention Build Operate & Transfer Operations & Maintenance Contracts

6. Case Studies - Private Sector Intervention (Roads) N-4 Toll Road (South Africa & Mozambique) • Length of concession: 30 years • Concessionnaire:TransAfrican Concessions (TRAC) consortium • Procurement arrangement: • Concession period from 1997. In 2004, the contract was amended to extend the concessionaire’s responsibility to include managing 630km of toll road. • The governments of South Africa and Mozambique jointly and severely guarantee the debt of concessionaire and to a certain extent the equity. Dakar -Diamniadio Toll road (Senegal) • Length of concession: 30 years • Procurement arrangement: • To ensure a rapid kick off of the project, the first section is being constructed through Government funding • The second phase is to be constructed using 40% Government / Development Partners funding and 60% Private funding Lekki Toll road (Nigeria) • Length of concession: 30 years • Concessionnaire:Lekki Concession Company • Procurement arrangement: • Operation and maintenance of new road infrastructure over 30-year Concession term • 70 : 30 Debt-Equity Ratio • Novel ‘Tied-in Equity’ arrangement with the construction contractor i.e. the option to pay part of contract value in equity so as to align long term interest of Concessionaire and Contractor

7. Overview of Railways - Africa Overview • In 2005, the continent had a total railway network of 90,320 km or 3.1 km of per 1,000 km2, most of which is disjointed. With the exception of North Africa, railways in Africa generally have a low level of traffic 6 • African railways carry only one per cent of global railway passenger traffic and two percent of goods 7 • The network density for most African countries range from 30 to 50 per million people with a few countries namely, Gabon, Botswana and South Africa; having network densities of more than 400, which is low in comparison to Europe’s range of 200-1000. 8 Railways – Africa 6,7Source: United Nations Economic & Social Council: Africa Review Report on Transport 2009 8 Source: AFDB Economic Brief September 2010: Infrastructure Deficit and Opportunities in Africa

8. Trends in Financing Overview Lagos, Nigeria (Blue & Red Line) • China is financing the rehabilitation of 1,350 kilometers of railway and constructing 1,600 kilometers of new railway lines across the region. 9 • Private Partnership in railway infrastructure has contributed fourteen railroad concessions. 25 Year Concession Rift Valley Railway (“RVR”) 25 Yr Concession 10 • This concession is to operate a 2,000-kilometre line connecting the port of Mombasa, in Kenya, with the interiors of both Kenya and Uganda. • Three years following the financial close of RVR in late 2006, the concession was underperforming on various levels and verging on collapse. • The concession was eventually rescued from collapse by Egyptian private equity firm Citadel Capital in early 2010, after it acquired a 49 percent stake in RVR’s major shareholder and promised to invest $150 million in the railway line over the next five years. SITA Rail Burkina Faso/Cote d’ivoire11 • In July 1992, the Governments of Côte d’Ivoire and Burkina Faso decided to privatize railway operations of the Abidjan - Ouagadougou railway under a 15 year concession scheme. • The ownership of infrastructure & rolling stock retained by both Governments while the concessionaire (“SITA”) would be responsible for operations and maintenance 9 PPAIF Report Grid Lines - 2008 10 Source: Infrastructure Investor Africa (February 2011) 11 Terra International Group Report on Private Sector Investment in Raiways

9. Current State Assessment: Ports 9 Overview • Africa operates 64 ports however, over-the-quay container handling performance is below 20 moves/hour, compared to 25–30 in modern terminals worldwide. 12 • Handling costs are on average 50% more than the rest of the world. 13 • Institutional reforms in the ports sector to date have been limited, with only Ghana and Nigeria adopting the internationally preferred landlord model and only South Africa introducing an independent regulator . • Thus far, the extent of Private Participation in port infrastructure consists of 26 container terminal concessions, investing USD$1.3 billion. • Maritime transport is the most dominant mode of transport for moving freight from and to Africa. It accounts for over 92 per cent of Africa’s external trade. With a total coastline of 30,725 km, 14 • African ports handle only 6 per cent of global traffic, of which about 6 ports, three each in Egypt and South Africa, handle about 50 per cent of Africa’s container traffic. 15 12, 13 Source: AFDB Economic Brief September 2010: Infrastructure Deficit and Opportunities in Africa 14 ,15 Source: United Nations Economic & Social Council: Africa Review Report on Transport 2009

10. Trends in Financing Ports Infrastructure - Globally Government ownership and operation e.g. Singapore, Colombo, Bahrain & some Indian ports Public Service Port Government owns all major assets, including handling equipment. Private Sector operates key functions, e.g. Manilla, Karachi, Ports Autonomes (France) Tool Port Port authority acts as landlord. Private Sector owns and operates equipment and leases terminals e.g. Hong Kong, Kelang, Rotterdam, New York Landlord Port Realise payment for rights to operate Private Sector owns and operates port, e.g. Associated British Ports Private Service Port Realise payment for operating rights and land lease Realise assets, land and equity Government ownership Full privatisation Global shift to corporatise but not always to privatise

11. Trends in Financing Ports Infrastructure - Africa Management Model(s) Public Service Port Model • Under the Public service port model, government owns all the port infrastructure and undertakes all ports operations • Under the landlord model, the government owns and manages major port infrastructure but allows private sector to provide basic services e.g. Ghana and Nigeria • South Africa is the only African country with an independent regulator separate from Government Landlord Model Apapa Container Terminal – Lagos, Nigeria 16 • In 2006, the Nigerian Ports Authority (“NPA”) awarded a concession to APM Terminals to manage and operate and develop the Apapa container terminal increasing capacity from 220,000 TEUs per year to 1.6million TEUs • Following this arrangement, delays for berthing space reduced significantly and shipping lines reduced their surcharge from US$740 to US$105 per TEU saving the Nigerian economy US$200million a year. 16 Report: African Infrastructure: A Time for Transformation