1 / 7

Mobilising Local Finance for Stable and Predictable Financing Mechanisms for Utility Providers

Presentation on financing access to basic utilities, discussing the changing African financial systems, the need for long-term funding for utility infrastructure, and the challenges faced in mobilizing finance for water utilities in Africa.

gkincaid
Download Presentation

Mobilising Local Finance for Stable and Predictable Financing Mechanisms for Utility Providers

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. MOBLISING LOCAL FINANCE STABLE AND PREDICTABLE FINANCING MECHANISMS FOR UTILITY PROVIDERSPRESENTATION BY REGINALD MAX FINANCING FOR DEVELOPMENT OFFICE, UN-DESA FRIEDRICH EBERT FOUNDATION INTERNATIONAL POVERTY CENTRE, UNDP MULTI-STAKEHOLDER CONSULTATIONS ON “FINANCING ACCESS TO BASIC UTILITIES” LUSAKA 22-25 APRIL 2007

  2. INTRODUCTION • AFRICAN FINANCIAL SYSTEMS HAVE CHANGED DRAMATICALLY OVER THE LAST 20 YEARS. • GOING THROUGH THE THIRD PHASE OF FINANCIAL MARKETS REFORMS • FIRST PHASE • DISSOLUTION OF FINANCIAL REPRESSION, REMOVE DIRECTED CREDIT POLICIES, PRICE CONTROLS, ASSOCIATED WITH STRUCTURAL ADJUSTMENT POLICIES OF THE EIGHTIES. • SENOND PHASE • PRIVATISATION, CAPITAL MARKET REFORMS, SECURITIES EXCHANGES. • THIRD PHASE • REGIONALISATION AND INTERNATIONALISATION, PENSION FUND REFORM, MICROFINANCE MOVEMENT, TECHNOLOGY PLATFORMS.

  3. THINKING BEYOND COMMERCIAL BANKING • UTILITY FUNDING WHICH IN THE MAIN CONSISTS OF INFRASTRUCTURE FINANCE HAS ONE OUTSTANDING CHARACTERISITC – IT NEEDS TO BE IN THE FORM OF LONG TERM FUNDING WITH MATURITIES OF 5,10, 15 OR EVEN 20 YEARS • EVEN THOUGH THEY MAY GENERATE HIGH LEVELS OF RETURNS UTILITIES CANNOT REPAY INVESTMENTS OUT THE CASH FLOWS GENERATED OUT THE SHORT TERM HORIZONS OF MOST AFRICAN MARKETS. THEY REQUIRE REPAYMENT PROFILES THAT MAKE THE LONG TERM CASH FLOW PROFILES.

  4. WHAT HAS CHARACTERISED THE AFRICA FINANCIAL SYSTEMS? • SCALE • INFORMALITY • GOVERNANCE ISSUES • EPISODAL SHOCKS • CAPITAL FLIGHT

  5. FOCUS AREAS FOR DEVELOPING CAPTIVE SOURCES • PENSION FUNDS AND OTHER INSTITUTIONAL INVESTORS AS PROVIDERS OF LONG TERM CAPITAL • SECURITIES MARKETS AS CATALYSTS OF LONG TERM FINANCING • INFRASTRUCTURE BONDS WITH SPECIAL FEATURES • BUILDING CONFIDENCE AND ABSORPTIVE CAPACITY • STABILIZING WHOLESALE FINANCIAL MARKETS

  6. WHATS THE PROBLEM WITH MOBILISING FINANCE FOR WATER UTILITIES INAFRICA • UTILITIES ARE COMPELLED TO OPERATE UNDER SUB ECONOMIC CONDITIONS. • TARIFF SETTING IS NOT A FUNCTION OF SUSTAINABILITY. IT IS DRIVEN BY POLITICAL DYNAMICS. THAT IS AT THE VERY HEART OF PROVIDING AFFORDABLE SUSTAINABLE SERVICES. • FINANCIAL STATEMENTS ARE NOT NORMALLY PUBLISHED OR RELEASED... EVER. CREATES CREDIBILITY PROBLEMS WITH POTENTIAL INVESTORS. • THERE IS NORMALLY A FINANCIAL RELATIONSHIP WITH CENTRAL GOVERNMENT. A COMPLEX FRAMEWORK THAT IS INCONSISTENTLY APPLIED AND NORMALLY TO THE DISADVANTAGE OF THE UTILITY. • THE MARKETS DO HAVE FUNDS. LONG TERM FUNDS ARE NORMALLY NOT ENOUGH TO SUSTAIN BOND ISSUES OR CAPITAL INVESTMENT REQUIREMENTS.

  7. THE FUTURE – POLICY CHOICES • FIVE DIFFERENT COUNTRY CHARACTERISTICS POINT TO DIFFERENT POLICY AND REFORM DESIGN • POST-CONFLICT COUNTRIES • SPARSELY POPULATED COUNTRIES • SMALL COUNTRIES • OIL RICH COUNTRIES • COUNTRIES WITH CRITICAL MASS

More Related