Jay Govender: “International investors using Mauritius as a platform is on the increase”

In 2013, 600 million sub-Saharan Africans did not have access to electricity. Growth prospects in the energy sector are huge. The Director of Projects & Infrastructure at South African business law firm DLA Cliffe Dekke Hofmeyr stresses on the need for action in this emerging sector across the continent.

BUSINESSMAG. How do you rate energy development on the African continent right now?

There is a buzz of activity and growth in the energy sector currently. Africa is fast climbing up the ladder in relation to its attractiveness as an investment destination. The population of Africa is predicted to double to at least 2.4 billion people by 2050. Power demand is predicted to increase by 93% by 2035.

There are developments in the energy sector across the continent in the form of legal reform, increased procurement of energy projects, greater participation by independent power producers, increased appetite by commercial lenders to fund such projects and facilitation by various development institutions.

BUSINESSMAG. Privatisation of energy supply model in Africa is a burning issue. What is your take on this and what about the Mauritian model?

Privatisation, operating in a competitive environment can produce the required efficiency in the provision of infrastructure in Africa. There is also an economic need for private sector finance and resources to manage massive projects, both of which the private sector brings to a project.

The Mauritian model is a combination of a vertically integrated utility model, together with private sector participation in the generation space. For Mauritius, this appears to be a viable option considering its size, population, demand needs and location.

BUSINESSMAG. In spite of several Double Taxation Avoidance Agreements (DTAAs) and Investment Promotion and Protection Agreements (IPPAs) signed along with Mauritius’s member in several African organisations, the level of local investment in Africa remains considerably low. What are the hurdles?

DTAAs and IPPAs probably work more as facilitation tools to provide investor confidence, rather than giving investors the security required when they make an investment into Africa. These types of agreements influence investors to at least open door to consider investment opportunities in the particular African country in question.

A Mauritian investor is no different to any other investor. Ultimately any investor seeks optimal returns on its investment. Prudent due diligence work is required to understand whether such goals can be achieved. Mega infrastructure and power projects are costly and capital intensive, involving a multitude of stakeholders and participants. These are complex projects and take a long time to reach commercial and financial close. Coupled with a lengthy construction phase, some investors do deter away in favour of opportunities which provide faster returns on investments.

International investors using Mauritius as a platform is on the increase as evidenced by the number of global business companies being registered in Mauritius and targeting African countries. As far as local Mauritian investors are concerned, the tendency is also on the increase.

BUSINESSMAG. How can Mauritian investors benefit from the energy boom right now?

We are seeing a trend of holding companies of project company SPVs being registered in Mauritius. There are also opportunities on the sponsor side for investment into energy projects.

Mauritians with skill and expertise gained on its domestic IPP projects can also assist its sub-Saharan counterparts with projects that Mauritius has developed ahead of the others, for example, the technology of co-generation.