AfricaLive speaks with Khato Civils Chairman Simbi Phiri on the outlook for infrastructure megaprojects in 2022.
AfricaLive: Khato Civils has been widely praised after delivering the 100km pipeline project ahead of schedule, averting a water crisis in Botswana’s capital city. Where can we expect to see Khato Civils next, and what is the expected impact of the projects in your pipeline?
Simbi Phiri: It’s not our first successful project in our twenty years of existence though we are pleased to have exceeded expectations. We have done bigger projects than this one but this one was special. It was special because of the emergency need that was there. We completed the project just as the main pipeline bringing water from the north to Gaborone broke down. That main pipeline broke down on the week we started pumping.
Our on-time intervention averted a water crisis that the people of Gaborone will be happy not to have experienced. Looking ahead, it’s all about securing similar projects and working on them. We want to avert a similar crisis and solve biting infrastructural problems all over the continent.
AfricaLive: Currently we understand you are looking at a few options in the pipeline Zimbabwe and Malawi. Can you reveal what else could be next in the pipeline?
Simbi Phiri: In Zimbabwe, we are looking to build roads with a feasibility study of the road between Beitbridge and Victoria Falls. We are looking at Mozambique as well for road works and water infrastructure jobs.
The Salima-Lilongwe Water Project is now at a very advanced stage. We have completed the feasibility studies and done all the designs. We are set and ready to begin the construction because even the environmental studies have been concluded. The Lilongwe Water Board has approved all our designs and we are busy finalizing the funding for the project.
Unfortunately, there had been a series of delays occasioned by opposition from western financiers who believed the project was too big for Malawi. There was also a false belief among those financiers that our company was too small to undertake such a project.
We have been discussing with some Australian financiers that have come on board and offered the Malawi government favourable loan terms for the project. There had been some confusion in the Ministry of Finance as to whom the borrower was supposed to be, the Ministry or Khato Civils? It is now clear to them that the government of Malawi is the borrower. Our role was to go out there and seek funding.
The President of Malawi helped provide clarity and save time by instructing that the project must proceed once all the documents are signed. The final stages before we begin will involve the Minister of Finance and the Lilongwe Water Board signing the loan agreement.
If everything goes as planned, the loan agreement will be sealed by the 20th of December and work will begin in January 2022. The World Bank and the IMF had previously raised concerns about Malawi’s ability to service the loan they were seeking. We are happy to report that Khato Civils secured favourable terms for the Malawian government.
AfricaLive: You made an interesting point about the people of Gaborone being unaware of the crisis that was coming. Is it time for greater public awareness of how important it is to move projects like these forward?
Simbi Phiri: Yes, because planning is essential. If we build plants that produce 400,000 megalitres, for example, we must know how many households that will serve. If more people immigrate into that community, we must add capacity. It also helps where populations are projected to go up over time. If this is neglected, there will be more consumption than there is supply. This output vs demand scenario is not only with water but also with electricity. Distribution infrastructure must also be adjusted to fit the current needs of the day.
Water is especially delicate. With growing populations, you must increase the treatment capacity as well as the distribution capacity. If the distributor pipes were 1 or 1.5 meter diameter pipes initially, they must be upgraded with 2 metre diameter pipes. The reservoirs must also be levelled up.
These are investments human beings should make consistently. This is why we must have proper data to help societies predict the number of people coming in or going out of Johannesburg for instance. Population decreases are generally better for supply but then you may take a hit in terms of revenue.
AfricaLive: Here in Southern Africa, we know the serious infrastructural challenges we face but we also know how to address them. It is a matter of getting those projects off the ground. Now is the time for governments to push us ahead in our development.
What are your expectations as we close this year and go into 2022, will we finally see breakthroughs in a lot of the projects that had stalled because of the pandemic?
Simbi Phiri: The problems of water and electricity as well as transport infrastructure, will be major campaign topics as various public officials seek to be elected or re-elected all over the continent. No serious leader can seek public office without a clear infrastructure plan. Utilities like electricity, water, roads and broadband must be available in modern Africa.
We live in the age of the information highway where you have online learning and high-level meetings done online. Broadband and electricity are not luxuries anymore. 2022 must-see our government get funding for these essential projects. I don’t see why Angola should not be connected with Zambia, and Zambia connected with Malawi as well as with Mozambique. Similarly, I don’t see why Zambia should not be connected to Tanzania and DRC.
If Zambia and Tanzania are connected we could see goods exchanged easily through the east of DRC and west of Zambia. This can be done through the ports of Nacala or the port of Beira that can bring goods from Zambia to Lubumbashi or Dar es Salaam. We have to move past Johannesburg being the sole centre of trade, we must have many centres.
When this infrastructure is built, we can have Africans across many countries doing trade freely. Only then we can talk confidently about decolonisation.
AfricaLive: According to the African Development Bank Africa will have to spend at least $93 billion a year for a decade in order to address Africa’s infrastructure gap. The current spend is $45 billion a year. At AfricaLive, we are reporting on the pathway to raising and utilising the required $48bn.
