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The Cost of Risk: Why Investors Demand 30% ROI in Africa

Infrastructure investment in Africa is expensive—not because of the projects themselves, but because of perceived risk. Investors expect five times the returns compared to OECD nations, making Public-Private Partnership (PPP) projects significantly costlier. How can we change this narrative? By lowering risk. Here’s what needs to be done:

✅ De-risking through Policy Stability & Regulatory Clarity:
Uncertainty in regulations, sudden policy shifts, and weak enforcement increase investor anxiety. Clear, predictable, and transparent legal frameworks build confidence and reduce perceived risk.

✅ Credit Enhancements & Risk Guarantees to Lower Costs:
Tools like blended finance, sovereign guarantees, and political risk insurance can help cushion investors against volatility, making projects more bankable and reducing the required ROI.

✅ Strengthening Institutional Capacity & Governance:
Robust PPP units, well-structured contracts, and efficient dispute resolution mechanisms can minimize financial and operational risks, making Africa a more attractive investment destination.

✅ Developing Local Capital Markets for Sustainable Financing:
Heavy reliance on foreign investment exposes projects to currency risks and external shocks. Strengthening local financing mechanisms can provide stable, long-term capital at more affordable rates.

✅ Showcasing Success Stories to Shift Perceptions:
Africa has profitable, well-executed PPP projects, but they often go unnoticed. Highlighting success stories and building investor confidence through data and transparency can gradually change the high-risk perception.

📉 Lower risk means lower costs. By improving regulatory environments, financial structures, and governance, Africa can attract investment at sustainable rates—unlocking infrastructure development at scale.

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About the author

AP3 Advisory
AP3 is a professional services firm that specialises in Advisory, Business Assurance and Portfolio Management Services

AP3 Advisory

AP3 Advisory is a professional services firm, with a global client base operating from regional offices in London, Lagos, Abuja & Durban. We support public, private and third sector firms, providing a range of accountancy and business assurance services, including bookkeeping, tax compliance, management & financial accounts, payroll management, HR strategy, admi...