Download Financing Options for African universities by Amini

Financing Options for
African Universities
by Amini Kajunju
Director of Strategic Partnerships
Africa Integras
at the MCF/AAU HE Consultation
November 22, 2016
Dakar, Senegal
The Problem / Opportunity
1. Youth bulge/dividend. Population growth
2. Higher demand for tertiary education
3. Long-lasting disinvestment away from higher education by
governments
4. Poor infrastructure (e.g. overcrowded classrooms and dorms,
old laboratories, old libraries)
5. Inadequate learning environment
6. Contribution to the brain drain
COMMON SOLUTIONS
PUBLIC UNIVERSITIES
PRIVATE UNIVERSITIES
Government transfers
Foreign government loans/grants
(China, Israel)
Private banks
DFIs (OPIC/IFC)
Donations/Grants
Public-Private Partnerships
(PPP)/BOT
Bonds?
Donations/Grants
Endowment/Savings
Private banks
DFIs (IFC)
Rent space
Public-Private Partnerships (PPP)
Bonds?
What is a PPP?
1. A long-term contract between a private party and a
government agency
2. The private entity bears most of the risk during the life of
the contract.
3. Best use of the resources and competitive advantage of
the public and private sector
4. Asset is transferred back to the public entity after the end
of contract. (BOT - Build, Operate, Transfer)
jj Typical SPV Structure for PPPsPPPs
Public
Entity/University
PPP
Agreement
Equity
Shareholding
Private Sector
(Special Purpose Vehicle)
(SPV)
Loan
agreement
Debt
Subcontractors
Subcontractor
Construction
Subcontractor
Operations
Advantages: PPP for Social Enterprises
1. Finance the project over time vs large outlay of funds
2. Speed in completion of project. Use facilities sooner
3. One private entity (SPV) is accountable to all
contractors/investors
4. Increased deployment of debt and equity/access to
private sector funds
Advantages: PPP for Social Enterprises
(continued)
1. Debt can be cheaper due to length of time and the
willingness for DFIs to loan money
2. Solid returns for investors
3. Job creation/generation of economic activities/support of
local entrepreneurs
Challenges: PPP for Social Enterprises
1. Cost of capital/the cost of pricing the equity risk
2. Credit risk and analysis/necessary cash flow to sustain
payments
3. Long-term risk: non-payment, political unrest, higher cost of
doing business/inflation, changes in the market/competition
4. Leadership transfer risk/stakeholder engagement
5. Human capacity/understanding of PPPs by governments and
universities
Questions for Discussion
Due to a lack of a strong capital market, African universities have limited
options for accessing public and private funds for infrastructure.
1. What role can African pension funds play in reducing the cost of
capital?
2. Why are we not issuing bonds to build educational infrastructure in
Africa? In the US, private and public universities issue bonds for all
sorts of capital projects.
3. What role can foundations like the MasterCard Foundation or the
Rockefeller Foundation play in becoming impact investors in education
infrastructure?