A study from McKinsey has highlighted that there is an appetite from international investors for African infrastructure, however, 80 per cent of African infrastructure projects fail at the feasibility and business-plan stage. This is Africa’s infrastructure paradox—there is a need and availability of funding, together with a large pipeline of potential projects, but not enough money is being spent.
How do you work with stakeholders to ensure the feasibility of new projects and how can more projects get past the business-plan stage?
Simbi Phiri: I believe that if we are involved in the designs from the beginning we have an incentive to do it right to completion. Our intention at the end of the day is not only to make a profit but also to get the project done.
Our involvement from the onset means not only doing the study properly but also getting the designs and financing models right. When we know the intricacies of a project, we can help make a strong case for financiers.
This is because some of the funding we seek to attract is from people that have never been to Africa and they may have reservations. Government officials may not get the finance details right sometimes and that may not bode well with financiers. This is where we can come in and demystify to ensure that financiers get sound answers to their questions and the private-public partnership in play becomes effective.
Our capacity to investigate, do designs, build and manage leads is so high. We can do a much better job than most government officials and that’s why I advocate for our early involvement. Our capacity to plan, design, and execute is elite, so they should not involve us too late in the process.
AfricaLive: Could your recent work in Botswana – where you reduced the capital spend from the government considerably – change how investors may see the feasibility of water infrastructure projects in the region?
Simbi Phiri: Yes, the faster you complete the project without compromising quality the more you save. When the infrastructure was envisaged there was a plan to have it done quickly. We succeeded at that when other companies couldn’t deliver and we also averted a crisis. When people see how well we completed the project without hiccups, then the region becomes a prospect that can attract capital for even more infrastructure.
AfricaLive: Another important piece of data to cover: African infrastructure is less risky than commonly perceived. According to Moody’s, default rates, at less than 6 per cent, are half those of Latin America.
This negative and inaccurate perception of the continent – often promoted by the international media – is known as Afro-pessimism. How can you play a role in fighting Afro-pessimism?
Simbi Phiri: Talking to you is one of the things I can do! We have a challenge in marketing our continent as a business hub and that hurts us. The African media is not serving us as they should. Our media is more interested in tabloid journalism than reporting on the realities of African development.
Our representation in the media is largely responsible for Afro-pessimism and the same media can help fix that quickly. It is damaging because western journalists pick up on the negativity from local media and continue it. The conversation must shift from fishing for gossip stories to focusing on the achievements of those developing our nations, the achievements made by black consultants, for example.
Our company has delivered water projects in townships that have been struggling with the issue for decades. We have also done numerous CSR projects that are largely unreported because of the pessimism of our journalists. Afro-pessimism will end when Africa’s media gets on board and back progressive African content.
AfricaLive: As part of our digital roundtable debate, please give your response to the following opinions relating to the development of African infrastructure:
On funding: Anshul Rai, Chief Executive, Nigeria Infrastructure Debt Fund: “Even in 2021, the financing model for Africa is stuck in the 1990s. Governments must insist on foreign investors accepting at least a part of the currency risk. We need funding models that match the realities of modern Africa.”
Do you agree with this?
Simbi Phiri: Absolutely, our funding models are just as redundant as the education most of our students have been getting. We have seen books written in the 1960s being used to teach students in 2010 and beyond. Evolution must occur. Incomes have changed, capital flows have changed and thus funding models must also change. To question the spending of $500 million on a road that will come from Lusaka to Tanzania because of a lack of traffic is backward. Traffic comes when the road is built, so analysing the recipient alone that way is archaic.
If we finish the road from Beitbridge to Victoria Falls through Bulawayo, most people will not pass through Mozambique anymore. Traffic will adjust according to the new option created. When they were building the road between Johannesburg and Nelspruit, many people wrote off the project as a failure in waiting because of the lack of traffic in that corridor at the time. Today, anyone going to Maputo, Eswatini and parts of Limpopo use that road.
Some of these roads don’t need direct government involvement, the private sector can handle them. We need the political will to make these things happen. With infrastructure comes traffic even in routes most thought were not viable. People pay toll rates of up to two thousand rand to use some of these roads and they don’t mind because of the convenience of it. So any financier must have that in mind as they make their decisions.
AfricaLive: On the role of African firms: From the CEO of an emerging Kenyan engineering firm: “With the stringent requirements for bidding for World Bank and IMF projects, local companies cannot gain the required track record to jump from the category of a subcontractor to contractor, or even less to EPC Contractor. That introduces a significant restriction to the possibilities of African development.”
Simbi Phiri: I agree because industries create a fraternity and they generally don’t like newcomers allowed in their circles. Construction and engineering is often a closed shop in that regard. Black companies haven’t got 50, 60 or 80 years of history. That won’t be the case in 30 years because we are gaining experience every day. We have to make it so that big multinationals from Mexico, Canada, the USA, Russia and other developed nations aren’t awarded projects that don’t involve local firms.
