EAD – Export Assistance & Development is a lean, flexible and responsive organisation dedicated to facilitating the international development of businesses.
Its CEO, Patrick Lecoy, shares his experience and analysis of the major changes underway in the structuring, financing and securing of development projects in high-risk environments.
Over the past decade, there has been a clear shift in the approach to African markets. With the growing emergence of local content requirements, Western companies that were primarily exporters in the past have become local players, members of the business ecosystem in the African countries concerned.
In order to continue their commercial development, they have had to invest in setting up production subsidiaries in Africa, sometimes alone, sometimes in collaboration with local partners through joint ventures.
Absolutely. Covering new foreign exchange risks, linked to the mandatory use of the local currency, which is often non-convertible, as the invoicing currency, is important and technically challenging. The main risk remains political risk.
The basics of financial analysis and profitability analysis for an investment project remain the same regardless of its location. However, it is the consideration of the country’s political risk that makes all the difference.
The longer the investment horizon, the greater the risk, which is difficult to assess and difficult to cover. The sudden occurrence of a political risk event, such as a coup d’état or civil war, can literally ‘kill’ an investment project and render it completely inoperative. It is often very difficult to cover the political risk of certain investment projects beyond a period of seven years. This is one of the problems that both bilateral and multilateral institutions can help to address, for example through the implementation of MIGA guarantees (an institution of the World Bank Group).
Yes, at the time of structuring the project financing. Typically, in an investment project in Africa, you will find the project sponsor, i.e. the private sector, a syndicate of commercial banks, a development bank, an insurer specialising in political risk coverage and, sometimes, local government participation (mainly in terms of risk sharing). Structuring project financing in Africa remains very complex, especially in the current regulatory compliance context.
Their involvement at the very heart of a development project in Africa or other emerging geographical areas tends to reassure both the private sponsor of the project and the commercial banks considering joining the syndication.
For example, when the IFC (International Finance Corporation of the World Bank Group) is the first to commit to a banking syndication, this encourages commercial banks to also finance the project in question. Bilateral and multilateral institutions therefore act as catalysts for private sector financing.
Definitely. There are only two possible approaches to working with them: responding to their calls for tenders, or proposing projects that might interest them, such as greenfield projects.
Experience has shown that monitoring calls for tenders requires considerable resources, which are often the preserve of multinationals. I prefer to work on initiating greenfield projects, ensuring that they fully understand the social and environmental aspects that correspond to the mandate and objectives of the institutions contacted.
In recent years, we have seen the emergence of political pressure on development aid budgets. The fact that President Trump almost completely cut federal funding for US development aid (USDAID) in February 2025 and withdrew the United States from funding the World Health Organisation (WHO) speaks for itself. This major decision by the US Republican administration has completely disrupted the financing of development projects in Africa: for some time now, the Islamic Development Bank (IDB) and the African Development Bank (AfDB) have been gaining in influence.
While the World Bank Group does not seem to be affected for the moment, it is impossible to count on aid from the US government. However, there are still financing solutions available from the United States: major American foundations, such as the Rockefeller Foundation, for example, remain very involved.
Nor can we ignore the growing involvement of sovereign wealth funds such as Qatar’s, African private equity funds (which are developing at an impressive rate, something no one would have believed possible ten years ago) and, of course, China. China is omnipresent, with its own tools and resources, in all infrastructure projects in Africa: port logistics, construction, mining, etc.
The fight against poverty, the transfer of expertise, and more specifically health (construction of hospitals, access to medicines and vaccines), nutrition (agricultural and agri-industrial development), environmental protection (decarbonisation, promotion of the use of non-polluting inputs for local agriculture) and education.
These institutions are increasingly demanding in terms of the inclusion of education programmes and expertise transfer in the terms of reference for projects to be financed.
The private sector must understand this and integrate it into the very heart of the projects proposed.
To set up public-private partnerships in Africa, you need to know the rules. You cannot talk about structuring financing without including strong institutional lobbying. Moreover, we are seeing the growing development of what is known as ‘blended finance’, which is closely linked to ‘impact financing’. Blended finance is the strategic use of development finance to mobilise additional private sector funding for sustainable development in low-income countries. This enables organisations with different objectives (public sector, private sector and civil society) to co-invest in a joint project with a high social and environmental impact.
The main risk to consider is political instability. Development projects in Africa are long-term projects that generally have a high entry ticket, which must be at least £10 million in order to attract investors and lenders.
We are therefore starting from a long maturity and high amounts. Often, payback periods are at least five years. If a political risk event were to occur during the payback period, the economic viability of the project would be destroyed. There are many risks to cover: confiscation of project infrastructure, nationalisation, destruction, cancellation of operating licences, etc. or even the inability to access hard currency to send dividends to the parent company and pay for purchases from suppliers or the services of consultants based outside the African country in question.
It is even a prerequisite for attracting lenders. Lenders will systematically require a political risk insurance policy to be taken out in their favour. In addition to the political risk insurance agencies of international development institutions such as MIGA, there are also specialist private insurers, particularly within the Lloyds syndicates.
Their cost should not be overlooked in the economic calculations for the investment project. It is generally borne by the project sponsor (private sector).
Risk sharing between project investors and lenders can be regulated by an express agreement signed between the parties as part of the implementation of a structured financing project. It should be noted that the government of the project host country may also provide a sovereign guarantee to investors and lenders using its MIGA allocation.
I personally appreciate structures based on the establishment of local SPVs (Special Purpose Vehicles) whose shareholding is shared between the parties to the project – particularly for infrastructure rehabilitation projects based on a Build-Operate-Transfer (B.O.T) scheme.
We have to accept that regulatory verification takes longer in Africa than in the European Union. Verifying that there is no involvement of politically exposed persons (PEPs) is crucial in Africa. Lenders are very cautious on this point and want to ensure that they do not become de facto accomplices in money laundering or terrorist financing operations.
Currency risk remains problematic because, with rare exceptions, the project is located in a country whose currency is not convertible. There are therefore no currency risk hedging tools available. However, in recent months we have seen the arrival of Fintechs specialising in the implementation of currency risk hedging solutions that are more or less adapted to this problem. Their solutions are not always perfect, they come at a cost, but at least they exist.
Investing in development projects in Africa or other challenging geographical areas remains a risky endeavour, with benefits only materialising after several years. It would be a mistake to view these projects as opportunities for immediate return on investment. On the other hand, they provide access to markets that are much more promising than Western markets, which are currently saturated, with sluggish growth rates and declining populations. Africa’s current population is 1.57 billion, and by 2050 it will be 2.5 billion. That says it all.
Investing in Africa means preparing for the future and adapting now to the world of tomorrow. Risks exist, but thanks to highly specialised experts, they can be analysed, managed and often covered.
