The future of infrastructure under the new John Mahama government

As Ghana enters a new chapter under the leadership of President John Dramani Mahama, optimism about the trajectory of the country’s real estate and infrastructure sectors is justified.

Known for his visionary leadership during his previous tenure, Mahama left a legacy of transformative social and economic infrastructure. His establishment of the Ghana Infrastructure Investment Fund (GIIF), one of Africa’s leading sovereign funds dedicated to infrastructure, was a testament to his forward-thinking approach.

Capitalized with an initial $300 million, GIIF through its debt and equity strategy, has made strategic local investments in vital assets such as the Kotoka International Airport (Terminal 3), the Takoradi Harbour, and other critical assets that continue to generate returns for Ghana’s economy.

Under his new administration, Ghana is poised for a renewed focus on a $10 Billion accelerated fund for infrastructure development- He calls this; “The Big Push”. Mahama’s manifesto outlines bold proposals to bridge the nation’s infrastructure deficit while leveraging Ghana’s robust Public-Private Partnership (PPP) framework, accented in 2020.

This framework, which simultaneously aligns with the new Public Investment Management Act provides a solid foundation for attracting private capital, both local and foreign, into the infrastructure market.

The PPP Act mandates a dedicated office within the Ministry of Finance, focused primarily on promoting efficiency and effectiveness in the development and implementation of partnership arrangements and ensuring compliance with the Act, also serving as a secretariat to the PPP Committee.

A Legacy of Infrastructure Development

During his previous tenure, John Mahama demonstrated a commitment to infrastructure development as a driver of economic growth. Projects such as the Ridge Hospital redevelopment, University of Ghana Medical Hospital, and the expansion of the Tema Port stand as enduring examples of his leadership. Social infrastructure, such as schools and water treatment plants, further underscored his belief in infrastructure as a tool for improving the quality of life for Ghanaians.

The Ghana Infrastructure Investment Fund played a critical role in this vision. By investing in strategic projects, the GIIF not only enhanced the country’s economic infrastructure but also established a model for leveraging private capital in development. The Fund’s role in Terminal 3 at Kotoka International Airport exemplifies the potential of combining public and private resources to deliver world-class assets.

For every dollar the fund invested, it managed to attract $10 more into those projects, making it a tried and tested approach, making infrastructure an investable asset class in Ghana.

What to Expect and The Investment Opportunities Under the New Mahama Government

1. Increased Infrastructure Investment

President Mahama’s renewed focus on infrastructure is expected to centre on bridging gaps in critical sectors such as transportation, energy, Agriculture, water, and housing. His administration has proposed bold solutions to these challenges, reflecting his belief in infrastructure as a catalyst for economic transformation.

He seeks to introduce innovative financing models like infrastructure bonds to finance infrastructure projects. A $10 Billion worth of infrastructure is an investment opportunity for institutional investors, private equity firms, family offices and local pension funds. Ghana is ripe for this move!

2. Optimizing Ownership Structures

Ownership structures of key assets like Kotoka International Airport, Tema Motorway, and Ridge Hospital may see significant reforms. Releasing equity in these core assets to private investors could free up government capital for new projects while maintaining operational efficiency.

For example, a partial sale or concession model could ensure that the government retains a stake in these assets while attracting private expertise and investment.

3. Expanding Railway Infrastructure

With Ghana’s robust PPP framework, the railway sector stands out as a promising area for development. The government must focus on derisking railway projects like bottlenecks around land acquisition to make them investment-ready for private capital. Greenfield railway projects, if properly structured, could attract significant investment, addressing both freight and passenger transport needs across the country.

4. Confidence in GIIF and Pension Capital Allocation

To achieve these goals, local financing shops and pension funds must have confidence in GIIF’s ability to manage and co-invest in large-scale infrastructure projects. As seen in global markets like Canada and Australia, pension funds can play a pivotal role in funding infrastructure, providing long-term, stable returns while addressing pressing development needs.

5. Leveraging Private Capital

Ghana’s infrastructure financing needs, estimated at billions of dollars annually, present an opportunity for innovative funding solutions. Blended finance models, involving development finance institutions, can help mitigate risks and attract additional private capital. By collaborating with global infrastructure funds such as KKR, Macquarie, and African-based firms like AFC and Africa50, Ghana can position itself as a hub for infrastructure investment in West Africa.

Global and African Perspectives
Globally, pension funds have increasingly diversified their portfolios into infrastructure due to its steady cash flows, inflation-hedged returns, and favorable risk-adjusted performance. In Canada, institutions like CPP Investments and the Ontario Teachers’ Pension Plan allocate significant portions of their portfolios to infrastructure, demonstrating the long-term benefits of this asset class.

In Africa, especially in the south, significant strides have been made in attracting private capital to their infrastructure sectors, the Lobito Corridor project is a great example. Ghana’s relatively small but robust pension market provides an opportunity to follow suit. However, this requires innovation in portfolio diversification and stronger confidence in vehicles like GIIF.

Recommendations for Infrastructure Development

1. Diversify Pension Fund Investments: Move beyond the current allocation of 90% in government securities and bank deposits. Pension funds should allocate a percentage to infrastructure and other alternative assets for long-term capital appreciation.

2. Strengthen GIIF’s Role: GIIF must be a trusted partner for local and foreign investors, facilitating co-investments and managing risk effectively.

3. Enhance PPP Implementation: Leverage Ghana’s PPP framework to attract global infrastructure investors and deliver impactful projects.

4. Reform Core Asset Ownership: Adopt innovative ownership structures to optimize the value and efficiency of key national assets.

5. Develop Institutional Investment Expertise: Establish a dedicated investment management entity to oversee real asset funds and ensure strategic allocation.

Under John Mahama’s leadership, Ghana has an opportunity to redefine its infrastructure landscape. Leveraging bold strategies, innovative financing models, and robust partnerships, the new government can deliver transformative infrastructure projects that drive economic growth and improve the quality of life for all Ghanaians.

With a clear vision and the right execution, the next chapter of Ghana’s infrastructure development could set a benchmark for the continent. Like I always say: Development Can Be Made Investable!

Watch as Majority Leader Ato Forson reads Speaker Bagbin’s profile