One of the reasons is capital transfer. We can’t be getting loans from a country like Russia and then see them build the roads themselves and leave without involving us. If a certain percentage of such a project was handed to a local company, there will be more accountability and valuation of materials. The second advantage is that when the infrastructure needs repair, the local companies that were involved can easily come and engage in the necessary maintenance.
AfricaLive: On the above point, with the recent shift of investment from fossil fuels to renewables we have seen what can be achieved with the necessary political will. Are we able to similarly change funding models that damage African development and hold the people of the continent back?
Simbi Phiri: The global warming issue is yet to be demystified completely in this part of the world. Climate change is a threat to coastal cities and farming as well. Unless you are on the lookout for this information, you will not be apprised of the need at hand.
The issue of funding is politically charged. I believe that African governments have had the will to make more sustainable choices. The challenge is the sourcing of new materials and sources of power as well as understanding new technologies.
I had to spend 10 million Rand to set up a solar power source on my farm and it works perfectly. I procured my solar solution from a Canadian company and it provides 1 megawatt-hour of solar electricity generation on the panels. This is clean energy which we use for welding and also distribute to some villagers. With the power cuts in South Africa, solar is a smart alternative.
We must raise awareness and begin to look at solar as a more sustainable power source.
To answer your point on wider project funding, there is a clear path for financiers here because all the projects being done are interconnected. Building a road from Gaborone, Francistown through to Bulawayo is a SADC corridor. In Botswana, the road between Martins Drift, Galape to Francistown, Nata and Kasane is also a SADC corridor. Governments must be sensitised out of claiming sole ownership of road infrastructure. These roads don’t belong to particular countries, they belong to the region because different countries use them.
Those roads will serve Zambia, DRC and other countries so there should be enough money to service whichever loans are handed out because people from all these countries will pay toll fees. Funding methodologies by the IMF, World Bank, European Union and even the African Development Bank must be arrived at by talking to us. That will help in their decision making because they will be moving from a place of greater understanding. I believe every multinational needs to give about 30 per cent of its project scope to a local firm to help our firms grow.
AfricaLive: 2021 has been a year most business people would like to forget. Are you able to send a message of confidence to the business community regarding the future?
Simbi Phiri: I am positive because the difficulties we have all had in the recent past are not unique. I have seen huge companies here in South Africa fall in 2007/2008. The two huge industrial complexes which are Durban and Johannesburg also took huge hits in that period. Things picked up in the subsequent years and the bad periods were relegated to the past. We have cycles in this industry and we must develop resilience to stay in business. The challenge is that these crashes usually claim casualties. I am sure that with the vaccinations, we are now on the right trajectory.
AfricaLive: What does the word ‘mentorship’ mean to you? Why should African leaders invest the time in being mentors to others? Why should the youth of today look for mentors?
Simbi Phiri: Mentorship is a must today because universities only teach you some theory. When you graduate you need to be under somebody who is giving you practical knowledge so that you know your way around the world. Mentors will feed you esoteric knowledge that you will need to succeed. Knowledge needs to be passed down from experienced people in the industry to the young ones that are just starting.
In our industry, for instance, young black engineers tend to overdesign their structures. They need experienced people in the industry to guide them away from that. Aspects like the cost of material and design should be imparted in the young ones as soon as possible. Young engineers will have a better appreciation of things when they are mentored through the design and build aspect, procurement aspect and finance aspect.
They must also learn how to deal with politicians and authorities because money is allocated in fiscal budgets, passed in parliament and sent to local authorities for projects. Once this is clear to them, they can position themselves strategically. This is how we can develop a conveyor belt of talent coming through consistently.
AfricaLive: You told me previously that you learned resilience from your grandfather who was a maize farmer. He would take big hits when crop yields went down or disasters such as livestock flu would hit. When it comes to doing business in Africa, what does the word resilience mean to you now?
Simbi Phiri: It means pushing through despite critics who attack you with petty issues. There must be synergy within your team. At times you have a low energy design engineer working with a high energy implementing engineer. Resilience means understanding the importance of the design engineer.You can not remove him from the project. You should push him to work in synergy with the implementing engineer.
Resilience also means dealing with issues of delayed payments even though you must pay suppliers as well as employees. You must have a bank surety to the amount that can pay your bills as you wait for delayed payments. You have to make these banks give you a loan through shrewd negotiation at times.
Negotiation and problem solving are two skills that are part of resilience as well. The challenges you overcome, the more you will achieve.
AfricaLive: What qualities do you look for in a person or firm that you would look to invest in or nurture? What do you believe marks the difference between someone being “a person with ideas” to a genuine, effective entrepreneur?
Simbi Phiri: I would back someone who has a registered entity and has tried, fallen and got back up again. Someone who has 4 to 5 years in construction and engineering. We have mentored some young people before and they have gone on to win. Going forward we will look for such serious individuals who are ready to fail and come back again. The ideal people for me are the people who have failed at a smaller scale and have come back stronger. It is also ideal to have people on board that reinvest in their craft instead of just wasting the profits they make.