Infrastructure financing in Africa

• Published in: Journal of international financial markets, institutions & money Vol. 91; p. 101954
• Main Authors: Lu, Qiongfang, Wilson, Craig
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.03.2024
• Subjects: Africa; Agency problems; Capital structure; Equity investment; Infrastructure financing; Public-private partnerships; Public-private partnerships; Infrastructure financing; Agency problems; Capital structure; Africa; Equity investment
• ISSN: 1042-4431; 1873-0612
• DOI: 10.1016/j.intfin.2024.101954

•Infrastructure development increases private investment in African infrastructure.•Infrastructure development increases the use of BOO ownership and commercial debt.•Infrastructure development decreases use of equity financing in the capital structure.•Projects in higher income countries use a smaller proportion of equity financing.•These relations show a substitution effect of equity for debt in riskier environments. We explore current development and constraints on infrastructure financing in Africa. We examine how infrastructure development in African countries affects ownership and capital structure choices of private and public–private partnership infrastructure projects. Using data from 33 African countries over 17 years, our findings suggest that infrastructure projects in African countries with better infrastructure development tend to have more private investment, more long-term investment, and they tend to use more debt financing, including more commercial debt, and less equity in their capital structure. For the least developed African countries, where debt financing is scarce, equity investment is vital for infrastructure financing.