Financial institutions and development partners have been urged to develop innovative strategies to de-risk public infrastructure financing and Public-Private Partnerships (PPPs), a crucial step toward closing infrastructure funding gaps in the country.

The call was made today at the start of a three-day training on Infrastructure Finance and PPPs in Lilongwe, organized by the Export Development Fund (EDF), a subsidiary of the Reserve Bank of Malawi.

The training has brought together various development finance institutions (DFIs), commercial banks, and government officials.

Zwelibanzi Sapula, Chief Executive Officer of the Southern African Development Community (SADC) Finance Resource Centre, noted that many financiers avoid public projects because they are perceived as high-risk, a factor that drives up the cost of borrowing.

"If you look at the SADC region, one of the biggest challenges that we have is the infrastructure gap, particularly the funding gap. And if we are looking to change that and fix the challenge, we need to start looking at innovative ways of financing our infrastructure," Sapula said.

He said that this perception of risk directly impacts interest rates:

"The reason interest rates are very high in the region is because of the perceived risk. And the people who have the money perceive us to be more risky than other places. So, what we really need to do is to put instructions, which reduce that risk, because if we're able to do that, we also reduce the cost of financing."

Sapula said that such training should focus on how to structure and be innovative with PPP frameworks to reduce the risk associated with transactions, thereby reducing the cost of financing.

EDF Board Chairperson, Dr. Ted Nakhumwa, told reporters the training is critical given the backdrop of declining donor support for public infrastructure and the clear economic imperative for investment.

"As you know that economic growth depends on infrastructure investment," Dr. Nakhumwa stated. "It is so important that we try to make commercial banks and other DFIs understand their roles, that it is not only government responsibility for infrastructure. I think if we join hands through private-public partnerships, we can do a lot."

Dr. Nankhumwa stressed that local institutions must take the lead in these investments.

"I think as locals, this is our country, so we need to take the lead. We appreciate what our development partners bring, but also as owners of this land, we need to take lead," he said. "We want to encourage banks and commercial banks to see value in investing in infrastructure. We know that it takes patient capital."

Currently, in Malawi, construction of roads are the only notable public projects that have consistently been able to attract private sector financing.

Sapula pointed to international and regional successes to show that these models can work.

He highlighted a model widely successful in South Africa: "One such model that has worked very well is the IP office, which is the independent power producer program. And that has been a model that's been widely successful, and it's actually resulted in a lot of investment."

The training, which includes international delegates, serves as a refresher course while introducing new concepts. Dr. Nakhumwa concluded with a clear objective.

"The point is clear that we need to be investing in the right infrastructure for Malawi to become competitive... We can't lag behind when everyone else is moving forward," he said.