This is a joint post with Julie Walz.
It is no secret that Africa faces an infrastructure crisis. The low-income economies of the region have fewer miles of paved roads and fewer modern freight and passenger-transport systems than any other region in the world. Electricity is also highly unreliable; businesses in many African countries suffer from power outages on more than half of the days they work per year. Inadequate infrastructure is cited by most African firms as the single biggest obstacle to doing business.
Now, there is a bold new idea-- Sokoni--an online marketplace for infrastructure projects in Africa. It is a project developed by the Silicon Valley–based company, Zanbato, and the African Development Bank. Says the founder of Zanbato, Stanford University professor Ryan Orr, “when I’m talking to senior government officials, they often ask me, ‘how can I bring more investment to my country?’ My answer is always the same: ‘can we start by sitting down and coming up with a list of projects?’ Unfortunately, that’s usually where the conversation breaks down. This was the problem that inspired the creation of Sokoni.”
Sokoni is a simple digital platform with a user-friendly interface which offers projects to potential investors; these can be sorted based on sector, location, size, transaction stage, and other investment criteria, with a scope for public projects, private projects, and public-private partnerships. By doing so, it greatly increases the transparency of projects offered for financing, reduces search costs for investors, and gives all parties a clear picture of projects in need of financing.
The premise is that by increasing transparency, the pool of investors will expand and a network of investors will be created—something that we have yet to see in Africa. Sokoni can also be used to provide increasing levels of detailed project information to more serious investors, who are pre-qualified to invest in infrastructure projects. Orr argues that Sokoni “can radically improve the speed, availability, and quality of information flows between market participants; it can provide a platform for key African infrastructure initiatives to endorse and promote projects…This will improve competition and provide more options for African policymakers.”
Rather than just relying on the World Bank and a few private players, Sokoni has the potential to expand the pool of potential investors who might be interested in investing in Africa. Google Green, for example, has invested over $850 million into renewable energy projects, primarily in the United States, and is interested to invest in Africa where there is an abundant supply of solar, wind and geothermal energy.
Sokoni will formally launch with over 50 projects in early 2012. Examples of projects currently listed on the site include the Mombasa-Nairobi-Addis Ababa Corridor – Phase II ($308.1 million), and the Lake Victoria Water and Sanitation Program ($124.8 million).
With a large enough scale, Sokoni (which means “marketplace” in Swahili) could prove to be a game-changer for the industry. Just last month, G-20 leaders embraced the recommendations of the High-Level Panel on Infrastructure, which endorsed Sokoni. The potential market is huge--investments in African infrastructure could generate $200 billion annually for private investors by 2020.
For years, Africans have been forced to rely almost entirely on the sluggish bureaucratic structures of multilateral institutions, which are bogged down by their own procedures and their inability to engage in regional projects on a significant scale. Sokoni presents a more nimble structure, one that might reduce risk, lower costs, improve the flow of information to investors, and present African investment opportunities in a positive light. No doubt there are challenges, including the need to achieve sufficient scale to sustain the model. Nonetheless, Sokoni presents a promising digital platform for investors and policymakers to address Africa’s vast infrastructure needs.