PPPs as an enabler of project financing for geothermal in Africa

With Public-Private Partnerships (PPPs) achieving success for geothermal in Kenya, it has the potential to attract project financing for the rest of Africa.

High upfront costs and risk remain one of the major obstacles to geothermal project development. Facilitating financing of geothermal projects through PPPs will provide the opportunity for new geothermal projects in Africa. PPPs allow governments to tap into the expertise, innovativeness, and flexibility of the private sector towards the timely conclusion of projects, financial efficiency, and quality assurance.

A government’s PPP framework typically evolves over time and can vary significantly from one nation to another. In the early stages, governments may focus on enabling or promoting opportunities for PPPs. Once several PPPs have been implemented, the PPP framework may be strengthened by addressing their level of fiscal risk. For instance, South Africa focused on improving public financial management for PPPs.

PPP laws and institutions have become increasingly common in Africa but are still in development in many cases. African governments are in different stages of implementing or creating PPP frameworks. The challenge, however, is ensuring strong rules and regulations, as well as effective implementation. A PPP program can only be effective if the legislative framework provides a clear, fair, predictable, and stable legal environment.